Trade-margin rationalisation is a more market-friendly tool than ceiling prices for making medicines affordable. Critically analyse in the context of anti-cancer drugs.

Under DPCO 2013, ceiling prices set a maximum price for scheduled drugs, which come from the National List of Essential Medicines (NLEM). Trade-Margin Rationalisation (TMR) works differently. It leaves the manufacturer's price free and caps only the margin between distributor and retailer. In October 2026, TMR was applied to 137 non-scheduled anti-cancer drugs at 30% of MRP [2]. TMR is more market-friendly, but it adds to ceiling prices rather than replacing them.

Manufacturer ──(price set freely)──► Stockist ──► Retailer/Hospital ──► Patient
                                     └── margin capped at 30% of MRP ──┘

Fig: TMR caps the margin added after the stockist. It does not touch the manufacturer's price.

Why TMR is more market-friendly

• Price discovery stays intact: firms set their own price to the stockist. This makes supply shortages or reduced investment in new cancer molecules less likely than under rigid ceilings.
• It targets the real distortion: in cancer care, large trade margins push up MRPs. The 2019 pilot on 42 drugs cut the MRPs of 526 brands by up to 90% [2].
• It reaches beyond the NLEM: it covers non-scheduled drugs through Paragraph 19, DPCO 2013 [2], while ceilings cover only Schedule-I drugs.
• The regulator needs less costing work: manufacturers calculate and report the revised MRPs themselves [2].

Limitations

• The starting price is untouched: if the price to the stockist is high, the MRP stays high. Ceilings, by contrast, cut the prices of scheduled anti-cancer formulations by about 21%, saving ₹294.34 crore a year [1].
• Weak enforcement: 85% of overcharging dues are unrecovered and about 70% are in litigation [3]. About ₹8,447 crore is still outstanding [4]. Prices that firms calculate themselves need audits.
• The legal basis is ad hoc: Paragraph 19 is a special power for extraordinary circumstances. A parliamentary committee asked for a permanent TMR framework within a fixed timeline [3].
• Launch-price loophole: the same committee found that non-scheduled drugs can be launched at arbitrary initial prices [3].
• Hospitals may shift costs: they may raise procedure charges to make up for lower drug margins.

Way forward

• Use both tools together: ceilings for essential NLEM drugs, and TMR for costly non-scheduled cancer drugs.
• Extend TMR step by step to other high-priced medicines. The Supreme Court has asked why caps should stop at cancer drugs [4].
• Have NPPA audit the revised MRPs.

TMR fixes the margin problem in a way that suits markets, while ceilings give firmer price protection. Together they make the right mix. Writing TMR permanently into DPCO and strengthening NPPA's enforcement would give practical effect to the right to health under Article 21 and support SDG 3.8, universal health coverage.