Top court flags steep mark-ups on essential drugs

1. At a Glance

• On 29 Sept 2026 the Supreme Court criticised the gap between the Price to Retailer (PTR) and the MRP of essential medicines, especially cancer drugs, and called the steep mark-ups "carnage" that ultimately burdens the taxpayer [7].
• The case tests India's drug-price regulation under the Drugs (Prices Control) Order (DPCO), 2013. Under DPCO, NPPA fixes ceiling prices only for the scheduled medicines in the NLEM. Most non-scheduled drugs have no direct price cap [1][2][4].
• For UPSC, the topic links Article 21 (right to health), out-of-pocket expenditure (OOPE), pharma-sector regulation, and courts' role in economic governance.

2. Why in the News

• 29 Sept 2026 (Tuesday): a Bench of Justices Vikram Nath and Sandeep Mehta asked the Centre why the 16% retailer margin in DPCO, 2013 should not apply uniformly to all essential medicines [7].
• Bench remark: "Why not keep the 16% margin on MRP, which is prescribed in the DPCO, on everything?... Ultimately, the loser is the taxpayer. This is carnage" [7].
• Petitioners: advocate Kishan Chand Jain and paediatric surgeon Sanjay Kulshrestha. They asked the court to regulate prices of drugs, medical equipment and generic medicines [7].
• Examples cited:
• An essential cancer drug was supplied to retailers at ~₹3,000 and sold to consumers at ~₹27,000. That is a ~10-fold mark-up, with a ~₹24,000 gap [7].
• Rosuvas, a statin in the non-scheduled category, costs ~₹240 per strip [7].

3. Background & Evolution

• Drug prices in India are regulated under DPCO, 2013 [1].
• Under DPCO, 2013, prices are fixed using widely available public-domain market data, not production cost [1][2].
• Milestones:
• NLEM is issued by the Ministry of Health & Family Welfare (MoHFW). It is added to Schedule-I of DPCO, 2013, which makes those drugs "scheduled" [2].
• Trade Margin Rationalisation (TMR):
  • NPPA capped trade margins on 42 select non-scheduled anti-cancer medicines.
  • MRPs of 526 brands fell by up to 90% [3].
  • About 500 brands fell by an average of ~50%, saving patients an estimated ~₹984 crore a year [3][6].
• COVID-19 period: NPPA applied TMR to essential medical devices: pulse oximeter, BP monitor, nebuliser, digital thermometer and glucometer [5][6].
• Ongoing: NPPA monitors prices of both scheduled and non-scheduled medicines under DPCO, 2013 [4].

4. Core Static Facts

• Key terms:
• PTR: the price at which the retailer buys.
• MRP: the maximum price the consumer pays.
• Trade margin: MRP minus PTR (or minus the manufacturer's price).
• Scheduled drug: listed in NLEM, Schedule-I.
• Non-scheduled drug: everything else [2][4][7].

5. Multi-Dimensional Analysis

Economic

• A ~10× PTR-to-MRP gap shows that price competition in branded generics happens through trade margins, not through lower consumer prices [7].
• TMR has shown it can deliver large savings without capping the manufacturer's price. The anti-cancer TMR saved ~₹984 crore a year [3][6].
• The Bench says the "taxpayer" is the loser. This points to costs for public schemes and insurance that buy drugs at MRP-linked rates [7].

Social

• Cancer and cardiovascular patients carry the most catastrophic OOPE. Mark-ups on oncology drugs hit these patients hardest [3][7].
• Chronic-disease drugs such as statins (Rosuvas) are bought repeatedly, so even moderate mark-ups add up over time [7].

Legal / Constitutional

• The petitions ask the SC to intervene in drug pricing. Courts have treated access to affordable medicine as part of the right to health under the right to life.
• The core legal question is whether DPCO's 16% margin can be extended by order to all essential and non-scheduled medicines [7].

Governance / Administrative

• Regulatory gap: ceiling prices cover only the NLEM-listed 930 formulations. Combinations and non-scheduled variants can escape the cap [1][4][7].
• NPPA's monitoring of non-scheduled drugs is reactive. TMR has been used selectively (oncology drugs, COVID-era devices) rather than across the board [3][4][5].
• High trade margins on medical devices remain an open policy issue [5].

6. Recent Developments (last 12–18 months)

• 29 Sept 2026: SC Bench (Nath and Mehta JJ.) flagged steep mark-ups and asked the Centre why the 16% DPCO margin should not apply uniformly [7].
• PIB / Parliament replies (2025–26):
• The Centre restated that prices are regulated under DPCO, 2013.
• NPPA monitors both scheduled and non-scheduled medicines.

• High trade margins on essential medical devices have been raised [1][4][5][6].

• The retrieved snippets did not give exact release dates for these PIB items. Check them against the PIB pages.

7. Prelims Hooks

• Drug prices in India are regulated under the Drugs (Prices Control) Order, 2013 [1].
• NPPA fixes ceiling prices of NLEM medicines placed in Schedule-I of DPCO, 2013 [2].
• NLEM is issued by the Ministry of Health & Family Welfare, not by NPPA [2].
• DPCO 2013 pricing is market-based, using public-domain data [1].
• Ceiling prices are fixed for 930 scheduled formulations [1][6].
• These include 131 anti-cancer formulations [1][6].
• Scheduled drugs must sell at or below ceiling price + local taxes [1][6].
• Under TMR, trade margins were capped on 42 non-scheduled anti-cancer medicines [3].
• TMR reduced MRPs of 526 brands by up to 90% [3].
• Estimated patient savings from the anti-cancer TMR: ~₹984 crore a year [3][6].
• During COVID-19, TMR was applied to pulse oximeters, BP monitors, nebulisers, digital thermometers and glucometers [5][6].
• DPCO 2013 provides a 16% retailer margin [7].
• The SC Bench in the 2026 hearing: Justices Vikram Nath and Sandeep Mehta [7].
• Petitioners: Kishan Chand Jain (advocate) and Dr. Sanjay Kulshrestha (paediatric surgeon) [7].

8. Why a Price Cap Did Not Stop the ₹24,000 Gap

• The ceiling price limits what the patient pays. It does not limit the dealer's cut.
• DPCO, 2013 fixes a ceiling price (the highest legal selling price) only for scheduled drugs [1][2].

• A cancer drug went to shops at ~₹3,000 and was sold at ~₹27,000 [7]. No law was broken, because the trade margin (the gap between the shop's buying price and MRP) had no limit.

• Companies compete by giving retailers more profit, not by charging patients less.

• A company can print a high MRP and sell cheaply to the chemist. The chemist then earns more by pushing that brand.

• The patient sees only the MRP. The patient never sees the PTR (the price the shop paid), so the patient cannot bargain.

• Market-based pricing can carry the inflated MRPs forward

• Ceiling prices are worked out from market data, not from what it costs to make the drug [1].
• If most brands in a market already carry inflated MRPs, a cap built from those prices also comes out high.
• This is why the Bench looked at the margin itself (the fixed 16%) and not only at the final price [7].

9. Why Fining Companies Later Has Not Worked

• Most overcharging money is never recovered
• From 1997 to January 2011, NPPA sent 786 demand notices (orders to repay money taken above the legal price). They covered ₹2,328.53 crore of overcharging [8].
• Only ₹207.86 crore was recovered, including money recovered through court orders. That is under 10% [8].

• Later, companies deposited ₹294.84 crore against such notices. Even this is small next to the amount demanded [9].

• The system acts only after the patient has paid

• The rules are enforced by notices and court cases after the sale. By then the overcharged patient cannot be found or paid back.
• In July 2026 the government changed DPCO to limit how much companies owe in overcharging cases and to make compliance easier [10].
• So recovery after the sale is getting weaker. A margin rule set in advance, like the 16% the Bench suggested, stops overcharging before the sale [7].

10. The Case Against One 16% Margin for All — and the Answer

• Objection 1: Setting prices is the government's job, not the court's
• Drug prices come from DPCO, which the executive issues. The NPPA is the expert body, not the Bench [1][2].

• Answer: The Bench did not fix a price. It asked the Centre to explain why the 16% should not apply to all essential drugs [7]. Asking for reasons is normal judicial review (the court checking government action) under Article 21. The court is not writing the policy.

• Objection 2: One flat margin ignores real differences in cost

• Some drugs need cold storage. A chemist in a village sells few strips, so a small percentage gives very little money.
• This is partly right. One 16% rule for every product could make some drugs not worth stocking in remote areas.

• Answer: The fix is margins set by product type, not unlimited margins. TMR (Trade Margin Rationalisation: a cap on the dealer's margin) already worked product by product. It covered 42 cancer drugs and 526 brands, and five COVID-era devices [3][5].

• Objection 3: Lower profits will hurt companies and new drugs

• Answer: TMR caps the trade margin, not the maker's own price [3]. The money cut is mostly the retailer's extra profit, not the factory's. The ~₹984 crore a year in savings came out of that gap [3][6].

11. Why the Bench Says the Taxpayer Loses

• The state now pays a bigger share of the health bill
• OOPE (money patients pay from their own pocket) fell from 62.6% of total health spending in 2014-15 to 39.4% in 2021-22 [11].

• In the same period, the government's share rose from 29.0% to 48.0% [11].

• So high MRPs now drain public money, not just family savings

• When public schemes and insurance pay bills linked to MRP, an inflated MRP is paid out of the budget.
• This is the Bench's point: 'ultimately, the loser is the taxpayer' [7].
• Falling OOPE does not solve the mark-up problem. It shifts the cost from patients to the government.

12. The Cheaper Route Already Exists — Why It Is Not Enough

• Generic medicines prove the gap is not needed
• Jan Aushadhi Kendras (government-backed generic medicine shops) sell medicines 50–80% cheaper than branded ones [12].
• By June 2025, medicines worth ₹7,700 crore at MRP were sold. Buyers saved an estimated ₹38,000 crore compared with branded drugs [12].

• The medicines are bought only from WHO-GMP certified makers. Every batch is tested in NABL-accredited labs [12].

• But there are too few outlets to control the market

• There are about 18,000 Kendras. The target is 25,000 by March 2027 [12].
• A patient given a branded prescription at a private hospital still buys at the brand's MRP. This is why the petitioners asked for generics and price control together [7].

13. Who Should Do What Next

• NPPA should use TMR for all essential medicines, not a few at a time
• The power and a tested method already exist. It was used for 42 cancer drugs and for COVID-era devices [3][5].

• Using it for all essential non-scheduled drugs would reach brands like Rosuvas that fall outside the ceiling cap [7].

• The Centre should give the Bench a clear answer on margins by product type

• It should say which drugs need a margin above 16% and why (for example, cold storage or low-sales areas).

• Any drug it does not justify should move to the 16% rule [7].

• The Department of Pharmaceuticals should expand Jan Aushadhi faster, especially near cancer hospitals

• Cancer drugs show the biggest mark-ups. Generic outlets already sell 50–80% cheaper [7][12].

• The government should not weaken the penalty for overcharging while there is no rule set in advance

• Only a small share of overcharged money has ever been recovered [8].
• Limiting liability without first capping margins leaves patients with no protection before or after the sale [10].

14. Anchors for Answers

• Data: A cancer drug sold to retailers at ~₹3,000 had an MRP of ~₹27,000, a ~10x mark-up [7]
• Data: Of ₹2,328.53 crore of overcharging flagged by NPPA from 1997 to January 2011, only ₹207.86 crore was recovered [8]
• Data: OOPE fell from 62.6% (2014-15) to 39.4% (2021-22) of total health expenditure [11]
• Data: TMR on 42 cancer drugs saved patients ~₹984 crore a year [3][6]
• Law/Case: DPCO, 2013 (16% retailer margin), issued under the Essential Commodities Act, 1955. Article 21 (right to health). The 2026 SC hearing on the Kishan Chand Jain and Sanjay Kulshrestha petitions [1][7]
• Scheme: PM Bhartiya Janaushadhi Pariyojana: generics 50–80% cheaper, ~₹38,000 crore saved by June 2025 [12]

15. Mains Relevance

• GS-II: Issues relating to the development and management of the social sector and services relating to Health. Government policies and interventions. Role of the judiciary.
• GS-III: Indian economy: pricing and regulation. Industrial policy (the pharma sector).
• GS-IV (optional angle): Ethics in business and profiteering from essential goods.
• Possible question stems: 1. India's drug price control regime covers ceiling prices but leaves trade margins largely unregulated. Critically examine in light of recent Supreme Court observations. (15 marks) 2. Discuss Trade Margin Rationalisation as a tool for affordable medicines. Should it be extended to all essential and non-scheduled drugs? (10 marks) 3. Affordable access to medicines is integral to the right to health. Evaluate the role of NPPA and DPCO, 2013 in achieving this. (15 marks)

16. Related Topics to Study Next

• National List of Essential Medicines (NLEM): it decides which drugs become "scheduled" [2].
• NPPA: its structure, powers and monitoring role [2][4].
• Pradhan Mantri Bhartiya Janaushadhi Pariyojana: the generic-drug route to affordability, linked to the petitioners' generics plea [7].
• Medical Devices regulation and pricing: trade-margin caps on devices [5].
• Right to Health and Article 21 jurisprudence: the basis for the SC's intervention [7].
• Out-of-pocket expenditure and Ayushman Bharat PM-JAY: the "taxpayer burden" the Bench flagged.
• Essential Commodities Act, 1955: the parent law under which DPCO is issued.
• Uniform Code for Pharmaceutical Marketing Practices (UCPMP): marketing-driven price inflation.

17. Common Errors / Trap Areas

• NLEM vs NPPA: MoHFW prepares NLEM; NPPA fixes prices. They are different bodies [2].
• Scheduled vs non-scheduled: ceiling prices apply only to Schedule-I (NLEM) drugs. TMR is the tool for non-scheduled drugs [3][4].
• "Up to 90%" vs "average ~50%": the first is the maximum MRP cut; the second is the average cut across ~500 brands in the anti-cancer TMR [3][6].
• DPCO year: the current order is 2013. Earlier DPCOs (1995 and before) followed a different, cost-based pricing method [1].
• Wrong comparison: the "16% margin" is the retailer margin under DPCO. Do not confuse it with GST rates or the manufacturer's margin [7].