Pharma sales remain subdued in first week

The first week of July did not witness a pickup in pharmaceutical sales because of delays in the goods and services tax (GST) registration by stockists, besides software-related problems.

In the first week of July, stockists held 17 days of inventory, which was similar to June-end stock and  23 days lower from May-end high.

Stockists had reduced inventory last month, ahead of GST implementation, fearing loss of margins. They had not taken fresh stocks before the implementation, waiting to pick up fresh stocks after the new tax is rolled out. This, it was widely believed, would lead to an increase in sales. However, this is yet to happen and sales were subdued in the first week due to teething problems.

“July first week inventory analysis shows the same inventory levels as of 28th June. This means that primary sales continue to remain subdued and stockists have not built up inventory again – they continue to operate with a 17-day inventory,” said Ameesh Masurekar, director of market research firm AIOCD-AWACS. 

Masurekar, however, said the 17 days of inventory at stockist level was adequate and there were no reports of shortage of medicines. “Maintenance of inventory levels shows that whatever stockists have sold, they have purchased equivalent amount from companies,” he said.

There have been other concerns, too, regarding incentives and tax on free samples. “We have received a clarification that the GST will not apply to free samples given by companies. We also need a greater clarity on incentives offered by companies as these are to be passed on to retailers, and there should not be any loss to us,” said a Mumbai-based stockist. 

Drug makers have offered 6.5-8.5 per cent incentives to stockists, and some are even giving extra credit period to ensure that adequate inventory is held by trade partners.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel