Margins in the pharma supply chain
Who takes what, from the manufacturer down to the chemist.
Last checked 20 September 2026
A medicine’s MRP is divided between the manufacturer, sometimes a C&F agent, the stockist and the retailer. Commonly cited trade margins are around 10% for the stockist and 20% for the retailer, but they vary widely by product type, and schemes and discounts move the real figure a long way from the printed one.
The chain
| Stage | Role | Typically earns |
|---|---|---|
| Manufacturer | Makes the product, sets MRP within any price control | What is left after trade margins and its own costs |
| C&F agent | Holds stock for the company in a state; usually does not buy it | A commission, not a trade margin |
| Stockist / distributor | Buys at PTS, sells to retailers at PTR, carries the credit risk | Around 10% |
| Retailer / chemist | Buys at PTR, sells at MRP | Around 20% |
A C&F agent is not a stockist
A carrying-and-forwarding agent holds the company’s stock on consignment and earns commission. A stockist buys the goods, owns them, and takes both the working-capital cost and the risk. Different economics entirely.
Why the headline margin is not the real one
A stockist working on "10%" is not making 10%. Take a line with a PTS of ₹82.29 and a PTR of ₹91.43 — ₹9.14 a pack, on paper. Then:
| Then subtract | Effect |
|---|---|
| Cash discount given to retailers | Directly off the ₹9.14 |
| Breakage, damage and expiry | A percentage of stock that earns nothing |
| Credit given, typically 30–60 days | A financing cost on every pack |
| Delivery and handling | Real cost of getting it to the chemist |
| Bad debts | Occasional, and painful when it happens |
And add back the one that helps:
- Free goods on a scheme. 10 + 1 means eleven saleable packs for the cost of ten, which is a real improvement in cost per unit and often the difference between a viable line and a pointless one.
Where distributors actually make money
- Volume on fast movers, where a thin margin turns many times a year. See stock turnover.
- Schemes, bought well and passed on selectively rather than automatically.
- Not losing stock to expiry — the fastest available margin improvement in the trade, because it costs nothing but discipline. See batch tracking and FEFO.
- Collecting on time. A margin you never collect is not a margin.
What to watch, monthly
| Number | Why it matters |
|---|---|
| Gross margin by product group | Averages hide the lines that lose money |
| Value expiring within 90 days | The last point at which you still have options |
| Days of outstanding receivables | Margin sitting in someone else’s shop |
| Stock turnover | How hard your working capital is working |
Are trade margins fixed by law?
Not generally. Price control operates on ceiling prices for scheduled formulations and on price increases for others, rather than by mandating a trade margin, though margin caps have applied to specific categories. Check the current position for what you handle.
Why do generics carry bigger margins?
Less brand pull means the trade has to be given a reason to stock and recommend them. The wider margin is that reason.
Should I take every scheme offered?
No. A scheme on a slow mover is dead stock with extra steps. Check the turnover of the line before committing capital to eleven packs of something that sells four a month.
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