Patients are worried about the possibility of a shortage of medicines because stockists and trade channels, uncertain about modalities of the implementation of the blass="key_underline" href="http://timesofindia.indiatimes.com/topic/Goods-and-Services-Tax">Goods and Services Tax (GST), are attempting to reduce stocks in trade.

Stockists, worried they may suffer losses on account of a possible mismatch between tax payouts and tax refunds once GST kicks in, have started maintaining a minimum inventory and even returning stock to companies.

This might lead to a temporary imbalance between demand and supply of certain medicines for a short while and should not create a major shortage, industry experts say, adding there is no need for panic.

Social media platforms are abuzz with messages voicing concern about depleting medicine stocks and asking patients to stock up now for a "severe shortage’’ from July.

"De-stocking is a natural fallout of the exercise so as to minimise unnecessary impact (due to GST implementation). Lower stocks could be maintained, just enough to serve market demand," GlaxoSmithKline Pharmaceuticals vice-president (South Asia) and managing director A Vaidheesh told TOI .

Dealers and stockists are in a wait-and-watch mode as the rates under GST are yet to be finalised.

"Distributors usually keep an inventory for 40 days, while at the retail level it’s 10 days. In case the GST rate is unfavourable, distributors in the last week of June may reduce inventory (stocks) to 15 days, but it is unlikely to have an impact at the retail level," Ameesh Masurekar, a director at AIOCD ( All Indian Origin Chemists & Distributors Ltd) AWACS, which has 60,000 distributors and seven lakh chemists in its fold, told TOI.

He added that there was no likelihood of a shortage and normal inventory levels would be restored by the first week of July.

"As a part of transition, and in the absence of clarity about credit for duty-paid stock on hand, all manufacturers and traders in many sectors are trying to reduce stock in trade. That is transitory and should not create a major shortage," Indian Pharmaceutical Alliance secretary general D G Shah said.

Distributors are worried because some dealers had suffered losses due to delays in tax refunds when the value-added tax (VAT) regime had kicked in.

As a result, this time they may attempt to minimise stocks, assess the tax refund situation once GST kicks in, and then replenish stocks, an industry expert explained.

"GST modalities and rules are still to be clarified, particularly on tax refunds and input credits. Uncertainty in the industry will dissipate once the rules are clarified," said Sujay Shetty of PricewaterhouseCoopers ( PwC).

Another grey area lies in the fact that the pharmaceuticals industry has an inverted duty structure where payouts (on account of active pharmaceutical ingredients and raw materials) may be more while the taxes it gets from trade channels is less.

To avoid chaos, companies need to plan in advance for implementing GST and the entire ecosystem, including IT, packaging and vendors, need to be geared up.

Countries that implemented GST witnessed a 5% dip in monthly sales in certain sectors in the first month, an industry expert added.

 04 May 2017, 02:07 PM