Pharmaceutical pricing usually involves several prices between the company and the final consumer.

The most commonly used terms are:

• MRP: Maximum Retail Price
• PTR: Price to Retailer
• PTS: Price to Stockist
• C&F Price: Price applicable before the stockist level
• Net Rate: Actual commercial rate after discounts or schemes
• GST: Goods and Services Tax

A common query is:

“How can I calculate MRP, Price to Retailer and Price to Stockist when GST and trade margins are known?”

The practical answer is:

First establish whether the percentages represent markup on purchase price or discount from the selling price. These two methods produce different results. After deciding the method, remove GST from MRP and calculate each price level sequentially.

Meaning of MRP, PTR and PTS

Maximum Retail Price

MRP means Maximum Retail Price.

It is the maximum amount at which a packaged product may be sold to the final consumer.

MRP normally includes:

• GST
• Retailer earnings
• Stockist earnings
• C&F or distribution cost
• Company expenses
• Marketing expenses
• Company profit
• Manufacturing and packaging costs

The product may be sold below MRP, but GST should not normally be added again over the printed MRP.

Price to Retailer

PTR means Price to Retailer.

It is the price at which a stockist, distributor or pharmaceutical company supplies the product to a retail chemist.

PTR may be quoted:

• Excluding GST, or
• Including GST

The quotation and invoice should clearly state which basis is being used.

Price to Stockist

PTS means Price to Stockist.

It is the price at which a pharmaceutical company, C&F agent or super stockist supplies the product to a stockist or distributor.

PTS may also be quoted:

• Excluding GST, or
• Including GST

For accurate comparison, always ask whether the quoted PTS is before or after GST.

Margin, Markup and Discount Are Different

The word “margin” is often used loosely in pharmaceutical trade.

Before calculating PTR or PTS, understand these three terms.

1. Markup on Purchase Price

Markup is calculated on the buyer’s purchase price.

Formula:

Markup % = Profit ÷ Purchase Price × 100

Example:

• Retailer purchase price: ₹100
• Retailer selling price: ₹120
• Profit: ₹20

Markup:

₹20 ÷ ₹100 × 100 = 20%

Therefore, a 20% markup on a purchase price of ₹100 gives a selling price of ₹120.

2. Margin on Selling Price

Margin on sales is calculated on the selling price.

Formula:

Margin % = Profit ÷ Selling Price × 100

Using the same example:

₹20 ÷ ₹120 × 100 = 16.67%

Therefore:

• Markup on cost is 20%.
• Margin on selling price is 16.67%.

They are not the same.

3. Discount From MRP

Discount is calculated as a reduction from the listed price.

Formula:

Discount % = Discount Amount ÷ MRP × 100

Example:

• MRP: ₹120
• Supply price: ₹96
• Difference: ₹24

Discount:

₹24 ÷ ₹120 × 100 = 20%

A 20% discount from MRP gives ₹96.

However, ₹96 increased by 20% becomes only ₹115.20—not ₹120.

This is why:

MRP × 80%

and:

MRP ÷ 120%

do not produce the same answer.

Decide Which Pricing Method You Are Using

There are two common commercial methods.

Method A: Markup on Purchase Price

Under this method:

• Retailer earns a stated percentage on PTR.
• Stockist earns a stated percentage on PTS.
• C&F earns a stated percentage on its purchase or billing price.

This is the mathematically correct method when the agreement says:

• 20% markup to retailer
• 10% markup to stockist
• 6% markup to C&F

Method B: Discount From Selling Price

Under this method:

• PTR is calculated by deducting a percentage from MRP.
• PTS is calculated by deducting another percentage from PTR.

This method is correct when the agreement specifically says:

• 20% discount from MRP
• 10% discount from PTR

Do not describe a discount formula as a markup formula.

How to Remove GST From MRP

MRP is generally GST-inclusive.

To calculate the price excluding GST:

Price excluding GST = GST-inclusive price ÷ (1 + GST rate)

The GST rate must be entered as a decimal.

Examples:

• 5% GST = 0.05
• 18% GST = 0.18

GST Factor

GST factor = 1 + GST rate

Examples:

GST Rate	GST Factor
5%	1.05
18%	1.18
40%	1.40

Example:

• MRP including GST: ₹120
• GST: 5%

MRP excluding GST

= ₹120 ÷ 1.05

= ₹114.29

GST included in the MRP:

GST amount

= ₹120 − ₹114.29

= ₹5.71

Do not calculate reverse GST as:

₹120 × 5% = ₹6

The ₹120 already includes GST. Therefore, reverse calculation must be made by division.

Method A: Calculate PTR and PTS Using Markup

Let:

• M = MRP inclusive of GST
• G = GST rate
• R = Retailer markup
• S = Stockist markup
• C = C&F markup

All percentages should be converted to decimals.

Step 1: Calculate MRP Excluding GST

MRP excluding GST = M ÷ (1 + G)

Step 2: Calculate PTR Excluding GST

PTR excluding GST

= MRP excluding GST ÷ (1 + R)

Combined formula:

PTR excluding GST

= M ÷ [(1 + G) × (1 + R)]

Step 3: Calculate PTS Excluding GST

PTS excluding GST

= PTR excluding GST ÷ (1 + S)

Combined formula:

PTS excluding GST

= M ÷ [(1 + G) × (1 + R) × (1 + S)]

Step 4: Calculate C&F or Company Price

C&F price excluding GST

= PTS excluding GST ÷ (1 + C)

Combined formula:

C&F price excluding GST

= M ÷ [(1 + G) × (1 + R) × (1 + S) × (1 + C)]

Complete Example Using Markup Method

Suppose:

• MRP including GST: ₹120
• GST: 5%
• Retailer markup: 20%
• Stockist markup: 10%

Step 1: Remove GST From MRP

MRP excluding GST

= ₹120 ÷ 1.05

= ₹114.29

Step 2: Calculate PTR Excluding GST

Formula:

PTR excluding GST

= MRP excluding GST ÷ (1 + Retailer markup)

Calculation:

PTR excluding GST

= ₹114.29 ÷ 1.20

= ₹95.24

Step 3: Calculate GST on PTR

GST on PTR

= ₹95.24 × 5%

= ₹4.76

PTR including GST:

₹95.24 + ₹4.76

= ₹100.00

Step 4: Calculate PTS Excluding GST

Formula:

PTS excluding GST

= PTR excluding GST ÷ (1 + Stockist markup)

Calculation:

PTS excluding GST

= ₹95.24 ÷ 1.10

= ₹86.58

Step 5: Calculate GST on PTS

GST on PTS

= ₹86.58 × 5%

= ₹4.33

PTS including GST:

₹86.58 + ₹4.33

= ₹90.91

Final Price Table Under 5% GST

Price Level	Excluding GST	Including 5% GST
MRP or consumer price	₹114.29	₹120.00
PTR	₹95.24	₹100.00
PTS	₹86.58	₹90.91

Retailer Earnings

Retailer earnings excluding GST:

₹114.29 − ₹95.24

= ₹19.05

Retailer markup:

₹19.05 ÷ ₹95.24 × 100

= 20%

Stockist Earnings

Stockist earnings excluding GST:

₹95.24 − ₹86.58

= ₹8.66

Stockist markup:

₹8.66 ÷ ₹86.58 × 100

= 10%

Direct Formula for PTR Under 5% GST

Where:

• MRP includes GST
• Retailer markup is 20%
• GST is 5%

PTR excluding GST

= MRP ÷ (1.05 × 1.20)

For an MRP of ₹120:

PTR

= ₹120 ÷ 1.26

= ₹95.24

Direct Formula for PTS Under 5% GST

PTS excluding GST

= MRP ÷ (1.05 × 1.20 × 1.10)

For an MRP of ₹120:

PTS

= ₹120 ÷ 1.386

= ₹86.58

Method B: Calculate PTR and PTS Using Discount

Suppose the commercial agreement states:

• Retailer discount from MRP: 20%
• Stockist discount from PTR: 10%
• MRP: ₹120
• GST: 5%

Step 1: Deduct Retailer Discount

PTR including GST:

₹120 × (1 − 20%)

= ₹96.00

PTR excluding GST:

₹96 ÷ 1.05

= ₹91.43

Step 2: Deduct Stockist Discount

PTS excluding GST:

₹91.43 × (1 − 10%)

= ₹82.29

PTS including GST:

₹82.29 × 1.05

= ₹86.40

Price Table Under Discount Method

Price Level	Excluding GST	Including GST
MRP	₹114.29	₹120.00
PTR	₹91.43	₹96.00
PTS	₹82.29	₹86.40

Why Both Methods Give Different Results

Using the same stated percentages:

Calculation Method	PTR Excluding GST	PTS Excluding GST
20% retailer and 10% stockist markup	₹95.24	₹86.58
20% and 10% sequential discount	₹91.43	₹82.29

The difference occurs because percentages are being calculated on different bases.

Therefore, every price list or agreement should state:

• Retailer markup on PTR
• Retailer discount from MRP
• Stockist markup on PTS
• Stockist discount from PTR

Do not write only:

“Retailer margin 20%, stockist margin 10%.”

How to Calculate MRP From PTS

Suppose you know:

• PTS excluding GST
• Stockist markup
• Retailer markup
• GST rate

Formula:

MRP

= PTS × (1 + Stockist markup)

      × (1 + Retailer markup)

      × (1 + GST)

Example

Suppose:

• PTS excluding GST: ₹100
• Stockist markup: 10%
• Retailer markup: 20%
• GST: 5%

PTR excluding GST

= ₹100 × 1.10

= ₹110

Consumer price excluding GST:

₹110 × 1.20

= ₹132

MRP including GST:

₹132 × 1.05

= ₹138.60

The commercial MRP may be rounded to an appropriate figure such as ₹138, ₹139 or ₹140, provided that:

• Price-control requirements are followed.
• The printed MRP is properly approved.
• The price is commercially reasonable.
• The product is not priced above an applicable NPPA ceiling.

How to Calculate MRP From Company Price

Suppose the company’s billing or realization price excluding GST is known.

Let:

• Company price: ₹100
• C&F markup: 6%
• Stockist markup: 10%
• Retailer markup: 20%
• GST: 5%

Formula:

MRP

= Company Price

  × (1 + C&F markup)

  × (1 + Stockist markup)

  × (1 + Retailer markup)

  × (1 + GST)

Calculation:

MRP

= ₹100 × 1.06 × 1.10 × 1.20 × 1.05

= ₹146.92

The calculated commercial MRP may be rounded after checking:

• Competitor MRP
• Price control
• Market acceptance
• Pack size
• Product positioning
• Required company realization

How to Calculate MRP Using Discount Method

Where retailer and stockist percentages are discounts rather than markup:

MRP

= PTS excluding GST × (1 + GST)

  ÷ [(1 − Retailer discount)

     × (1 − Stockist discount)]

Example:

• PTS excluding GST: ₹100
• Retailer discount: 20%
• Stockist discount: 10%
• GST: 5%

MRP

= ₹100 × 1.05 ÷ (0.80 × 0.90)

= ₹145.83

This is different from the ₹146.92 calculated under the markup method.

How to Build MRP From Manufacturing Cost

MRP should not be calculated by simply adding all percentages directly to manufacturing cost.

Different costs and margins apply at different stages.

A better pricing ladder is:

Step 1: Calculate Landed Product Cost

Include:

• Manufacturing cost
• Product development allocation
• Packaging cost
• Freight from manufacturer
• Testing
• Artwork and printing
• Handling
• Breakage provision
• Non-creditable taxes, if any

Step 2: Add Company Expenses

Include:

• Staff salary
• Office expenses
• Marketing
• Sales promotion
• Samples
• Warehousing
• Distribution support
• Expiry provision
• Bad-debt provision
• Regulatory expenses

Step 3: Add Company Profit

After adding costs and desired company profit, determine the required:

Company realization excluding GST

Step 4: Add Channel Markups Sequentially

Apply:

• C&F markup
• Stockist markup
• Retailer markup

Step 5: Add GST

GST should be added at the end to derive the GST-inclusive MRP.

Example From Manufacturing Cost

Suppose:

Component	Amount
Manufacturing and packaging cost	₹55
Freight and handling	₹5
Marketing allocation	₹15
Administrative expenses	₹5
Company profit	₹20
Required company realization	₹100

Now apply:

• C&F markup: 6%
• Stockist markup: 10%
• Retailer markup: 20%
• GST: 5%

MRP

= ₹100 × 1.06 × 1.10 × 1.20 × 1.05

= ₹146.92

The final proposed MRP can then be evaluated against:

• Competitor products
• Patient affordability
• NPPA ceiling price
• Actual market discount
• Product positioning
• Expected sales volume

Excel Formulas for MRP, PTR and PTS

Suppose the Excel sheet contains:

Cell	Detail
B2	MRP including GST
C2	GST rate
D2	Retailer markup
E2	Stockist markup
F2	C&F markup

Enter percentages as:

• 5%
• 20%
• 10%
• 6%

MRP Excluding GST

=B2/(1+C2)

PTR Excluding GST

=B2/((1+C2)*(1+D2))

PTR Including GST

=B2/(1+D2)

PTS Excluding GST

=B2/((1+C2)*(1+D2)*(1+E2))

PTS Including GST

=B2/((1+D2)*(1+E2))

Company or C&F Base Price Excluding GST

=B2/((1+C2)*(1+D2)*(1+E2)*(1+F2))

Excel Formula for MRP From PTS

Suppose:

Cell	Detail
B2	PTS excluding GST
C2	GST rate
D2	Retailer markup
E2	Stockist markup

Formula:

=B2*(1+E2)*(1+D2)*(1+C2)

Excel Formulas Using Discount Method

Suppose:

• B2 = MRP including GST
• C2 = GST
• D2 = Retailer discount
• E2 = Stockist discount

PTR Excluding GST

=B2*(1-D2)/(1+C2)

PTS Excluding GST

=B2*(1-D2)*(1-E2)/(1+C2)

When Percentages Are Entered as Whole Numbers

Suppose Excel contains:

• GST = 5
• Retailer markup = 20
• Stockist markup = 10

Use /100 in the formula.

PTR:

=B2/((1+C2/100)*(1+D2/100))

PTS:

=B2/((1+C2/100)*(1+D2/100)*(1+E2/100))

It is usually easier to format the cells as percentages and enter:

• 5%
• 20%
• 10%

How to Calculate Actual Retailer Profit

Retailer profit should be calculated excluding GST because GST collected is not the retailer’s trading income.

Formula:

Retailer gross profit

= Selling price excluding GST − PTR excluding GST

Retailer markup:

Retailer markup %

= Retailer profit ÷ PTR × 100

Retailer margin on sales:

Retailer sales margin %

= Retailer profit ÷ Selling price excluding GST × 100

How to Calculate Actual Stockist Profit

Stockist gross profit

= PTR excluding GST − PTS excluding GST

Stockist markup:

Stockist markup %

= Stockist profit ÷ PTS × 100

Stockist margin on sales:

Stockist sales margin %

= Stockist profit ÷ PTR × 100

Effect of Free-Goods Schemes

Schemes such as:

• 10+1
• 10+2
• 20+5

reduce the buyer’s effective net cost.

Example: 10+1 Scheme

Suppose:

• Billed quantity: 10 units
• Free quantity: 1 unit
• Rate per billed unit: ₹100

Invoice taxable value:

10 × ₹100 = ₹1,000

Total units received:

10 + 1 = 11 units

Effective cost per unit excluding GST:

₹1,000 ÷ 11

= ₹90.91

Therefore, the printed PTS may be ₹100, but the effective net rate after the scheme is ₹90.91.

Always distinguish between:

• Invoice rate
• Scheme rate
• Effective net rate
• GST
• Freight
• Cash discount

Cash Discount and Trade Discount

Trade Discount

A trade discount is generally adjusted before arriving at taxable value when it is part of the invoice and applicable GST conditions are met.

Cash Discount

A cash discount may be linked to:

• Advance payment
• Payment within a specified period
• Immediate payment
• Achievement of turnover

The GST treatment of post-sale discounts depends on documentation and applicable GST conditions.

Commercial teams should not reduce GST output merely because an informal discount was given later.

Freight and PTS

Clarify whether PTS is:

• Ex-factory
• Freight paid
• Freight to pay
• Door delivery
• Godown delivery

Example:

• PTS excluding GST: ₹100
• Freight allocation: ₹3
• Effective stockist cost: ₹103

A lower PTS with separate freight may be more expensive than a slightly higher freight-paid rate.

Regulatory Checks Before Fixing MRP

1. Check Whether the Medicine Is Scheduled

For a scheduled formulation:

• Check the latest NPPA notification.
• Confirm formulation, strength, dosage form and unit.
• Calculate the ceiling price for the proposed pack.
• Add applicable taxes only as permitted.
• Do not exceed the allowed maximum price.

A company cannot ignore the ceiling price merely because its production or marketing expenses are high.

2. Check Whether It Is a New Drug Under DPCO

Certain new drugs require an NPPA-fixed retail price.

Do not freely fix the launch MRP without checking whether the formulation falls within the applicable definition.

3. Non-Scheduled Medicines

For non-scheduled formulations:

• Initial commercial pricing is generally determined by the company.
• NPPA continues to monitor prices.
• MRP should not be increased by more than 10% during the preceding 12 months.

4. Verify the GST Rate

Do not assume that every medicine attracts 5% GST.

Depending on the product, applicable rates may include:

• 0%
• 5%
• 18%
• Another notified rate

Check:

• HSN
• Composition
• Product classification
• Applicable notification
• Exemption or specified list

5. Verify Pack Size

NPPA ceilings may be notified per:

• Tablet
• Capsule
• Millilitre
• Gram
• Injection
• Defined unit

Calculate the full-pack ceiling correctly.

Example:

Ceiling price per tablet × Number of tablets in pack

Scheduled Medicine and the 16% PTR Concept

Under the current NPPA pricing methodology, a 16% retailer margin is added to the average PTR while deriving the ceiling price of a scheduled formulation.

Simplified illustration:

• Average PTR excluding applicable tax: ₹100
• Retailer addition: 16%

Ceiling price

= ₹100 × 1.16

= ₹116

Where 5% GST is applicable:

Maximum GST-inclusive amount

= ₹116 × 1.05

= ₹121.80

This is only a simplified illustration. The latest product-specific NPPA notification must be followed.

Are 20% Retailer and 10% Stockist Margins Compulsory?

No universal rule makes 20% retailer and 10% stockist margins compulsory for every pharmaceutical product.

These percentages are frequently used as commercial benchmarks for certain non-scheduled products.

Actual terms may differ according to:

• Product category
• Scheduled or non-scheduled status
• Prescription or trade-generic model
• Hospital supply
• Government tender
• PCD franchise
• Distributor arrangement
• Product demand
• Schemes
• Company policy

The agreement should clearly state the calculation basis.

Common Calculation Mistakes

Avoid:

• Using MRP × (1 − GST%) to remove GST
• Confusing margin with discount
• Quoting PTR without saying whether GST is included
• Quoting PTS without freight terms
• Adding all margins directly to manufacturing cost
• Calculating GST as profit
• Ignoring free-goods schemes
• Ignoring cash discounts
• Ignoring NPPA ceiling prices
• Assuming all medicines attract 5% GST
• Calculating trade earnings on GST-inclusive values
• Comparing different pack sizes
• Rounding every stage excessively
• Printing MRP before final regulatory review

Recommended Price-List Format

A professional price list should contain:

Product	Pack	MRP Incl. GST	GST	PTR Excl. GST	PTR Incl. GST	PTS Excl. GST	PTS Incl. GST	Scheme	Freight

It should also mention:

• Effective date
• Price validity
• GST treatment
• Freight terms
• Scheme conditions
• Payment terms
• Expiry policy
• Right to revise rates
• Applicable NPPA restrictions

Practical Formula Summary

Remove GST

Ex-GST price = Inclusive price ÷ (1 + GST rate)

PTR Using Retailer Markup

PTR Ex-GST

= MRP ÷ [(1 + GST) × (1 + Retailer markup)]

PTS Using Stockist Markup

PTS Ex-GST

= MRP ÷ [(1 + GST)

         × (1 + Retailer markup)

         × (1 + Stockist markup)]

MRP From PTS

MRP

= PTS × (1 + Stockist markup)

      × (1 + Retailer markup)

      × (1 + GST)

PTR Using Discount From MRP

PTR Ex-GST

= MRP × (1 − Retailer discount)

  ÷ (1 + GST)

PTS Using Sequential Discounts

PTS Ex-GST

= MRP × (1 − Retailer discount)

      × (1 − Stockist discount)

      ÷ (1 + GST)

Frequently Asked Questions

1. What is the formula for PTR?

When retailer percentage means markup on the retailer’s purchase price:

PTR Ex-GST

= MRP ÷ [(1 + GST) × (1 + Retailer markup)]

2. What is the formula for PTS?

PTS Ex-GST

= PTR Ex-GST ÷ (1 + Stockist markup)

3. Is MRP inclusive of GST?

Yes, printed MRP is generally the maximum GST-inclusive consumer price.

4. Can GST be charged over MRP?

GST should not normally be added over the printed MRP.

5. Is 20% retailer margin equal to a 20% discount from MRP?

No.

A 20% discount from MRP is equivalent to a 25% markup on the reduced purchase price.

6. How do I remove 5% GST from MRP?

Divide the GST-inclusive MRP by 1.05.

Example:

₹120 ÷ 1.05 = ₹114.29

7. Is PTR inclusive or exclusive of GST?

It may be quoted either way. The price list should clearly specify the basis.

8. Can the company fix any MRP it wants?

Not for scheduled medicines or products with an NPPA-fixed retail price. Non-scheduled medicine pricing is also subject to DPCO monitoring and limits on subsequent increases.

9. Should free quantities be included in margin calculations?

Yes. Free-goods schemes reduce the buyer’s effective net cost and increase the effective commercial margin.

10. Which method should be used?

Use the method stated in the commercial agreement. For clarity, markup on purchase price is generally easier to verify across each distribution stage.

Final Thoughts

Correct pharma pricing starts by asking:

Is the stated percentage a markup, a sales margin or a discount?

The safest calculation sequence is:

Determine MRP excluding GST
→ Calculate PTR
→ Calculate PTS
→ Calculate C&F or company realization
→ Add GST separately on invoices
→ Verify schemes and freight
→ Check NPPA and GST compliance

Never rely on a formula that simply deducts percentages without identifying their basis.

The complete price should be commercially workable for:

• Company
• C&F agent
• Stockist
• Retailer
• Consumer

while remaining compliant with:

• NPPA ceiling prices
• DPCO requirements
• GST classification
• Printed MRP
• Product-specific pricing restrictions

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