The 80% Blind Spot: Why India's Drug Price Control Misses Where Patients Pay Most

The Regulatory Line That Ends at the Hospital Door

India regulates drug prices through the Drugs (Prices Control) Order, 2013, issued under Section 3 of the Essential Commodities Act, 1955. The DPCO draws one decisive line. Medicines in the National List of Essential Medicines are scheduled and carry ceiling prices that include a 16% retailer margin.

Everything else is non-scheduled and its manufacturer can only be stopped from raising the MRP by more than 10% a year. That line explains the Supreme Court hearing of 12 October. NLEM 2022 lists 388 medicines, which account for roughly a fifth of the market.

The other four-fifths - non-scheduled drugs, most medical devices and consumables - sit outside the ceiling system. The DPCO regulates the price of a drug but not the gap between what the seller paid and what the patient pays.

Where the

gap becomes extortion The gap is widest where the patient has least choice. In September, the Bench heard of a cancer drug sold to retailers at Rs 2,700 and carrying an MRP of Rs 27,000, a 1,000% mark-up and called such practices broad daylight dacoity.

The Centre's own affidavit said hospitals often buy from manufacturers offering the highest trade margin, then sell to patients at full MRP. Margins on oncology drugs run from 170% to over 700%. On 12 October, Justice Sandeep Mehta gave the device version: an Indian cardiac stent costing about Rs 5,000 is sold by hospitals for more than Rs 25,000.

The Bench accepted that transport, raw materials and R&D are real costs. It noted that they are already inside the MRP and asked what justified selling at hundreds of times the cost. A hospital patient cannot walk to another shop.

The MRP then stops being a ceiling and becomes the price.

Why trade-margin rationalisation is the better tool The Centre's 30% cap on non-scheduled cancer drugs regulates the margin, not the price.

That difference matters:

• Ceilings fix a number; margin caps fix a relationship. A ceiling must be recalculated drug by drug. A margin cap limits how far MRP can rise above the trade price, leaving companies free to price their products while removing the room for exploitation.
• The record supports it. The NPPA's 2019 margin cap on 42 non-scheduled anti-cancer drugs reportedly cut MRPs by up to 91% and saved about Rs 984 crore a year, without a ceiling regime.
• The record also warns against blunt ceilings. The 2017 coronary stent cap cut prices by up to 85%, but Abbott and Medtronic then sought to withdraw their latest stents from India.

The genuine counterweight The Centre's caution is not mere industry pleading.

The Indian Pharmaceutical Alliance and OPPI argue that a uniform cap ignores how varied the sector is and could deter R&D or trigger shortages. The Bench answered that ensuring availability of price-controlled medicines is the government's responsibility.

A calibrated margin cap, by category, is how that responsibility is met without breaking supply. For the examiner, this is a governance question with a constitutional edge. The right to health under Article 21 has been read in by the courts, but the pricing tools are executive.

The Court can push the government; only the government can design the rule.