SC flags steep mark-ups on essential drugs

1. At a Glance

• The Supreme Court is hearing petitions that allege overpricing of essential medicines by pharmaceutical companies and retailers, and disproportionate profit margins across the drug supply chain [1].
• The petitions ask for stricter enforcement of the Drugs (Prices Control) Order, 2013 (DPCO 2013) [1].
• The Bench tied drug prices to public finances. When treatment is paid for through schemes like Ayushman Bharat, "the taxpayer pays" [1].
• UPSC relevance: this brings together health access (GS-II), pharma regulation and price controls (GS-III), and judicial oversight of economic regulation.

2. Why in the News

• 30 Sep 2026: The Hindu (Chennai edition, p. 12) reported that the SC flagged steep mark-ups on essential drugs [1].
• The Bench said inflated drug prices affect "a larger section of society" because government-funded treatment is ultimately paid for by taxpayers [1].
• Mr. Mehta (arguing before the Bench) asked for time to present details of the existing drug-pricing mechanisms [1].
• The matter is listed for further hearing on 12 October 2026 [1].

3. Background & Evolution

• Earlier price-control orders: DPCO 1970, 1979, 1987, 1995 [BG].
• 1997: the National Pharmaceutical Pricing Authority (NPPA) was set up as the independent pricing regulator [BG].
• 2012: the National Pharmaceutical Pricing Policy (NPPP) shifted pricing from a cost-based to a market-based method [BG].
• 2013: DPCO 2013 was notified. Its First Schedule is the National List of Essential Medicines (NLEM) [2][3].
• 2017: NPPA capped prices of coronary stents and knee implants using its extraordinary powers [BG].
• 2019: Trade Margin Rationalisation (TMR) was applied to 42 non-scheduled anti-cancer drugs [BG]. NPPA's role in making cancer drugs affordable was highlighted by PIB [6].
• NLEM 2022 (384 medicines) became the current Schedule-I [BG].
• NPPA had fixed ceiling prices for 930 scheduled formulations [3], rising to 935 as on 1 Dec 2025 [4].

4. Core Static Facts

Item	Fact
Regulating instrument	Drugs (Prices Control) Order, 2013 [2][3]
Parent Act	Issued under Section 3, Essential Commodities Act, 1955 [BG]
Price regulator	NPPA [2]
Administrative ministry	Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers [BG] (not the Ministry of Health)
Schedule-I	NLEM, notified as the First Schedule to DPCO 2013 [2][3]
Who sets the NLEM	Ministry of Health & Family Welfare [BG]
Scheduled formulations	NPPA fixes a ceiling price. All manufacturers, branded or generic, must sell at or below it (plus GST) [2][3]
Count	930 formulations, including 131 anti-cancer, 11 anti-diabetic and 66 cardiovascular [3]. 935 as on 1.12.2025 [4]
Annual revision	Linked to the Wholesale Price Index (WPI, all commodities) of the previous calendar year. Revised on or before 1 April each year [5]
Non-scheduled drugs	The manufacturer fixes the MRP, but may not raise it by more than 10% in 12 months [5]
Monitoring	NPPA monitors prices of both scheduled and non-scheduled medicines [5]
Extraordinary power	Para 19, DPCO 2013, can be used in public interest [BG]

5. Multi-Dimensional Analysis

Economic

• High mark-ups in the chain from manufacturer to stockist to retailer inflate the MRP, even when the ex-factory cost is low [1].
• Inflated prices raise costs for publicly funded insurance such as Ayushman Bharat, which puts pressure on the fiscal side [1].
• The 10% annual cap leaves non-scheduled drugs outside ceiling-price control, and these form most of the market [5].

Social

• Out-of-pocket spending on medicines hits poor and chronically ill patients hardest (cancer, diabetes, cardiac care) [3].
• Essential-drug affordability is central to Universal Health Coverage.

Legal / Constitutional

• Article 21 (right to health, as interpreted by the courts) and Article 47 (Directive Principle on public health) are relevant [BG].
• The petitions seek enforcement of DPCO 2013 rather than new law. The case turns on a regulatory-compliance gap [1].

Governance / Administrative

• Split responsibility: the Health Ministry sets the NLEM, while the Department of Pharmaceuticals and NPPA handle pricing [BG].
• Trade margins are not capped for most drugs, and it is hard to track overcharging at the retail level [1].

Ethical

• Profit-making in essential healthcare runs up against the public interest. The Bench's point that "the taxpayer pays" frames overpricing as a question of wider social justice [1].

6. Recent Developments (last 12-18 months)

• Aug 2025 (approx.): PIB reported ceiling prices for 930 scheduled formulations [3].
• 1 Dec 2025: ceiling prices stood fixed for 935 scheduled formulations [4].
• 1 Apr 2026: annual WPI-linked revision of scheduled-drug ceiling prices, as required by DPCO 2013 [5] (the specific figure was not found).
• 29–30 Sep 2026: the SC Bench flagged steep mark-ups and the Ayushman Bharat and taxpayer burden [1].
• 12 Oct 2026: next hearing date [1].

7. Prelims Hooks

• The NLEM is the First Schedule of DPCO 2013 [2].
• NPPA fixes ceiling prices of scheduled formulations [2].
• Ceiling prices apply to both branded and generic versions [3].
• GST is charged on top of the ceiling price [3].
• Ceiling prices are revised yearly using the WPI (all commodities), not the CPI [5].
• The revision takes effect on or before 1 April [5].
• The MRP of a non-scheduled drug may rise by at most 10% in 12 months [5].
• Scheduled formulations under ceiling price: 935 (as on 1.12.2025) [4].
• These included 131 anti-cancer formulations (out of 930) [3].
• NPPA monitors scheduled and non-scheduled drugs alike [5].
• The SC petitions sought curbs on overpricing by both companies and retailers [1].
• DPCO is issued under the Essential Commodities Act, 1955 [BG].

8. Why a Price Cap Does Not Stop a Mark-Up

• The ceiling price controls only the drugs on the list, not the rest of the market
• NPPA fixes a ceiling price only for scheduled formulations, the drugs listed in the NLEM [2][3].
• For every other drug, the company sets the MRP (Maximum Retail Price, the highest price printed on the pack) itself [5].

• The 10% rule only limits how fast that MRP can rise each year [5]. It says nothing about whether the starting price was fair.

• The trade margin is where the mark-up hides

• Trade margin means the gap between what the company charges the stockist and what the patient pays at the chemist. The stockist and the retailer keep this gap.

• For most drugs, DPCO 2013 does not cap this gap. So a drug that is cheap to make can still carry a high MRP.

• The 2019 cancer-drug experiment showed how big these margins were

• NPPA capped the trade margin at 30% for 42 non-scheduled anti-cancer medicines [7].
• The MRP of 526 brands fell, by up to 90% for some brands [7], and by about 50% on average [7].

• A price can only fall by 90% when a margin is capped if most of the old price was margin, not manufacturing cost.

• Why this matters for the SC case

• The petitions complain about margins "across the supply chain" [1]. The ceiling-price system was not built to control those margins.
• Enforcing DPCO 2013 more strictly will not fix a gap that DPCO 2013 does not cover.

9. Why Catching Overchargers Recovers So Little

• NPPA acts one case at a time, and the numbers are small
• From 1 April 2020 to 31 March 2025, NPPA started 436 overcharging cases and recovered ₹133.19 crore from companies [4]. That is roughly ₹27 crore a year.
• Compare this with one structural step. The 2019 trade-margin cap on just 42 cancer drugs saved patients about ₹984 crore every year [7].

• The two figures cover different periods, so read them as a rough comparison. Even so, the gap is large. Capping margins in advance does far more than chasing violations afterwards.

• Detection depends on someone else reporting the problem

• NPPA acts on references from State Price Monitoring and Resource Units (PMRUs), State Drugs Controllers and consumer complaints [4].
• A patient at a chemist counter rarely knows the ceiling price, so many violations are never reported.
• Also, a high MRP on a non-scheduled drug is legal as long as it rose by no more than 10% in a year [5]. It is not "overcharging" in law, so there is nothing to recover.

10. The Industry's Case Against Tighter Controls — and Its Limits

• The strongest objection: price caps can push drugs off the shelf
• If controlled prices fall below cost, a company may stop making a low-price drug. A chemist may also stop stocking a brand that earns little margin.

• This concern is real, and any wider cap must be watched for shortages.

• What the objection gets right

• DPCO 2013 already builds in room for rising costs. Ceiling prices are revised every year using the WPI (Wholesale Price Index, a measure of price rise at the wholesale level) [5].

• Non-scheduled drugs can rise by up to 10% a year [5]. So the system already gives companies some room to cover costs.

• Where the objection is weaker

• Trade Margin Rationalisation caps the gap after the factory gate. It does not touch the manufacturer's own selling price [7].
• So the "cannot cover production cost" argument mostly does not apply to it. What gets squeezed is the distribution mark-up.
• The 2019 cap cut prices of 526 cancer-drug brands, and those brands stayed on the market to be counted [7].

11. Why High Drug Prices Hurt Families Before the Taxpayer

• Households still pay a large share of health costs themselves
• Out-of-pocket expenditure (OOPE) means money patients pay directly at the time of treatment, not through insurance or the government.

• OOPE fell from 62.6% to 47.1% of total health spending between 2014-15 and 2019-20 [10]. That is progress, but nearly half of all health spending still comes from families' own pockets.

• Medicines are the biggest part of that burden

• The largest share of OOPE, about 52%, goes on medicines [11].

• So a mark-up at the chemist counter hits families directly, and more often than a hospital bill does.

• The Bench's "taxpayer pays" point is only half the picture

• The Bench framed overpricing as a cost to public schemes [1].
• But the family buying medicines with its own money pays the full MRP, with no scheme in between. The damage to households comes first and is larger.

12. Turning a One-Off Cap into a Standing Rule

• Department of Pharmaceuticals: write trade-margin caps into DPCO itself
• Today, trade-margin caps rest on one-off use of NPPA's special public-interest power, as with the 42 cancer drugs in 2019 [7].
• In August 2026, the government was reported to be considering adding Trade Margin Rationalisation to DPCO [8].

• The idea is not new. A cap for drugs priced ₹100 and above was already being discussed in 2022 [9]. Four years without a rule is itself part of the problem the SC is looking at.

• Supreme Court: ask for a timeline, not only a description

• On 12 October, the government is expected to explain the existing drug-pricing mechanisms [1].

• The Bench can ask when the trade-margin rule will be notified and which drugs it will cover. Without that, the hearing only describes the gap.

• Use Jan Aushadhi as a working model of a fixed margin

• Under PMBJP (Pradhan Mantri Bhartiya Janaushadhi Pariyojana), store operators get a fixed 20% trade margin on the MRP [11].
• This shows that a fixed, published margin can keep a retail network running. It is a real Indian example to cite against the claim that caps will kill supply.

13. Anchors for Answers

• Data: A 30% trade-margin cap on 42 anti-cancer drugs cut the MRP of 526 brands (by up to 90%) and saved patients about ₹984 crore a year [7]
• Data: 436 overcharging cases and ₹133.19 crore recovered by NPPA, 2020-21 to 2024-25 [4]
• Data: OOPE fell from 62.6% to 47.1% of total health expenditure, 2014-15 to 2019-20 [10]. Medicines make up about 52% of OOPE [11]
• Report/Committee: National Health Accounts Estimates for India, 2019-20 [10]
• Law/Case: DPCO 2013 under the Essential Commodities Act, 1955; Article 21 (right to health); Article 47 (Directive Principle on public health)
• Scheme: PMBJP (Jan Aushadhi): a fixed 20% trade margin for operators, proof that a capped margin can work in practice [11]

14. Mains Relevance

• GS-II: Issues relating to the development and management of the Social Sector/Services relating to Health; the role of the judiciary.
• GS-III: Government policies and interventions; pricing and regulation; inclusive growth.
• GS-IV: Ethics in business, and the tension between profit and public good.
• Possible question stems: 1. "Price control on scheduled drugs has not translated into affordable medicines for most Indians." Critically examine the design of DPCO 2013. 2. Discuss the role of trade-margin rationalisation in reducing out-of-pocket health expenditure in India. 3. How does overpricing of medicines affect the fiscal sustainability of publicly funded health insurance like Ayushman Bharat?

15. Related Topics to Study Next

• NLEM 2022: it decides which drugs fall under ceiling-price control.
• Trade Margin Rationalisation: a tool for the retail mark-ups the SC flagged.
• Ayushman Bharat PM-JAY: the taxpayer-burden angle the Bench raised.
• Jan Aushadhi (PMBJP): an alternative route to affordable generics.
• Essential Commodities Act, 1955: the parent legal basis of DPCO.
• Out-of-pocket expenditure / National Health Accounts: measures the household burden.
• Uniform Code for Pharmaceutical Marketing Practices (UCPMP): links to the ethics of drug promotion and pricing.
• Quality regulation (CDSCO, Schedule M): pricing and quality together are the axes of access.

16. Common Errors / Trap Areas

• NPPA is under the Department of Pharmaceuticals (Ministry of Chemicals & Fertilizers), not the Ministry of Health [BG].
• The NLEM is prepared by the Health Ministry, while its prices are fixed by NPPA. Do not mix up who lists the drugs and who prices them.
• Ceiling prices are revised by the WPI, not the CPI [5].
• The 10% cap is for non-scheduled drugs. Scheduled drugs have a ceiling price [5].
• DPCO is an Order under the ECA, 1955, not a standalone Act [BG].