Capped Ceilings, Uncapped Margins: Rethinking India's Drug Price Control Regime

India's drug pricing framework regulates the final price ceiling but not the margins along the supply chain, allowing mark-ups of up to 1,000% between the price to retailer and the maximum retail price. The Supreme Court's recent concern over this disparity makes the structural flaw impossible to ignore, particularly for cancer patients.

Key Regulatory Gaps

  • The Drugs (Prices Control) Order, 2013, caps the ceiling for scheduled drugs, yet leaves hospital-level transactions unregulated.
  • A hospital buying at a lower price can still sell at a much higher ceiling, pocketing the difference.
  • Non-scheduled drugs, including several anti-cancer medicines, remain outside ceiling-price control.

Structural Challenges

  • Since these drugs are not sold over the counter, hospitals decide the brand, so manufacturers compete for institutions, not patients.
  • Inflated MRPs paired with low PTRs act as an implicit kickback.
  • Captive on-premise pharmacies deny patients the option to shop around, disadvantaging cheaper equivalents and straining household finances, with possible non-adherence to long treatment regimens.

Regulatory Imperatives

  • The National Pharmaceutical Pricing Authority's (NPPA) 2019 exercise capping trade margins of 42 anti-cancer drugs at 30% lowered prices of 526 brands by up to 91%, proving margins are compressible.
  • Policy should therefore extend trade-margin caps across drug categories and adopt a regressive margin structure, with lower percentages for costlier drugs, to blunt incentives favouring expensive brands.
  • Regulators must also curb compulsory in-house purchases and mandate MRP transparency.

Summing Up

Price ceilings without margin discipline merely relocate the problem, leaving patients exposed. Aligning market incentives with patient welfare, through coordinated Union and State enforcement, is essential if affordability is to become real rather than nominal in India's healthcare system.

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