In this article
If you work in pharma distribution or run a chemist shop, three abbreviations decide your profit on every strip of medicine: MRP, PTR and PTS. New entrants to the trade often find the calculations confusing, especially once GST and schemes come into play. Here’s a step-by-step explanation.
Pricing rules, GST rates and trade margins change over time and differ by product. Use this guide to understand the method, and always confirm current terms with your company, distributor or a tax professional.
The three prices
| Term | Full form | Who pays it |
|---|---|---|
| MRP | Maximum Retail Price | The patient, at the chemist’s counter (includes GST) |
| PTR | Price to Retailer | The chemist, buying from the stockist/distributor |
| PTS | Price to Stockist | The stockist, buying from the company or C&F agent |
The flow of goods is: Company → Stockist (pays PTS) → Retailer (pays PTR) → Patient (pays up to MRP). Each level keeps the difference as its gross margin.
Step-by-step calculation
The most common trade method works backwards from MRP:
Step 1: Remove GST from MRP
MRP includes GST, but margins are calculated on the price before tax.
MRP excluding GST = MRP ÷ (1 + GST rate)
Step 2: Deduct the retailer’s margin to get PTR
PTR = MRP excluding GST × (1 − Retailer margin %)
Step 3: Deduct the stockist’s margin to get PTS
PTS = PTR × (1 − Stockist margin %)
Example: MRP ₹105, GST 5%, retailer margin 20%, stockist margin 10%.
MRP excluding GST = 105 ÷ 1.05 = ₹100
PTR = 100 × 0.80 = ₹80
PTS = 80 × 0.90 = ₹72
Retailer earns ₹20 per unit; stockist earns ₹8 per unit (before expenses).
When invoicing, GST is added on top of PTR or PTS. In the example, the chemist’s invoice shows ₹80 + 5% GST = ₹84, which the chemist recovers as input tax credit when selling at MRP.
Typical margins
For many branded medicines, trade practice has commonly been around 20% for retailers and 10% for stockists, though companies negotiate their own terms.
For scheduled (price-controlled) formulations, the government fixes ceiling prices, and the Drugs (Prices Control) Order allows lower trade margins — commonly cited as 16% for retailers and 8% for wholesalers, expressed on the trade price rather than on MRP. That means real margins on scheduled drugs are thinner than on most branded or OTC products.
Margin on price vs markup on cost
A frequent source of confusion is the base of the percentage:
- Margin on selling price: 20% of ₹100 = ₹20, so PTR = ₹80.
- Markup on cost: 20% added to ₹80 = ₹96, not ₹100.
A “20% margin” and a “20% markup” are not the same thing. When reading a price list or scheme circular, check which one is meant.
How schemes change the real margin
Companies often offer free goods — “10 + 1”, “5 + 1” and so on — instead of extra discounts. You pay for 10 units and receive 11.
Effective rate = PTR × Paid units ÷ (Paid + Free units)
With a PTR of ₹80 and a 10 + 1 scheme: ₹80 × 10 ÷ 11 = ₹72.73 per unit. Against ₹100 (MRP excluding GST), the chemist's effective margin rises from 20% to about 27.3%.
Schemes improve margins only if the extra stock actually sells before its expiry date. Overstocking slow movers to chase a scheme is one of the most common ways pharmacies lose money.
Quick checklist for pricing a new product
- Confirm the MRP and the applicable GST rate for the product.
- Check whether it is a scheduled (price-controlled) formulation.
- Confirm the margin basis (percentage of price or markup on cost).
- Factor in schemes, credit period and expiry risk.
- Compare the effective margin with your other suppliers.
Calculate it instantly
Our Pharma Margin Calculator works out PTR, PTS, GST-inclusive rates, profit per unit and the effective margin after any free-goods scheme — just enter the MRP, GST rate and margins.
Free toolTry the Pharma Margin Calculator (PTR/PTS)Work out PTR, PTS, margins and the net rate after schemes, from the MRP.Frequently asked questions
Is the retailer margin calculated on MRP or on PTR?
Both conventions exist. Trade margins are often quoted as a percentage of the selling price before tax (MRP excluding GST), while some regulations express the margin as a percentage added on top of PTR. Always check which base your company or price list uses.
Can a chemist sell above MRP?
No. MRP is the maximum retail price, inclusive of all taxes. Chemists may sell below MRP but not above it.
Who sets prices for scheduled medicines?
The National Pharmaceutical Pricing Authority (NPPA) fixes ceiling prices for scheduled formulations under the Drugs (Prices Control) Order.
For general information only — not medical advice, diagnosis or treatment. Always consult a qualified doctor, pharmacist or healthcare professional. Written by the Toolsopedia team. Spotted an error? Tell us and we’ll fix it.