Shortage of drugs? GST uncertainty drives chemists to cut back on stocks

Business Standard By Bhaswar Kumar May 4, 2017. 12:15 IST

Messages on social media platforms warn of severe shortage ahead

Photo: Shutterstock

If you are suffering from any illness and need regular medication, be warned that chemists are not stocking medicines and drugs beyond one week in anticipation of any setbacks brought about by the introduction of the goods and services tax (GST) regime, DNA reported on May 2.

According to the Times of India, worried that they could suffer losses on account of a possible mismatch between tax payouts and tax refunds under the GST regime, stockists have decided to maintain a minimum inventory at hand. In fact, they have even started returning their stock to pharmaceutical companies.

The GST regime will come into effect from July 1.

Social media panic

Across messaging platforms, like WhatsApp, and social media sites, messages have been circulating warning patients of an impending severe shortage of medicines at the chemist's shop due to the coming of GST.

'No severe shortage'

The fallout could be a temporary shortage of certain medicines in the market as demand exceeds supply, the national daily said, citing industry experts. However, contrary to messages circulating on social media platforms, these experts have told the national daily that a major shortage is unlikely.

According to the DNA report, stockists have gone from stocking drugs required for around 30 to 40 days to stocking up for only a week's worth.

Speaking to ToI, Ameesh Masurekar, a director at All Indian Origin Chemists & Distributors Ltd, which has 60,000 distributors and seven lakh chemists in its fold, said that distributors usually kept an inventory of 40 days while retailers maintained an inventory for 10 days. However, Masurekar said that distributors could reduce their inventories to 15 days worth in the last week of June in case the GST rate turns out to be unfavourable. He added that this was unlikely to impact the retailers. In fact, Masurekar maintained there was no likelihood of any shortage of medicines as far as patients were concerned and that inventory levels would be back to normal by the first week of July.

Speaking to DNA, Anil Navandar, Secretary, Maharashtra State Druggists and Chemists Association, said, “The burden of new regime will fall on retail chemists. Old stocks will have to be sold according to the new regime. The burden cannot be passed on to patient as MRPs are fixed. So, we are stocking for fewer days, until we are sure of the situation.”

Not a surprise development

According to a Bloomberg Quint report from December last year, industry body All India Organisation of Drugs and Chemists had advised chemists across the country to return their excess stock purchased prior to September 30, 2016, and destock by March 31, 2017.

According to the report, the industry body had said that in the absence of clarity on GST on near-expiry goods, members could stand to lose out on refunds.

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