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BW Businessworld

DPCO Paves Way For FDI By Drug Store Chains

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Two critical clauses in the recently notified Drugs Price Control Order (DPCO) 2013 could open the doors for FDI from international drug store chains into the country. One is intended to free the wholesalers —  or stockists in trade terms — from the whims of the pharmaceutical company. The second is to free the companies themselves from the whims of the trade body of stockists.

The first clause has broadened the definition of “wholesaler”. The new definition “technically” allows any stockist to demand drug manufacturers to stock their medicines with him. So far, drug manufacturers appointed handpicked stockists who could sell their medicines.

On the other hand, the order has also done away with the requirement of a no-objection-certificate (NoC) from the medicine trade body —  All India Organisation of Chemists and Druggists (AIOCD) — before adding a new stockist to its marketing network. This will benefit pharmaceutical companies which are now legally empowered to supply medicines to more stockists, without waiting for the NoC.

The development assumes significance in the wake of a recent Competition Commission of India (CCI) decision that charged AIOCD of unfair trade practices to control the supply of medicines in the market. Insistence on NoC was one of the issues highlighted by the CCI.

Traders also see this as a move to encourage the entry of global medicine retail chains into the country. “The earlier attempts of medicine retail chains to gain foothold in Indian pharmaceutical market failed because association had an influence on the appointment of stockists. The dilution of the definition will now allow them to directly negotiate supply deals with pharmaceutical companies”, the wholesaler added.

While the earlier DPCO of 1995 had defined “wholesaler” as a dealer or his agent or a stockist appointed by a manufacturer or an importer for the sale of his drugs to a retailer, hospital, etc.,” DPCO 2013, has turned the wholesaler company agnostic.

It merely mentions “wholesaler " as  “a dealer or his agent or a stockist engaged in the sale of drugs to a retailer, hospital, dispensary, medical, educational or research institution or any other agency” .

According to trade sources, the notification has already resulted in about a dozen police complaints in Maharashtra after the Drugs Controller of that State issued a circular asking pharmaceutical companies and the drug trade to follow DPCO 2013 in its letter and spirit.

Following the circular of the Maharashtra Food and Drugs Authority, wholesalers affiliated to AIOCD have stopped placing fresh orders with the companies, trade sources point out. The development is keenly watched by the 600,000 strong medicine traders across the country as the outcome of these actions might alter the future direction of the country’s medicine trade.

"We have requested the government to look into the matter. Indiscriminate supply of medicines will create a chaotic situation”, a Mumbai based wholesaler said.

Ramesh Chandra Gupta, a Hyderabad based veteran drug wholesaler has a different view. “Handling of medicines is a specialized job. Allowing every one, irrespective of their capacity to store medicines in good conditions, to stock medicines may not be a good idea”, he points out. According to him, some control over the appointment of stockist also helps maintain more accountability.

The drug law says that “no manufacturer or distributor shall withhold from sale or refuse to sell to a dealer any drug without good and sufficient reasons and no dealer shall withhold from sale or refuse to sell any drug available with him to a customer intending to purchase such drug” to ensure uninterrupted supply of medicines in the country.

joe(dot)mathew(at)abp(dot)in; joecmathew(at)gmail(dot)com