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How e-pharmacies would able to give 18-20% discount to customers?

Query: First of all, a big thanks for your work. Pharmaceutical industry looks like complex web for a common people but due to your blog it is easy for us to understand this whole industry. Now coming to my question, I want to know if total margin for retailers in this industry is 18-20% then how netmeds, pharmeasy and other online players are giving 25% discount? And what steps we have to take if we want to open pharmacy shop and want to give 15-20% discount. Can a retailer buy medicines directly from company or c&f and cutting margin of distributor/Wholesaler? Response: Online players give discounts upto 18-20% or something like that. Not at all products they give exact margins. In the pharmaceutical industry , Only few brands give less margin, most brands give good margin plus schemes etc, even to offline retailers. If we talk about generic and other products there are huge discounts like product cost is 30 rs and mrp is 100 rs. So, an 25% discount in the pharma market is not

Branded Medicines Vs Generic Medicines

Branded Medicines:

When a pharmaceutical company develop a new medicine which is effective in curing the condition it claims to treat and safe for human being. Pharmaceutical company fix a brand for its innovative medicine. These medicines are known as Branded Medicines. Pharmaceutical company has to invest considerable amount of money to develop a new medicine, so they are given patent for a period of time.

Generic Medicines: A generic medicine is a copy of the original branded product. Once a patent of medicine is expired, other pharmaceutical companies have become eligible to manufacture and distribute their own version of the medicine. These versions are known as Generic Medicines. Generic medicines may be with brand name or without brand names.

Difference Between Generic Medicines and Branded Medicines:
In term of manufacturing of pharmaceutical products, there is no difference between branded and generic medicines. Branded and generic medicines are manufactured in same way, with same active ingredient, same master formulae and with same machineries in same plant. Even in some cases, same batch is taken to pack branded as well as generic medicines.

Then what is the difference between these two?

There are difference in India and USA to differentiate between generics and branded medicines. If we talk about USA, there is only one Brand could be available for a medicine i.e. it’s innovator’s brand and no one else is allowed to market this medicine within patent protection period. On expiry of patent, other companies can market this medicine only with its generic name. Other companies can fix a brand name for it. There may be several generic versions of the branded one. Generic name is the common name of molecule where as brand name is particular name fixed by molecule’s innovator to market the medicine.

In India, there is no restriction of fixing brand name of any generic medicine. Companies other than its innovator may also fix a brand name of their choice and market it with brand name hence there are several brands of same drug molecule is available in market. They are not brands in true sense, as they are not marketed by the innovator. Hence they are called ‘branded generics’.

Differentiating between generics and branded medicines is easy in USA as there are only one brand available for the medicines and other products of same molecule is available only with generic names of that medicine.

But in India, differentiating between generic medicines and branded medicines is difficult. In first look (through packaging), it’s impossible to predict whether it is a branded medicine or generic medicine because all medicine’s products are available with a brand name.

In India, there is one way that can differentiate between branded medicine (generic branded) or generic medicines. If a medicine brand is prescribed by registered medical practitioner then it is a Branded medicine and if a medicine is directly distributed through pharmaceutical distribution channel. It is not promoted through Doctors and sold out by pharmacies and chemist shops by substituting a branded version or without prescription then it is a generic medicine.

There are no other way to find out difference between generic medicines and branded medicines.

Why Generic medicines are cheaper as compare to Branded Medicines?

As we have discussed above. In USA and India, there are different way to differentiate between generic medicines and branded medicines. Same in form of cost, in USA, we have different methodology to differentiate between price of generic medicines and branded medicines and in India we have different.

In USA, there are only one brand is available and that of its innovator. To innovate a molecule which is effective, safe and useful for any particular disease or condition requires lot of fund and time. When a company develop a new molecule, a patent is granted to innovator for a specific time period for recovering its expenses while developing a new molecule which is effective and safe for human.

Due to huge investment for developing a new molecule, innovator has to sell it at high price to recover its expenses and investment.

After expiry of patent, other companies can also become eligible for manufacturing of generic versions of that molecule. Generic medicines are same as of branded medicines in term of active ingredient, strength, use, effect, dosage form, bio equivalence and testing standards etc. But they don’t have to undergo process and developing a molecule and prevents time & investment requires developing a drug. That why generic medicines producers don’t have to cover these expenses. So they sell generic medicines cheaper as compare to its branded version.

In India, other than patented molecule, number of brands is available for a particular molecule. These are called ‘branded generics’. But cost of these branded generics is almost same as of its patent brand. We can differentiate a generic medicine from branded medicine in a way whether its brand name is prescribed by registered medical practitioner or not.

Marketing and distribution create difference between generic medicine and branded medicine in India. That also affects its cost. Branded medicines require sales team, marketing budget, promotion and other expenses. It is difficult work to generate prescription from a medical practitioner in India. It requires time, investment and relation for prescribing a brand. These marketing expenses make Branded medicines costlier in India whereas Generic medicines are distributed through pharmaceutical distribution channel without any marketing expenses. That’s the reason why generic medicines are cheaper as compare to branded medicine in India.

Hope above information is helpful to you...
For any query and suggestion, mail us at pharmafranchiseehelp@gmail.com

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