Factors affecting profit margin in Pharmaceutical Industry
Pharmaceutical industry is very wide segment of businesses and each type of business has its own profit. Likewise pharma manufacturers has different profit margin as compared to PCD Pharma Companies. Similarly pharma marketing company’s profit share is different from retail pharmacy. All parts of pharma businesses has completely different profit share as compared to other one. In this blog we are going to discuss about profit share of major pharma businesses.
Profit share of each pharma business is different from one another. We cannot estimate exact amount of profit for any pharma company. We need to understand company’s business operation deeply to understand its margin. Mostly business players are associated with each other and there profit is also affected by various factors such as their brand value, quality, pricing, availability, status of company, business practice etc. So here we are going to discuss whole distribution channel of pharma segment to understand profit share. Pharma distribution channel consists of following business players.
- Manufacturing company
- Marketing Company
- C&F agents
- Stockist
- Distributor/wholesaler
- Retail pharmacy
Profit share is divided between above given players but sometime some other individuals also included. It we take profit share ethically then margin of bottom player should be fixed but in the case of unethical business practice actual profit is higher than profit because own profit is added in actual cost. For example selling medicines at MRP cost but actual cost is 3-4 times lesser than MRP.
Company’s profit is also dependent on its expense because some pharma manufacturing companies and Pharma Franchise Companies employ machinery, marketing team, staff personals, promotional items, advertisement and other expenses. So in that case, they set their profit accordingly. Similarly sale turnover also affect company profit. Big profit also gains by big sale of pharma product so pharma company can survive in low margins also. Infect trade policies, competitor company’s business strategy and their pricing also affect profit of the pharma company. Similarly marketing type of pharma company such as generic marketing, branded marketing, pcd marketing and pharma franchise marketing also affect expense and profit sharing of pharma company.
So we can say that nothing is permanent in pharmaceutical business sector. There are many factors which largely affect company’s business strategy and profit margins.
