New Delhi: Essential medicines in the country are likely to become further reasonable and cheaper as the government is now considering a proposal to cap the prices of the drugs at the first point of sale rather than retail price. The move is expected to curb down the margins offered to the hospitals, distributors, and doctors in order to push particular brands

Niti Aayog has submitted a proposal to the Prime Minister’s Office suggesting the change in the current mechanism of price fixing to check the inflated prices of the essential medicines.

Market and institutional data such as costs at central, state and private hospitals will be used to arrive at ceiling prices.

Presently, the prices of the essential drugs are capped on the average price to the retailer of all brands of any particular medicine with at least 1 percent market share including all trade margins, except for the retailer margin, which is fixed at 16 percent and added to the ceiling price to arrive at an MRP.

Under the current pricing mechanism, 8 percent margin is fixed for wholesaler, it is usually not closely monitored as it is inbuilt in the ‘price to retailer’ –used for calculating ceiling price which, Niti Aayog says, is an opaque procedure that lends to profiteering.

TOI confirms that Niti Aayog has proposed to use ‘average price at the first point of sale’, or price to the stockist, wholesaler, distributor or hospital for calculation of ceiling price and fixing a total trade margin of 24% which can be added to the ceiling price to arrive at MRP.

The drug makers currently have the flexibility to change prices by altering trade margins given to distributors and retailers which includes heavy expenses on marketing and promoting drug brands among hospitals and doctors.