Distributor margins and pricing: build the price from the end user back.
Work back from the price the end user or the tender actually pays: take off the margin the distributor needs, then clearance, border costs and freight, and what is left is your transfer price. There is no standard margin. It has to pay for the stock, credit, clinical support and service you ask the distributor to carry.
Margin and markup are not the same number
Margin is the share of the selling price the distributor keeps. Markup is what it adds on top of its own cost. Mixing them up is an easy and expensive mistake in a first negotiation.
- Margin % = (selling price minus landed cost) ÷ selling price
- Markup % = (selling price minus landed cost) ÷ landed cost
- To convert: markup = margin ÷ (1 minus margin), and margin = markup ÷ (1 plus markup)
A 40% margin is a 67% markup. Price for a 40% markup when the distributor meant margin, and it keeps about 29%. It will not complain. It will sell something else.
Build the stack backwards: a worked example
Take a maker of orthopaedic trauma plates entering Brazil, where the Index lists 287 independent distributors with orthopaedic devices on record. The numbers are round and invented to show the method, not a benchmark. All are net of taxes the distributor recovers.
| Step | Amount | Where it comes from |
|---|---|---|
| End-user net price | 1,000 | What the hospital pays after tender or volume discounts |
| Distributor margin, 40% here | 400 | Pays reps who cover cases, loan sets, credit, service and profit |
| Distributor landed cost | 600 | 1,000 minus 400 |
| Clearance and handling | 10 | Broker, port and inland freight |
| Border cost that stays a cost | 68 | About 13% of CIF, real after credits, from the Brazil orthopaedics page (medium confidence) |
| CIF value | 522 | 600 minus 10, divided by 1.13 |
| Freight and insurance | 25 | Your forwarder's quote |
| Your transfer price | about 497 | What is left for you, ex works |
Now run it forwards from the 600 ex works you would like. Landed cost becomes about 716, and at the same end-user price the distributor keeps 284, a 28% margin. It raises its price and loses tenders, or holds the price and stops pushing your line.
Watch cash too. The same page shows about 49% of CIF collected at the Brazilian border, most of it recovered later. For orthopaedic devices shipped from the US into Germany, about 19% is collected, all of it import VAT, and under 1% stays a cost (Germany orthopaedics page). The distributor funds that cash until it comes back, so high cash at the border needs more margin or better payment terms.
What decides the margin a distributor needs
Margin pays for work: the more of this the distributor carries, the more it needs.
- Stock: weeks of cover and the full size range.
- Credit: when hospitals pay slowly, the distributor is your bank.
- Clinical support: reps who cover cases, specialists, training.
- Service: installation, maintenance, loaners, spare parts.
- Registration: a distributor that pays for it wants the money back, and starts to treat the registration as its own. See who holds the registration.
- Tender bonds: guarantees that use up its credit lines.
- Consignment: stock in hospitals that it owns until used.
Take a task over yourself, such as consignment stock, registration fees or a clinical specialist, and take it out of the margin.
Price structures
| Structure | How it works | Use it when |
|---|---|---|
| Fixed transfer price | One price per item, reviewed once a year | Simple lines in stable markets |
| List minus discount | A fixed discount off a local list price | Margin should move with one visible price level |
| Volume tiers | Lower transfer price above set volumes | Growth markets, with tiers measured on sell-out, not orders |
| Rebates | Money back at quarter or year end against targets | You want to pay for results after they happen |
| Consignment | You own the stock until it is used or sold | High-value sets, or a launch the distributor cannot fund |
| Separate fees | Registration, service or training paid as a fee, outside the margin | You want those costs visible, and the registration to stay yours |
Tiers and rebates are incentives too; see how to incentivise distributors.
Tenders change the arithmetic
In a tender the bid sets the end-user price. Agree the process before the first one: the distributor sends you the tender, you approve a special transfer price within a fixed number of days, and its margin has a signed floor. Otherwise every tender is a fresh negotiation against a deadline. More in medical device tenders.
Price corridors across the EEA
Goods move freely inside the EEA, so a big price gap between two countries invites parallel trade. Under the EU rules on vertical agreements, Regulation (EU) 2022/720, you may recommend a resale price or set a maximum, but fixing a resale or minimum price is a hardcore restriction. In most cases, so is stopping a distributor from answering unsolicited orders from another territory.
So keep a corridor: the gap between your highest and lowest EEA transfer prices should stay below the cost of moving, relabelling and supporting goods across the border.
General information, not legal advice. Local law varies; take local counsel before you set price or territory terms.
Common mistakes
- Quoting a transfer price before you know the end-user or tender price.
- Ignoring the cash collected at the border and the credit the distributor carries.
- One margin for every product. A reorder consumable and an implant set with case cover are different jobs.
- Never checking again. Look at realised prices and margin in every quarterly business review, as part of managing distributors like a sales team.
Questions people ask
What margin does a medical device distributor need?
Enough to pay for the work you ask of it and still make a profit on your line: sales people, stock, credit, clinical support and service. There is no single right percentage. Ask what it needs on the first call, then build the price backwards from the end-user or tender price.
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of cost. A 40% margin is a 67% markup. Agree which one you mean before you negotiate.
How do I set a transfer price?
Start from the net end-user or tender price. Take off the distributor's margin, clearance, the border cost that stays a cost, and freight. What is left is your transfer price. If it is below your floor, rethink the market or the channel, not the distributor's margin.
What do import duty and VAT add?
Duty is usually a real cost. Import VAT is usually recovered by a VAT-registered distributor, so it costs cash and time, not margin. Distributor Index country pages show both: orthopaedic devices shipped from the US into Germany pay about 19% at the border, and under 1% stays a cost.
Should margin vary by product or volume?
By product, yes: a reorder consumable needs less support than an implant set with case cover. By volume, use tiers or rebates measured on sell-out, so you reward demand, not stock loading.
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Sources: landed cost and distributor counts from the Bastion Hale Distributor Index, build 25 October 2026, orthopaedics pages for Brazil and Germany (tariffs from World Bank WITS, taxes from official sources; source notes); European Commission, vertical block exemption, Regulation (EU) 2022/720. The worked example is an illustration, not market data. Registry data; Bastion Hale does not vouch for any establishment. This guide is not legal, tax or financial advice. Last reviewed 25 October 2026.