Why in News?
The Supreme Court’s recent scrutiny of extreme Price to Retailer (PTR)-Maximum Retail Price (MRP) gaps, including a reported case of a cancer medicine with a procurement price of around ₹3,000 and MRP of ₹27,000, highlights a major affordability concern.
National Health Accounts 2022-23 shows that out-of-pocket expenditure remains a substantial component of healthcare spending, making excessive medicine mark-ups particularly significant.
Causes and Regulatory Gaps
Ceiling-price limitation: Under DPCO, 2013, NPPA regulates ceiling prices of scheduled medicines, but negotiated hospital procurement prices may remain substantially below the permissible patient price.
- Example: A medicine procured at ₹50 against an applicable ceiling/MRP of ₹116 can leave a ₹66 differential.
Hospital-controlled demand: Patients generally depend on doctors and hospitals for brand selection, weakening consumer-driven price competition.
Captive pharmacies: CCI investigations have identified concerns regarding restrictions on patients purchasing medicines and other healthcare products from outside pharmacies, creating a captive market.
Information asymmetry: Patients often do not know the hospital’s procurement price, available alternatives or actual mark-up.
Evidence and Consequences
NPPA Trade Margin Rationalisation (2019): NPPA capped trade margins at 30% for 42 non-scheduled anti-cancer medicines.
- Subsequently, 526 brands reportedly recorded price reductions of up to 90%, with estimated annual savings of about ₹984 crore.
Anti-cancer price regulation: By March 2026, ceiling prices for 131 anti-cancer medicines were effective, with the government reporting an average reduction of around 21% compared with prices under NLEM 2015.
Financial burden: National Health Accounts 2022-23 continued to show a substantial household burden from healthcare expenditure, particularly relevant for patients requiring prolonged treatment.
Competition distortion: Excessive margins can incentivise hospitals to favour higher-priced brands over therapeutically equivalent, affordable alternatives.
Significance of Supreme Court Intervention
Beyond MRP compliance: The issue concerns the entire procurement-to-patient pricing chain, not merely whether the printed MRP is legally permissible.
Market failure: When hospitals influence both medicine selection and purchase, normal consumer price competition can weaken.
Uniform-margin approach: A fixed permissible margin could improve transparency and reduce extreme mark-ups.
Regressive margins: A uniform percentage may still create large absolute profits on expensive medicines; therefore, lower percentage margins for higher-priced drugs could reduce incentives to favour costly brands.
Way Forward
Transparent billing: Disclose procurement price/PTR, permitted margin and final patient price.
Graduated margins: Adopt progressively lower margins as medicine prices increase.
Patient choice: Permit purchase from outside pharmacies where no clinical justification exists for restriction.
Digital surveillance: Integrate NPPA, GST and hospital-billing data to identify abnormal PTR-MRP spreads.
Affordable alternatives: Expand Jan Aushadhi and AMRIT pharmacies to improve access to lower-priced medicines.
Coordinated regulation: Strengthen coordination between NPPA, CCI and State authorities to regulate the complete drug-pricing chain rather than only the printed MRP.
