Discuss the role of trade-margin rationalisation in reducing out-of-pocket health expenditure in India.

Out-of-pocket expenditure (OOPE) fell from 62.6% to 47.1% of total health expenditure between 2014-15 and 2019-20 [1]. Medicines are a major part of what households still pay. Trade Margin Rationalisation (TMR) caps the gap between the price a company charges a stockist and the MRP a patient pays. This makes it a direct tool against OOPE, though an underused one.

Role of TMR in reducing OOPE

• Targets the hidden mark-up: DPCO 2013 ceiling prices cover only scheduled (NLEM) drugs. For non-scheduled drugs, companies set their own MRPs and face only a 10% annual increase cap [4]. TMR addresses the margin that the ceiling-price system leaves open.
• Proven impact: In 2019, NPPA used Para 19 of DPCO to cap trade margins at 30% on 42 anti-cancer drugs. MRPs of 526 brands fell by up to 90%, saving patients about ₹984 crore a year [2].
• Prevention beats recovery: Between 2020 and 2025, NPPA recovered only ₹133.19 crore from 436 overcharging cases [3]. Capping margins in advance saves far more.
• Keeps supply viable: TMR leaves the manufacturer's price untouched. Jan Aushadhi stores run on a fixed 20% margin [5], which shows that capped margins can sustain retail.
• Fiscal gain: The Supreme Court noted that under Ayushman Bharat "the taxpayer pays" for inflated prices [6].

Limitations

• Ad hoc: TMR rests on one-off use of an extraordinary power and is not a standing rule.
• Narrow coverage: 42 molecules leave most of the non-scheduled market untouched.
• Weak detection: NPPA relies on state Price Monitoring and Resource Units (PMRUs), drug controllers and complaints [3], and patients rarely know what a fair price is.
• Supply risk: Retailers may stop stocking low-margin brands, so availability needs monitoring.
• Partial remedy: OOPE also comes from diagnostics and hospital bills.

Way forward

• Write slab-based TMR into DPCO so it applies automatically instead of case by case.
• Strengthen PMRUs and publish price information that patients can check.
• Expand Jan Aushadhi alongside TMR.

TMR works on the part of drug pricing that ceiling prices miss, which is the distribution margin. Making it a standing, broad-based rule with proper monitoring would turn a one-off success into lasting financial protection. That would advance Article 21's right to health and SDG 3.8 on Universal Health Coverage.