By Sumeet Chatterjee
Oct 7 (Reuters) - GlaxoSmithKline's Indian businesshas been hit by a drop in sales which two industry sources saidwas linked to a protest by bulk buyers against a cut in theirprofit margins under a new government drug pricing policy.
GlaxoSmithKline Pharmaceuticals Ltd said on Mondaybulk sellers in "major pockets" of India had stopped buying thecompany's drugs since Sept. 15.
It did not give a further explanation in a statement and aMumbai-based spokeswoman for the Indian unit of the UK-basedpharmaceuticals company declined to elaborate.
However, the two sources said wholesalers and retailers inmany parts of India had stopped buying medicines from somecompanies in protest against a reduction in their profit marginsunder a new government pricing policy. They declined to beidentified due to the sensitivity of the matter.
Under the recent policy change, the prices of 348 drugsdeemed essential are now being regulated, compared with 74previously. The move has curbed prices of costly brands sold bydrugmakers in a market that already has rock-bottom medicineprices thanks to a large generics industry.
To compensate drugmakers, the government has reduced marginsfor wholesalers to 8 percent from 10 percent and for retailersto 16 percent from 20 percent, the sources said.
"The retailers are using pressure tactics by not purchasingdrugs from companies who have reduced their margins to complywith the new directive," said one of the sources, adding thatsales of both multinational and domestic companies had been hit.
The All India Organisation of Chemists and Druggists(AIOCD), a lobby group for pharmaceutical retailers andwholesalers, was aware of some members not buying from companiesthat have reduced the margins, its president, J.S. Shinde said.
"There is information saying that because companies havereduced their margins some of the stockists are not buying,"Shinde told Reuters.
"AIOCD has not declared any non-cooperation against Glaxo oranybody," he said.