Pharmaceutical distribution profit margin. How to solve?
Author: Luiz Fernando Buainain
Source: CapitalNews - MS - COLUMNISTS - 27/10/2009
Throughout this chain that involves the medication sector, the situation of distributors draws attention. The segment faces the difficulty of a small profit margin, resulting from the reduction of discounts previously practiced by the industry. With restricted credit and fixed payment terms, these margins have been further reduced. However, the economic crisis only worsened a situation that has been debated for a long time by distributors. There are several difficulties that the wholesaler faces and that directly affect the consumer.
Lack of security in transportation, counterfeiting of medicines, precariousness of the Brazilian road network and increased tax burden are factors that hinder profit margins, but which can be solved with actions strategically designed to improve the distribution of medicines in the country.
With regard to security, Abafarma - Brazilian Association of Wholesale Pharmaceuticals, in partnership with Anvisa, works to implement the National Drug Traceability System. The procedure will make it possible to identify whether the product originates in contraband, is forged or stolen, reducing errors and risks for wholesale, retail and consumers.
The improvement of the road network, in addition to contributing to the sector's logistics, would also have a direct impact on the safety of the transport of medicines. In order to avoid the high incidence of thefts, a greater exchange of information between States would still be necessary to facilitate the monitoring of cargo movement.
This exchange transcends the issue of security. The exchange of information with industry, commerce and university entities can provide an advance in the activities of the distribution chain. Technology is another factor that can improve the entire process carried out by distributors. E-commerce, for example, optimizes the operational routine, enabling greater control over the issuance and transit of invoices and cargo shipping notices.
Finally, the reduction of the tax burden would be one of the main actions that would assist in restoring the distributors' profit margin and would also bring benefits to all those involved, especially to consumers. The pharmaceutical sector suffers from a high tax rate of 38% on GDP. Recently, the government announced the reduction of IPI for the white line. Why not apply the same measure to products that are indispensable for the consumer's life? The reduction of IPI or exemption from tax on medicines is necessary in view of the high fees charged by the pharmaceutical sector.
As seen, there are several obstacles. But the solutions are in our eyes and are guided by the improvement of the entire process that involves the sector's dynamics. With the support of public agencies and the initiative of retail, wholesale and industrial entities, the Brazilian pharmaceutical sector can move towards better development. The population thanks you.
By: Luiz Fernando Buainain is president of Abafarma - Brazilian Association of Pharmaceutical Wholesale
RELATED
Pharmaceutical distribution profit margin. How to solve?
Author: Luiz Fernando Buainain
Source: Communicate, 02/06/2009
A financial crisis tends, at first, not to shake the pharmaceutical sector, since the medicine is a good for health recovery, having no reflexes of demand due to promotional prices or impulse buying. However, when the crisis spreads and afflicts various segments of the world economy, it becomes almost impossible not to feel the symptoms of turbulence. And the companies operating in the wholesale market, which handle around R $ 16 billion a year, suffered a drop in their profitability, since the costs of retail and industry registered a considerable increase.
Throughout this chain that involves the medication sector, the situation of distributors draws attention. The segment faces the difficulty of a small profit margin, resulting from the reduction of discounts previously practiced by the industry. With restricted credit and fixed payment terms, these margins have been further reduced. However, the economic crisis only worsened a situation that has been debated for a long time by distributors. There are several difficulties that the wholesaler faces and that directly affect the consumer.
Lack of security in transportation, counterfeiting of medicines, precariousness of the Brazilian road network and increased tax burden are factors that hinder profit margins, but which can be solved with actions strategically designed to improve the distribution of medicines in the country.
With regard to security, Abafarma - Brazilian Association of Wholesale Pharmaceuticals, in partnership with Anvisa, works to implement the National Drug Traceability System. The procedure will make it possible to identify whether the product originates in contraband, is forged or stolen, reducing errors and risks for wholesale, retail and consumers.
Incompatible and non-serious practices, according to research by the Brazilian Institute of Ethics in Competition (Etco), point out that taxes due evaded and informal labor represent a real risk. In view of these data, the search for technologies that enable traceability and validate the authenticity of medicines is extremely necessary. Controlling the circulation and commercialization of these products would facilitate specific actions against each of the problems mentioned, as it would be possible to identify the origin, destination and exact location of the medications. Also in simpler situations, such as the need to collect a batch of drugs, a tracking system would be of great use.
The improvement of the road network, in addition to contributing to the sector's logistics, would also have a direct impact on the safety of the transport of medicines. In order to avoid the high incidence of thefts, a greater exchange of information between States would still be necessary to facilitate the monitoring of cargo movement.
This exchange transcends the issue of security. The exchange of information with industry, commerce and university entities can provide an advance in the activities of the distribution chain. Technology is another factor that can improve the entire process carried out by distributors. E-commerce, for example, optimizes the operational routine, enabling greater control over the issuance and transit of invoices and cargo shipping notices.
Finally, the recomposition of profit margins and deadlines to be adjusted by the industries to the distributors and the reduction of the tax burden would be the main actions that would assist in the sustainability of the distributors and would also bring benefits to all those involved, especially for consumers. The pharmaceutical sector suffers from a high tax rate of 38% on GDP. Recently, the government announced the reduction of IPI for the white line. Why not apply the same measure to products that are indispensable for the consumer's life? The reduction of IPI or exemption from tax on medicines is necessary in view of the high fees charged by the pharmaceutical sector.
As seen, there are several obstacles. But the solutions are in our eyes and are guided by the improvement of the entire process that involves the sector's dynamics. With the support of public agencies and the initiative of retail, wholesale and industrial entities, the Brazilian pharmaceutical sector can move towards better development. The population thanks you.
* Luiz Fernando Buainain is President of Abafarma - Brazilian Association of Pharmaceutical Wholesale