PHARMA INDUSTRY is one of the biggest and most important industry for any country. Almost every person is taking some medicine in either form, supplements or Medicinal drugs. These drugs are manufactured using different type of salts to cure from certain disease, allergies, etc.
In India, there are many companies who are in the process of manufacturing and selling & distribution of medicines domestically and exporting to outside the country. These companies have Stockist who are in the process of distribution of medicines produced by the companies. Stockist can either purchase the medicines from the companies to earn profit or act as distributor of the medicine to earn commission.
Pharma Companies calculate the "Cost to Sale" by preparing cost sheet for a specific drug. In Cost Sheet, companies consider, Direct Material, Direct Labour, Direct Expenses, Indirect material, Indirect Labour and Indirect Expenses like Factory Overhead, Administrative Overhead and Selling & Distribution Overhead with Profit to arrive Cost to Sale of Company.
There is a Cost of Stockist which Pharma Companies calculate to ascertain the Selling and Distribution Overhead. The calculation of Price to Stockist (PTS) is calculated as below-
As shown above, There is a difference of Excise Duty, VAT (Now GST), Retailers Margin and Stockist Margin between Maximum Retail Price (MRP) and Price to Stockist. Margin of Retailer and Stockist may vary from product to product. There are many more calculations in the Pharma Sector and this is just a small part of calculation which we should know as this is the most important calculation for any Pharma Company.
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