Where the Price Cap Stops: The Supreme Court Finds a Ten-fold Gap Inside India's Drug Price Control Regime

The Ten-fold Gap Lives Exactly Where the Cap Ends

India does control medicine prices, but only for a defined list of medicines. The Drugs (Prices Control) Order, 2013, issued under the Essential Commodities Act, 1955, sets ceiling prices for scheduled drugs, the ones listed in the National List of Essential Medicines.

That ceiling includes a fixed 16% margin for the retailer. Everything outside that list is a non-scheduled drug. For these, the manufacturer sets the MRP freely and is limited only to an annual increase of about 10%.

The Supreme Court's examples this week show what that line produces. A cancer drug bought by retailers for about ₹3,000 carries an MRP of ₹27,000. Rosuvas, a non-scheduled statin, costs about ₹214 a strip, while its combination with aspirin, which is scheduled, costs about ₹70.

The drug with more active ingredients is cheaper, because it happens to fall inside the controlled list.

The

Rule as Written, the Rule as Practised The text of the DPCO regulates the MRP printed on the pack. It does not regulate the price the seller actually paid. In practice, a high MRP becomes a margin that can be shared.

A manufacturer can print ₹27,000, sell to a hospital far below that and let the hospital charge the patient the full MRP. The Solicitor General's submission that private hospitals, not drug companies, are the main gainers fits this structure.

But the hospital's room exists only because the MRP printed on the pack is so far above what the drug actually changes hands for. The second channel is the captive pharmacy. When a hospital requires patients to buy from its in-house pharmacy, the patient cannot shop around.

Competition, which is supposed to discipline non-scheduled prices, simply never reaches the bedside.

The Fiscal Twist The

Bench also noted who pays when the patient does not. Under publicly funded insurance such as Ayushman Bharat PM-JAY, much of hospital treatment is paid from public money. PM-JAY largely pays fixed package rates, so the link is indirect.

Package rates are set against market costs and inflated drug prices raise the base on which those rates rest. A mark-up that looks like a private arrangement between a hospital and a patient ends up, in part, on the public budget.

Is a Uniform

16% Margin the Answer? The Bench's proposal is simple and has a precedent. In 2019, NPPA used its Para 19 emergency power to cap trade margins at 30% on 42 non-scheduled cancer drugs. It later reported price falls of up to 90% across hundreds of brands. But extending a 16% margin to every medicine raises real problems:

• Viability: low-volume, cold-chain oncology drugs may not be economical to stock at 16%, which risks shortages.
• Displacement: manufacturers could raise their price to retailers so the gain simply moves up the chain.
• Hospital pricing: a margin calculated on MRP does not touch the discounts hospitals receive below the invoice price. A graded trade-margin cap for high-value therapies, combined with a ban on forcing patients to use in-house pharmacies, targets the gap more precisely.

For the exam: The sharper point is not that drugs are expensive. It is that list-based price control creates a two-tier market and the gap in that design is what needs fixing.