Discuss Trade Margin Rationalisation as a tool for making medicines affordable. Should it be given a permanent statutory basis?

Trade Margin Rationalisation (TMR) caps the gap between the price at which a drug leaves the manufacturer and its Maximum Retail Price (MRP). Ceiling prices apply only to Schedule-I drugs under DPCO 2013 [2]. TMR goes after the inflated margins beyond that list. It works, but its temporary legal footing weakens it.

TMR as an affordability tool

• Proven results: In Feb 2019, the NPPA invoked Para 19 of DPCO 2013 to cap trade margins at 30% on 42 non-scheduled anti-cancer drugs. MRPs of 526 brands fell by about 50% on average, saving patients about ₹984 crore a year [1].
• Reaches non-scheduled drugs: The launch prices of these drugs are unregulated. Only their yearly price rise is capped, at 10% [3].
• Corrects hospital-driven distortion: Hospitals choose the brand, so firms compete by offering a wide MRP–trade price gap rather than a low price. TMR removes much of that incentive.
• Complements ceilings: Price fixation under NLEM 2022 saved about ₹3,788 crore a year [5]. TMR extends price discipline beyond the list.

Limitations

• Distribution costs: Wholesalers and chemists carry cold-chain cancer drugs to small towns. A single flat cap may make low-margin brands unviable.
• Data opacity: Price-to-Stockist (PTS) data is not made public, so margin gaps are hard to prove [3].
• Weak enforcement: Of ₹2,328.53 crore overcharged between 1997 and 2011, the NPPA recovered only ₹207.86 crore [4].

Case for a permanent statutory basis

• DPCO 2013 allows margin capping only for a limited period [3]. Relying on the emergency Para 19 power invites case-by-case legal challenges and lapses.
• The Standing Committee on Chemicals and Fertilisers (Dec 2025) found TMR a "viable" tool. It recommended amending DPCO to make it permanent [3].
• A predictable rule helps firms plan and discourages inflated launch MRPs.

Safeguards needed

• Tiered caps by drug category instead of one flat number.
• Mandatory PTS disclosure and studies comparing PTS with MRP [3].
• Faster recovery of overcharges with help from State drug controllers, plus a right for patients to buy outside hospital pharmacies.

TMR has shown it can halve prices without the rigidity of ceiling prices. Parliament's committee urged a permanent basis for it in DPCO. Making it permanent, tiered and transparent would turn an emergency remedy into standing policy. That would advance Article 47's duty to improve public health and SDG 3.8 on access to affordable medicines.