Summary
In an Indian Express opinion piece, public health expert Abhay Shukla argues that private hospitals profit heavily from the gap between what they pay for medicines and consumables and the printed MRP. Maharashtra FDA figures show a drip set bought for Rs 11 carries an MRP of Rs 325 and a syringe bought for under Rs 7 is marked at Rs 57.
An audit of patient bills found margins most commonly of 200-400%. Only about 18% of medicines are under direct price control. In 2016, the Department of Pharmaceuticals committee chaired by Sudhansh Pant recommended capping trade margins on all medicines and implants at 35-50%, but the recommendation was never implemented.
Shukla calls for transparent billing, wider statutory price regulation and enforcement of patients' right to buy medicines outside the hospital pharmacy.
WHY IN NEWS FOR UPSC & STATE PCS
The Indian Express published the piece after Maharashtra FDA Commissioner Tukaram Mundhe released examples of large markups on medical items sold in hospitals and issued directions that hospitals cannot force admitted patients to buy only from in-house pharmacies. The Supreme Court is separately hearing a PIL on cancer drug prices, in which it criticised the gap between the price to retailers and the MRP.
Standard News
Cap the Gap Between Purchase Price and MRP, on Every Drug and Consumable
TAN's position is plain: India should cap trade margins, the gap between what a hospital or pharmacy pays and what it charges, on all medicines and medical consumables, not just the roughly 18% under direct price control. The 2016 Sudhansh Pant committee recommended exactly this. Ten years later, it has still not been done.
Why the
current system invites overcharging India's price control covers essential medicines on the national list. For everything else, manufacturers are free to set the MRP. That creates an obvious incentive. A manufacturer sells to hospitals at a low price but prints a high MRP and hospitals prefer brands with the widest gap between the two, because the gap is their profit.
A patient admitted to hospital cannot shop around. Maharashtra FDA figures show a drip set bought for Rs 11 printed at Rs 325 and a syringe bought for under Rs 7 marked at Rs 57. An audit of critical patients' bills found margins most commonly of 200-400%.
A paracetamol drip bought for about Rs 33 was billed at Rs 408. None of this is illegal, which is exactly the problem. A trade-margin cap addresses this gap directly. It does not decide what a manufacturer may charge. It limits how far the MRP can sit above the price at which the product first enters the supply chain.
The Pant committee proposed caps of 35-50%, which are generous enough to pay for distribution but too low to reward manufacturers for inflating the MRP.
The strongest objection Industry's best argument is serious.
Blanket price controls can cause shortages. When India capped coronary stent prices in 2017, some companies sought to withdraw premium products. Low margins can make distributors stop stocking cheaper items. A system that controls every price leaves less money for research and quality and patients may end up with fewer, older products.
Why the
position still holds That objection is aimed at price caps, not margin caps. A trade-margin cap leaves the manufacturer's selling price, the part that pays for research and quality, untouched. It limits only the markup between purchase price and MRP.
When the NPPA applied trade-margin rationalisation to anti-cancer drugs in 2019, it did not report the kind of withdrawals that followed the stent price cap. A 35-50% margin also still pays for storage, logistics and pharmacy work.
The Pant committee's banding, a lower cap for costlier products and a higher one for cheaper items, answers the concern about distributors dropping low-value products. Pairing the cap with transparent billing, showing the purchase price beside the charge and with enforcement of patients' right to buy outside the hospital pharmacy would limit profiteering without shrinking supply.
Quick Facts
Key numbers & takeaways — revise these first
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About 18% of medicines in India are under the NPPA's direct price control.
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The NPPA works under the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers.
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The Drug Price Control Order, 2013 is issued under Section 3 of the Essential Commodities Act, 1955.
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The 2016 Sudhansh Pant committee recommended capping trade margins at 35% for medicines with an MRP above Rs 50 and at 50% for cheaper ones.
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The Maharashtra FDA has ruled that hospitals cannot force admitted patients to buy medicines only from the hospital pharmacy.
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The National Consumer Commission has described forcing patients to buy from in-house pharmacies as an unfair trade practice.
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The trade margin is the difference between what a retailer or hospital pays for a medicine and the MRP it charges.
Connect the dots for your UPSC preparation.
Standard news covers the event. Log in to read our comprehensive analysis and uncover the hidden constitutional, structural, and ethical dimensions of this topic:
The full reasoning for why the MRP loophole outside the 18% of price-controlled drugs rewards hospitals for choosing high-margin brands.
Industry's strongest counter-argument, set out in full with the evidence from the 2017 stent cap and the risks to supply and innovation.
Why trade-margin caps answer that objection, drawing on the 2019 anti-cancer drug margin rationalisation.
The combination of margin caps, transparent billing and patients' right to buy outside the hospital pharmacy that TAN recommends.
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