Before starting a PCD pharma franchise or pharmaceutical marketing business, it is important to understand how product prices and profit margins are calculated.

Many new franchise distributors believe that their profit is simply:

MRP minus Net Rate

This calculation is incorrect.

The actual profit is affected by:

• GST
• Freight
• Packing and forwarding
• Retailer margin
• Stockist margin
• Product schemes
• Credit period
• Free samples
• Promotional expenses
• Medical representative salary
• Travelling expenses
• Expiry and replacement
• Customer discounts
• Returns and breakage
• Interest on working capital

Therefore, a product with a high difference between MRP and net rate may still generate low net profit.

Quick Answer

The basic calculation is:

Gross Profit = Selling Price excluding GST − Landed Cost excluding recoverable GST

The landed cost may include:

Net Rate + Freight + Packing Charges + Non-creditable Taxes + Handling + Other Direct Expenses

Net operating profit is:

Net Profit = Gross Profit − Marketing Expenses − Salaries − Travel − Rent − Credit Cost − Expiry and Other Overheads

Always calculate profit on the price at which you actually sell—not on MRP.

Important Pharma Pricing Terms

1. Maximum Retail Price

MRP means Maximum Retail Price.

It is the maximum amount that can be charged from the final consumer for a pre-packed product.

MRP is inclusive of:

• GST
• Other applicable taxes
• Retail margin
• Distribution expenses
• Company margin

A retailer may sell below MRP but cannot charge GST separately over the printed MRP.

2. Net Rate

Net rate is the price at which a PCD or pharma franchise company supplies a product to its franchise partner.

A price list should clearly state whether the net rate is:

• Exclusive of GST
• Inclusive of GST
• Ex-factory
• Freight paid
• Freight extra
• Subject to packing charges
• Subject to minimum order quantity

In most pharma franchise price lists, net rate is quoted excluding GST and freight, but this should never be assumed without checking the company’s terms.

3. Landed Cost

Landed cost is the actual cost of bringing the product into your stock.

Formula

Landed Cost = Net Rate + Freight per Pack + Packing/Forwarding + Non-creditable Expenses

Where GST input credit is legally available and correctly claimed, recoverable GST should not normally be treated as a permanent product cost.

Where input tax credit is not available, the tax becomes part of the cost.

4. Price to Stockist

Price to Stockist is commonly abbreviated as PTS.

It is the price at which the company, super stockist or franchise distributor supplies the product to a stockist or wholesaler.

PTS should normally be mentioned excluding GST unless the price list clearly says otherwise.

5. Price to Retailer

Price to Retailer is commonly abbreviated as PTR.

It is the price at which a stockist, distributor or franchise partner supplies the product to the retail pharmacy.

The retailer adds its margin and sells the product to the consumer at or below MRP.

6. Trade Rate

“Trade rate” is not always used consistently.

Some companies use it for:

• PTR
• PTS
• Distributor rate
• Rate after trade discount
• Rate offered to a direct retailer

Therefore, a price list should not contain only the words “trade rate.”

It should clearly mention:

• PTS
• PTR
• GST status
• Scheme
• Freight terms
• Margin basis

7. Retailer Margin

Retailer margin is the earning available to the chemist or pharmacy.

It may be calculated either:

• As markup on PTR, or
• As discount from MRP

These methods produce different results.

8. Stockist Margin

Stockist margin is the difference between PTR and PTS after considering the agreed calculation method.

9. Franchisee Margin

Franchisee margin is the difference between the franchisee’s selling price and landed cost.

It is not automatically equal to MRP minus net rate.

Difference Between Profit, Margin and Markup

These terms should not be used interchangeably.

Suppose:

• Purchase cost: ₹50
• Selling price: ₹75
• Profit: ₹25

Profit Amount

Profit = Selling Price − Cost

₹75 − ₹50 = ₹25

Markup Percentage

Markup is calculated on cost:

Markup % = Profit ÷ Cost × 100

₹25 ÷ ₹50 × 100 = 50%

Profit-Margin Percentage

Profit margin is calculated on selling price:

Profit Margin % = Profit ÷ Selling Price × 100

₹25 ÷ ₹75 × 100 = 33.33%

Therefore:

• Markup is 50%
• Margin is 33.33%

Although the profit amount is the same, the percentages are different.

How a Pharma Company Calculates Its Net Rate

A pharma marketing company should first calculate its total cost.

Total Company Cost per Pack

The total cost may include:

• Third-party manufacturing rate
• Raw-material cost, for a manufacturer
• Packing-material cost
• Conversion charges
• Testing charges
• Artwork and development
• Inward freight
• Warehouse cost
• Salary allocation
• Administrative expenses
• Samples
• Promotional-material allocation
• Finance cost
• Expiry and return provision
• Regulatory expenses
• Company overheads

Formula

Total Cost = Product Purchase Cost + Direct Expenses + Allocated Overheads

The company can then use either a markup method or a margin method.

Net Rate Using Markup

If total cost is ₹60 and the company wants a 25% markup:

Net Rate = Cost × (1 + Markup)

₹60 × 1.25 = ₹75

Net Rate Using Desired Gross Margin

If total cost is ₹60 and the company wants a 25% gross margin on the selling price:

Net Rate = Cost ÷ (1 − Desired Margin)

₹60 ÷ 0.75 = ₹80

Therefore:

• A 25% markup gives a selling price of ₹75.
• A 25% margin gives a selling price of ₹80.

Confusing these two calculations can reduce the company’s expected profit.

How to Remove GST From MRP

Because MRP is inclusive of GST, first remove GST before calculating trade margins on a tax-exclusive basis.

Formula

MRP excluding GST = MRP ÷ (1 + GST Rate)

Suppose:

• Printed MRP: ₹105
• GST rate: 5%

MRP excluding GST = ₹105 ÷ 1.05 = ₹100

Two Methods of Calculating Retailer Margin

The parties must decide whether margin means:

• Markup on purchase price, or
• Discount from MRP

Method 1: Margin as Markup on PTR

Suppose:

• MRP excluding GST: ₹100
• Retailer margin: 20% on PTR

Formula

PTR = MRP excluding GST ÷ 1.20

PTR = ₹100 ÷ 1.20 = ₹83.33

Retailer’s gross earning excluding GST:

₹100 − ₹83.33 = ₹16.67

The retailer earns ₹16.67, which is:

• 20% of PTR, but
• 16.67% of MRP excluding GST

Method 2: Margin as Discount From MRP

Suppose the agreement says the retailer receives a 20% discount from MRP excluding GST.

Formula

PTR = MRP excluding GST × 80%

PTR = ₹100 × 0.80 = ₹80

Retailer’s gross earnings:

₹100 − ₹80 = ₹20

The result differs from the markup method.

Therefore, the price list should state:

• “20% margin on PTR,” or
• “20% discount from MRP”

It should not simply say “retailer margin 20%.”

DPCO Retailer-Margin Calculation

For scheduled formulations, NPPA’s market-based ceiling-price calculation adds a 16% margin to the average PTR.

In simplified form:

Ceiling Price excluding applicable tax = Average PTR × 1.16

Therefore:

Average PTR = Ceiling Price ÷ 1.16

If the ceiling price excluding tax is ₹116:

PTR = ₹116 ÷ 1.16 = ₹100

This does not mean the retailer margin is 16% of ₹116. It means the ceiling price is 16% above the PTR used in the calculation.

Manufacturers must check the latest NPPA ceiling or retail price before finalising MRP for a scheduled formulation. NPPA provides the Pharma Sahi Daam price-checking facility for scheduled and non-scheduled products.

How to Calculate Price to Stockist

Suppose:

• PTR excluding GST: ₹83.33
• Stockist margin: 10% on PTS

Formula

PTS = PTR ÷ 1.10

PTS = ₹83.33 ÷ 1.10 = ₹75.76

Stockist’s gross earning:

₹83.33 − ₹75.76 = ₹7.57

This is 10% of the stockist’s purchase price of ₹75.76.

When Stockist Margin Is a Discount on PTR

If the agreement provides a 10% discount from PTR:

PTS = PTR × 90%

₹83.33 × 0.90 = ₹75

Again, the two calculation methods produce different results.

Complete Pharma Franchise Profit Example

Suppose a product has:

• MRP including GST: ₹105
• GST: 5%
• Net rate excluding GST: ₹40
• Freight and handling per pack: ₹3
• Retailer margin: 20% on PTR
• Stockist margin: 10% on PTS

Step 1: Remove GST From MRP

₹105 ÷ 1.05 = ₹100

MRP excluding GST is ₹100.

Step 2: Calculate PTR

₹100 ÷ 1.20 = ₹83.33

PTR excluding GST is ₹83.33.

Step 3: Calculate PTS

₹83.33 ÷ 1.10 = ₹75.76

PTS excluding GST is ₹75.76.

Step 4: Calculate Landed Cost

₹40 + ₹3 = ₹43

Landed cost excluding recoverable GST is ₹43.

Step 5: Profit When Selling Directly to Retailer

Selling price excluding GST: ₹83.33
Landed cost: ₹43

Gross Contribution = ₹83.33 − ₹43 = ₹40.33

Gross Margin

₹40.33 ÷ ₹83.33 × 100 = 48.40%

Markup on Landed Cost

₹40.33 ÷ ₹43 × 100 = 93.79%

Step 6: Profit When Selling Through Stockist

Selling price excluding GST: ₹75.76
Landed cost: ₹43

Gross Contribution = ₹75.76 − ₹43 = ₹32.76

Gross Margin

₹32.76 ÷ ₹75.76 × 100 = 43.24%

This amount is not final net profit.

The franchisee must still deduct:

• Medical representative expenses
• Salary
• Travel
• Samples
• Compliant promotional expenses
• Rent
• Software and billing
• Interest
• Expiry
• Returns
• Bad debts

How to Calculate Product Schemes

Product schemes reduce the effective purchase rate.

Formula for Free-Goods Scheme

For a scheme such as 10+1:

Effective Rate = Listed Rate × Paid Quantity ÷ Total Quantity

Suppose:

• Net rate: ₹100
• Scheme: 10+1

The buyer pays for 10 units and receives 11 units.

Effective Rate = ₹100 × 10 ÷ 11

Effective Rate = ₹90.91 per unit

Actual Discount From Common Schemes

Scheme	Paid units	Free units	Actual effective discount
1+1	1	1	50.00%
5+1	5	1	16.67%
10+1	10	1	9.09%
10+2	10	2	16.67%
20+1	20	1	4.76%

A 10+1 scheme is not an actual 10% discount on the total quantity. Its effective discount is approximately 9.09%.

Formula for Scheme Discount

Scheme Discount % = Free Quantity ÷ Total Quantity × 100

For 10+1:

1 ÷ 11 × 100 = 9.09%

How to Calculate Combined Scheme and Cash Discount

Suppose:

• Listed net rate: ₹100
• Scheme: 10+1
• Additional invoice discount: 5%

First apply the invoice discount:

₹100 × 95% = ₹95

Then calculate the effective scheme rate:

₹95 × 10 ÷ 11 = ₹86.36

The effective product rate is ₹86.36 per unit before freight and other charges.

GST Treatment of Free Schemes

GST treatment may depend on how the invoice and scheme are structured.

The company and distributor should ensure that:

• The invoice correctly reflects taxable value.
• Free quantities are supported by the applicable scheme.
• Input tax credit is claimed only where legally permitted.
• Credit notes and discounts satisfy GST requirements.
• The accounting treatment agrees with the invoice.

Do not calculate the effective scheme rate only from the physical quantity while ignoring the tax invoice.

A chartered accountant should verify schemes involving:

• Post-sale discounts
• Turnover incentives
• Credit notes
• Year-end schemes
• Free goods
• Buy-one-get-one arrangements

How to Calculate Freight per Pack

Freight should be allocated to the quantity actually received.

Suppose:

• Total freight: ₹1,200
• Total saleable packs received: 400

Freight per Pack = ₹1,200 ÷ 400 = ₹3

If free goods are received, include them in the total saleable quantity when calculating the effective freight per unit.

How to Calculate Credit Cost

Credit given to stockists and retailers has a financial cost.

Suppose:

• Receivable amount: ₹1,00,000
• Credit period: 60 days
• Annual finance cost: 15%

Formula

Credit Cost = Receivable × Annual Rate × Credit Days ÷ 365

₹1,00,000 × 15% × 60 ÷ 365 = approximately ₹2,466

This cost should be considered while fixing the selling price.

How to Calculate Expiry and Return Provision

A franchise distributor should maintain a provision for:

• Expired goods
• Near-expiry replacement
• Damaged stock
• Leakage
• Product recall
• Unsold slow-moving products

Suppose annual purchases are ₹10 lakh and expected expiry or return loss is 2%.

Expiry Provision = ₹10,00,000 × 2% = ₹20,000

The provision can be allocated across products according to:

• Sales value
• Expiry risk
• Product movement
• Shelf life

Gross Profit vs Net Profit

Gross Contribution

Gross Contribution = Selling Price excluding GST − Variable Landed Cost

Monthly Gross Contribution

Monthly Gross Contribution = Contribution per Pack × Packs Sold

Net Operating Profit

Net Operating Profit = Gross Contribution − Fixed and Operating Expenses

Operating expenses may include:

• Salaries
• Medical representative expenses
• Travel
• Rent
• Electricity
• Telephone
• Internet
• Billing software
• Accountant
• Interest
• Samples
• Promotional material
• Expiry
• Bad debts
• Administration

Break-Even Calculation

Break-even is the sales volume at which total contribution equals fixed expenses.

Formula

Break-Even Packs = Monthly Fixed Expenses ÷ Contribution per Pack

Suppose:

• Monthly fixed expenses: ₹60,000
• Contribution per pack: ₹30

Break-Even Quantity = ₹60,000 ÷ ₹30 = 2,000 packs

The business must sell 2,000 packs per month to recover its fixed operating expenses.

Sales above this quantity may generate operating profit, subject to expiry, bad debts and other variable losses.

Monthly Profit Example

Suppose:

• Packs sold: 3,000
• Average contribution per pack: ₹30
• Monthly fixed expenses: ₹60,000
• Expiry and bad-debt provision: ₹8,000

Gross Contribution

3,000 × ₹30 = ₹90,000

Net Operating Profit

₹90,000 − ₹60,000 − ₹8,000 = ₹22,000

A high apparent MRP margin does not guarantee high monthly profit when sales volume is low.

How to Calculate Required Selling Price

Suppose:

• Landed cost: ₹50
• Variable marketing cost: ₹10
• Required contribution: ₹20

Formula

Required Selling Price = Landed Cost + Variable Cost + Required Contribution

₹50 + ₹10 + ₹20 = ₹80 excluding GST

If GST is 12%:

Invoice Value = ₹80 × 1.12 = ₹89.60

The printed MRP must also provide the agreed downstream retailer or stockist margin and remain within any applicable NPPA ceiling.

How to Calculate MRP Backwards

Suppose:

• Required PTS: ₹60
• Stockist margin: 10% on PTS
• Retailer margin: 20% on PTR
• GST: 5%

Step 1: Calculate PTR

PTR = ₹60 × 1.10 = ₹66

Step 2: Calculate Tax-Exclusive MRP

MRP excluding GST = ₹66 × 1.20 = ₹79.20

Step 3: Add GST

MRP including GST = ₹79.20 × 1.05 = ₹83.16

A commercially suitable rounded MRP may be selected only after confirming:

• NPPA restrictions
• Competitor prices
• Pack declarations
• Consumer affordability
• Applicable tax
• Company pricing policy

Scheduled and Non-Scheduled Formulations

Scheduled Formulations

Scheduled formulations are subject to NPPA ceiling-price control under DPCO.

The manufacturer should:

• Check the current ceiling price.
• Calculate pack price correctly.
• Add applicable tax only as permitted.
• Keep MRP within the legal ceiling.
• Follow current NPPA notifications.
• Obtain prior price approval where required for a qualifying new drug.

NPPA continues to issue and revise scheduled-formulation ceiling and retail prices under DPCO 2013.

Non-Scheduled Formulations

Manufacturers generally determine the initial price of non-scheduled formulations, subject to:

• DPCO monitoring
• Applicable annual increase restrictions
• Public-interest orders
• Competition
• Consumer laws
• GST
• Legal Metrology
• Other pricing directions

Do not assume that a non-scheduled medicine is completely outside NPPA monitoring. NPPA’s official FAQ states that it monitors such prices and can take corrective measures where warranted.

Retailer and Stockist Margins Are Not Universal

The commonly discussed trade structure is sometimes:

• Retailer margin: approximately 20%
• Stockist margin: approximately 10%

However, this is not a universal mandatory formula for every non-scheduled medicine.

Actual terms may vary according to:

• Product category
• Company
• Competition
• Hospital supply
• Generic or branded market
• OTC product
• PCD model
• Institutional sale
• State market
• Product movement
• Credit period
• Scheme

The agreed calculation basis must be written into the price list or distribution agreement.

Promotional Expenses and UCPMP Compliance

UCPMP 2024 states that pharmaceutical companies and their agents—including distributors, wholesalers and retailers—should not offer gifts or pecuniary benefits for the personal benefit of healthcare professionals. It also restricts travel, hospitality and monetary grants except in limited permitted circumstances.

Permissible marketing-cost heads may include:

• Product literature
• Approved visual aids
• Compliant samples
• Field-force salary
• Travel for genuine sales work
• Digital promotion
• Product training
• Approved conferences or educational activities
• Customer-service systems
• Distributor meetings
• Brand communication

Pricing should not be designed to fund prohibited inducements.

Medical Samples

Free medical samples are different from trade schemes.

Samples should be:

• Properly labelled
• Accounted for
• Not sold
• Distributed under company policy
• Compliant with UCPMP
• Included in marketing-cost calculation

The UCPMP portal’s official FAQ states that free samples should be marked “Free medical sample—not for sale” and provides a monetary limit linked to annual domestic sales.

Recommended Pharma Price-List Format

A professional PCD price list should include:

Column	Purpose
Product name	Brand name
Composition	Generic ingredients and strength
Dosage form	Tablet, capsule, syrup, injection etc.
Pack size	10×10, 100 ml, 30 capsules etc.
Net rate	Franchise purchase rate
GST	Applicable tax rate
Scheme	Free goods or discount
Effective net rate	Rate after scheme
PTS	Price to stockist
PTR	Price to retailer
MRP	Maximum retail price inclusive of taxes
MOQ	Minimum order quantity
Freight	Paid or extra
Promotional support	Visual aid, samples etc.
Product status	Scheduled/non-scheduled, where relevant

Sample Price List

Product	Pack	Net rate excl. GST	Scheme	Effective rate	PTS excl. GST	PTR excl. GST	MRP incl. GST
ABC Tablets	10×10	₹40	10+1	₹36.36	₹75.76	₹83.33	₹112
DEF Syrup	100 ml	₹28	Nil	₹28	₹54.55	₹60	₹80.64
GHI Capsules	10×10	₹55	5+1	₹45.83	₹82.65	₹90.91	₹122.18

These are mathematical examples only. Actual MRP and trade prices must be confirmed against product costs, GST classification, current NPPA requirements and commercial terms.

How to Compare Two Pharma Franchise Price Lists

Do not compare companies only by net rate.

Compare:

• Effective rate after scheme
• GST
• Freight
• Minimum order
• MRP
• PTR
• PTS
• Retailer margin
• Product quality
• Manufacturer
• Product permission
• Replacement policy
• Credit terms
• Monopoly conditions
• Promotional support
• Expiry policy
• Dispatch time

Comparison Formula

Effective Landed Rate = Effective Net Rate + Freight + Packing + Non-creditable Charges

Then calculate:

Contribution = Expected Selling Price − Effective Landed Rate

The company offering the lowest printed net rate may not provide the best overall business margin.

Direct Retailer Supply vs Stockist Route

Direct to Retailer

Advantages:

• Higher contribution
• Direct market control
• Better retailer relationship

Disadvantages:

• More billing
• More collection work
• More delivery cost
• Higher credit risk
• Greater field-force requirement

Through Stockist

Advantages:

• Wider distribution
• Lower delivery burden
• Consolidated billing
• Better local availability

Disadvantages:

• Stockist margin must be provided.
• Franchisee contribution is lower.
• Less direct control over retailers.

The correct model depends on market size and sales volume.

Why High MRP Does Not Guarantee High Profit

A high MRP may appear attractive, but it can create problems such as:

• Difficult retailer acceptance
• Patient resistance
• Excessive discount demand
• Low prescription conversion
• NPPA risk
• Poor repeat sale
• Competition from cheaper brands
• Higher expiry

A sustainable product should offer:

• Reasonable MRP
• Acceptable retailer margin
• Adequate franchise contribution
• Competitive patient price
• Consistent product quality
• Repeat demand

Important Cost Provisions

A franchisee should provide for the following before calculating profit:

Marketing Cost

• Visual aids
• Samples
• Product cards
• Digital promotion
• Field work

Staff Cost

• Medical representative salary
• Incentive
• Travel allowance
• Office staff

Distribution Cost

• Freight
• Courier
• Local delivery
• Packing

Finance Cost

• Credit period
• Delayed payments
• Bank interest
• Working-capital borrowing

Product Loss

• Expiry
• Damage
• Leakage
• Recall
• Unsold stock
• Replacement

Administrative Cost

• Rent
• Electricity
• GST filing
• Accountant
• Software
• Telephone
• Licence renewal

Practical Profit Calculator

Use the following structure for each product.

Item	Amount
Net rate excluding GST	₹_____
Scheme-adjusted rate	₹_____
Freight per pack	₹_____
Packing/handling	₹_____
Effective landed cost	₹_____
Selling price excluding GST	₹_____
Gross contribution	₹_____
Marketing cost per pack	₹_____
Credit and expiry provision	₹_____
Net contribution per pack	₹_____
Monthly quantity	_____
Monthly product contribution	₹_____

Common Pricing Mistakes

Avoid these mistakes:

• Treating MRP minus net rate as profit
• Adding GST over MRP
• Treating GST input credit as permanent cost
• Confusing markup with margin
• Assuming trade rate always means PTS
• Using a fixed 70% of MRP formula
• Assuming every retailer margin is 20%
• Ignoring freight
• Ignoring product schemes
• Calling 10+1 a 10% discount
• Ignoring credit cost
• Ignoring expiry
• Calculating profit on unsold stock
• Comparing price lists only by net rate
• Using prohibited gifts and tours as marketing-cost heads
• Fixing MRP without checking NPPA
• Printing MRP before verifying GST
• Quoting prices without stating whether GST is included

Recommended Price-List Notes

A price list should clearly state:

• Rates are exclusive or inclusive of GST.
• GST will be charged at the applicable rate.
• Freight is paid or extra.
• Schemes are subject to company policy.
• PTR and PTS are exclusive or inclusive of GST.
• MRP includes applicable taxes.
• Rates may change with raw-material and regulatory changes.
• Scheduled products remain subject to NPPA prices.
• Orders are subject to minimum quantity.
• Expiry and replacement terms apply as per agreement.
• Credit terms require written approval.

Practical Pricing Procedure for a Franchisee

Follow this sequence:

1. Obtain the latest company price list.
2. Confirm whether net rates exclude GST.
3. Check freight and packing terms.
4. Calculate scheme-adjusted net rate.
5. Calculate landed cost.
6. Remove GST from MRP.
7. confirm the margin calculation method.
8. Calculate PTR.
9. Calculate PTS.
10. Calculate franchise contribution.
11. Deduct field-force and marketing cost.
12. Add expiry and credit provision.
13. Calculate break-even sales.
14. Compare with competitors.
15. Finalise commercial rates in writing.

Final Answer

Profit in pharma franchise marketing is not calculated merely by subtracting net rate from MRP.

The correct calculation begins with:

• MRP excluding GST
• PTR
• PTS
• Scheme-adjusted net rate
• Freight
• Effective landed cost
• Actual selling price

The most important formulas are:

Profit = Selling Price − Landed Cost

Profit Margin % = Profit ÷ Selling Price × 100

Markup % = Profit ÷ Landed Cost × 100

Effective Rate for Free Scheme = Rate × Paid Quantity ÷ Total Quantity

Break-Even Quantity = Fixed Expenses ÷ Contribution per Pack

A professional price list should separately mention:

• Net rate
• GST
• Scheme
• Effective rate
• PTS
• PTR
• MRP
• Freight
• Minimum quantity

There is no universal rule that every non-scheduled pharma product must provide exactly 20% retailer and 10% stockist margin. The commercial structure should be clearly agreed upon and should comply with NPPA, GST, Legal Metrology and UCPMP requirements.

Frequently Asked Questions

1. What is net rate in pharma franchise?

Net rate is the price at which the franchise company supplies the product to the franchise partner, usually before GST and freight unless otherwise mentioned.

2. What is PTR?

PTR means Price to Retailer—the price at which a product is supplied to a retail pharmacy.

3. What is PTS?

PTS means Price to Stockist—the price at which the product is supplied to a stockist or wholesaler.

4. Is trade rate the same as PTR?

Not always. Some companies use trade rate for PTR, while others use it for PTS or distributor rate.

5. Is MRP inclusive of GST?

Yes. MRP is inclusive of applicable taxes, including GST.

6. Can GST be charged over MRP?

No. A consumer should not be charged GST separately over the printed MRP.

7. How is profit margin calculated?

Profit margin is profit divided by selling price, multiplied by 100.

8. How is markup calculated?

Markup is profit divided by cost, multiplied by 100.

9. Is a 10+1 scheme equal to a 10% discount?

No. The effective discount from a 10+1 scheme is approximately 9.09%.

10. Is retailer margin always 20%?

No. It depends on the product, company, price-control status and commercial agreement.

11. Is stockist margin always 10%?

No. Ten per cent is a commonly discussed market figure for some products, not a compulsory universal margin.

12. Should recoverable GST be included in product cost?

Generally, valid input tax credit should be treated separately rather than as a permanent cost. Confirm the accounting treatment with a tax professional.

13. What is landed cost?

Landed cost is the effective product cost after adding freight, packing, handling and other non-recoverable direct expenses.

14. How do I calculate break-even sales?

Divide total fixed monthly expenses by the net contribution earned per pack.

15. Should promotional gifts and tours be included in marketing cost?

Pricing should not include prohibited inducements. Pharmaceutical marketing must comply with UCPMP 2024.

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