Earning profit is the fundamental objective of any business. Especially, if you are in the niche of medicines, then you can expect more significant profit margins.
The pharmaceutical sector has outperformed in the past three decades. With the tremendous economic growth in India, healthcare and wellness business performed remarkably well.
More and more companies are entering because of golden opportunities of earning.
Many people wonder about the profit margins in the pharma sector. It is quite phenomenal according to industry experts.
Mainly, the profit margin in the wholesale business is substantial. Though various aspects put an impact on the profit margins, a general assumption can be made about profitability.
It varies from company to company
If you are an entrepreneur who wants to take the wholesale agency of a company, then it is essential to see the profit-sharing policy of the company first.
Some companies are client-oriented. Hence, they share a substantial percentage of the profit with the channel partners.
Some companies are conservative. They share a little amount as profit share. However, they run incentive schemes for wholesalers.
The money one can make by launching a wholesale pharma business gets affected by a variety of factors:
- Branded or unbranded medicine
- Generic medicine
- Brand value
- Status and reputation of the company
- Ethical or unethical practices
- OTC product
The distribution channel and profits
The distribution channel starts from the company. The next entities are the C&F Agent (career and forwarding agent), stockiest, distributor, retailer or chemist or pharmacy.
If you are a wholesaler or stockiest, then the profit margin varies from 6 percent to 10 percent. Usually, there are feeble chances of having any special offers or schemes in case of wholesalers.
The wholesaler needs to invest in establishing a distribution channel by providing advance payment to the manufacturer, C&F agent. Sometimes, he must provide a credit facility as well.
In a branded marketing, the profit margin is calculated after adding all types of expenses such as sales and marketing expenses, doctor’s commission, transportation, operating costs and so on.
Of course, all the expense heads are not added to the individual product, but the profit margin calculation is based on the whole product catalog.
If you are a wholesaler, then the company fixes a profit margin and distributes it to you. Now, you are supposed to distribute it further after keeping your share.
The figures included in the blog are generic. Actual numbers may vary depending on the market conditions.
Also Read: How to start a wholesale pharmacy business in India?
