Understanding sale prices of bulk drugs is essential for B.Pharm students involved in procurement, pricing, and regulation. This introduction reviews pricing components — ex‑factory price, trade margins, taxes (GST/VAT), landed cost, tendering, and regulatory controls like DPCO and NPPA — and explores calculation methods, mark‑up vs margin, discounts, and cost-plus pricing. Knowing these concepts helps future pharmacists assess supply chain economics, ensure compliance, and make informed purchasing or pricing decisions. Practical knowledge of price fixation, procurement strategies, and market dynamics equips students to manage cost-effective sourcing of active pharmaceutical ingredients and wholesale drugs. Now let’s test your knowledge with 30 MCQs on this topic.
Q1. What is the term for a bulk drug primarily used as the active component in formulations?
- Active Pharmaceutical Ingredient (API)
- Excipient
- Finished Product
- Coating Agent
Correct Answer: Active Pharmaceutical Ingredient (API)
Q2. Which price typically represents the manufacturer’s selling price for bulk drug before taxes and distribution costs?
- Ex-factory price
- Maximum Retail Price (MRP)
- CIF (Cost, Insurance, Freight) price
- Retail price
Correct Answer: Ex-factory price
Q3. In India, which order governs price control for essential medicines?
- Drug Price Control Order (DPCO)
- Drug Regulatory Action Plan (DRAP)
- Food and Drug Administration (FDA) Order
- WHO Pricing Guidelines
Correct Answer: Drug Price Control Order (DPCO)
Q4. Which authority is primarily responsible for enforcing drug prices and ceiling prices in India?
- National Pharmaceutical Pricing Authority (NPPA)
- Central Drugs Standard Control Organization (CDSCO)
- National AIDS Control Organisation (NACO)
- Food Safety and Standards Authority of India (FSSAI)
Correct Answer: National Pharmaceutical Pricing Authority (NPPA)
Q5. Maximum Retail Price (MRP) is generally applied to which of the following?
- Packaged formulations
- Bulk APIs
- Raw materials
- Industrial solvents
Correct Answer: Packaged formulations
Q6. Is Goods and Services Tax (GST) applicable on the sale of bulk drugs in most jurisdictions?
- Yes
- No
- Only on export
- Only on retail sales
Correct Answer: Yes
Q7. What does the trade margin represent in bulk drug distribution?
- Difference between purchase and selling price
- Tax paid on sale
- Manufacturing cost
- Shipping cost
Correct Answer: Difference between purchase and selling price
Q8. Which term describes the price excluding transport and insurance, quoted at the seller’s premises?
- Ex-works (ex-factory) price
- CIF price
- FOB price
- Landed cost
Correct Answer: Ex-works (ex-factory) price
Q9. Landed cost of an imported bulk drug typically includes which of the following?
- Purchase price, freight, insurance, customs duty
- Only purchase price
- Only freight and insurance
- Retail margin and advertising
Correct Answer: Purchase price, freight, insurance, customs duty
Q10. In government procurement tenders, the term ‘L1’ usually refers to which bidder?
- Highest bidder
- Lowest evaluated responsive bidder
- First registered bidder
- Bidder with best quality rating
Correct Answer: Lowest evaluated responsive bidder
Q11. Which mechanism is commonly used to set a maximum selling price for scheduled drugs?
- Price ceiling fixation
- Open market bidding
- Free pricing by manufacturer
- Dynamic surge pricing
Correct Answer: Price ceiling fixation
Q12. Bulk drugs are primarily sold through which channel?
- Business-to-business (B2B) to manufacturers and wholesalers
- Direct retail to consumers
- Hospital outpatient counters
- Doorstep delivery to patients
Correct Answer: Business-to-business (B2B) to manufacturers and wholesalers
Q13. If the cost of production of a bulk drug is ₹200 and the manufacturer adds a 25% margin on cost, what is the selling price before tax?
- ₹225
- ₹250
- ₹275
- ₹300
Correct Answer: ₹250
Q14. If the ex-factory price is ₹100, trade margin 20% on ex-factory, and GST is 12% applied on subtotal (ex-factory + margin), what is the final price?
- ₹132
- ₹134.4
- ₹136
- ₹140
Correct Answer: ₹134.4
Q15. Which statement correctly distinguishes markup from margin?
- Markup is percent of cost; margin is percent of selling price
- Markup is percent of selling price; margin is percent of cost
- Markup and margin are always the same
- Markup is a tax; margin is a discount
Correct Answer: Markup is percent of cost; margin is percent of selling price
Q16. Parallel importation of bulk drugs mainly tends to cause which market effect?
- Increased competition and reduced domestic prices
- Guaranteed higher domestic prices
- Elimination of local manufacturers
- Improved patent protection
Correct Answer: Increased competition and reduced domestic prices
Q17. Price discrimination in pharmaceutical markets refers to:
- Charging different prices to different customers or markets
- Charging the same price globally
- Fixing a single regulated price
- Giving only cash discounts
Correct Answer: Charging different prices to different customers or markets
Q18. Which document issued by the seller records the final agreed sale price and quantity for a bulk drug shipment?
- Invoice
- Purchase order
- Quotation
- Goods receipt
Correct Answer: Invoice
Q19. Cost-plus pricing method involves:
- Adding a predetermined profit margin to the cost of production
- Setting the price equal to competitors’ price
- Pricing purely based on demand
- Pricing excluding all taxes
Correct Answer: Adding a predetermined profit margin to the cost of production
Q20. Which component is NOT normally included in the landed cost of an imported API?
- Retailer’s profit margin
- Customs duty
- Freight
- Insurance
Correct Answer: Retailer’s profit margin
Q21. Pooled procurement of bulk drugs can primarily achieve which benefit?
- Lower purchase price through volume discounts
- Higher storage costs for each buyer
- Increased regulatory complexity
- Reduced supply security
Correct Answer: Lower purchase price through volume discounts
Q22. Currency depreciation against the supplier currency will typically do what to the import cost of bulk drugs?
- Increase import cost
- Decrease import cost
- No change
- Nullify customs duty
Correct Answer: Increase import cost
Q23. Which pricing strategy adjusts prices in response to changing market conditions and competitor behavior?
- Dynamic pricing
- Cost-plus pricing
- Fixed ceiling pricing
- Peak-load pricing
Correct Answer: Dynamic pricing
Q24. If a wholesaler buys at ₹80 per unit and sells at ₹100 per unit, what is the profit margin expressed as percentage of selling price?
- 20%
- 25%
- 15%
- 12.5%
Correct Answer: 20%
Q25. Which of the following best helps regulators ensure affordability without distorting supply for essential drugs?
- Setting reasonable ceiling prices with stakeholder consultation
- Banning private sales
- Eliminating patents
- Fixing zero profit for manufacturers
Correct Answer: Setting reasonable ceiling prices with stakeholder consultation
Q26. Which discount is typically offered as an incentive for prompt payment?
- Cash discount
- Trade discount
- Quantity discount
- Seasonal discount
Correct Answer: Cash discount
Q27. Which is the primary risk when tender prices for bulk drugs fall below sustainable production costs?
- Supply shortages and manufacturing exits
- Higher profits for manufacturers
- Improved product quality
- Increased market entry
Correct Answer: Supply shortages and manufacturing exits
Q28. Which document initiates a purchase from the buyer and specifies required quantities and delivery?
- Purchase order
- Invoice
- Packing list
- Credit note
Correct Answer: Purchase order
Q29. When calculating the ex-works price plus 10% trade margin and 5% GST on the subtotal, which order of operations is correct?
- Add margin to ex-works, then apply GST on subtotal
- Apply GST first, then add margin
- Add GST to ex-works and margin separately
- Subtract margin then apply GST
Correct Answer: Add margin to ex-works, then apply GST on subtotal
Q30. Trade discount is generally offered to wholesalers as:
- A reduction from list price for intermediaries
- A penalty for late payment
- A tax collected by government
- A refund after sale
Correct Answer: A reduction from list price for intermediaries
I am a Registered Pharmacist under the Pharmacy Act, 1948, and the founder of PharmacyFreak.com. I hold a Bachelor of Pharmacy degree from Rungta College of Pharmaceutical Science and Research. With a strong academic foundation and practical knowledge, I am committed to providing accurate, easy-to-understand content to support pharmacy students and professionals. My aim is to make complex pharmaceutical concepts accessible and useful for real-world application.
Mail- Sachin@pharmacyfreak.com