Essential Medicines Price Regulation in India: Affordability, Mark-ups and Access

Subject: GS 02: Polity & Governance

Context: The Supreme Court has questioned the steep mark-ups on essential medicines, particularly cancer drugs, highlighting the burden of high medicine prices on patients, public health schemes and taxpayers. 

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Background

• Price Disparity: The Supreme Court highlighted a case where an essential cancer drug had a Price to Retailer (PTR) of around ₹3,000 against an MRP of ₹27,000.
• Pricing Concerns: The Bench questioned the application of the 16% retailer margin prescribed under the Drugs (Prices Control) Order (DPCO), 2013 to essential medicines.
• Patient & Public Burden: Excessive mark-ups can raise out-of-pocket expenditure (OOPE) and increase the financial burden on both patients and government-funded health schemes.
• Hospital Pharmacies: The Court flagged concerns over private hospitals requiring patients to purchase medicines from in-house pharmacies, potentially restricting access to lower-priced alternatives.
• Supply-Chain Issue: The Centre indicated that steep mark-ups may occur at the hospital/retail level, highlighting pricing concerns across the medicine supply chain.

About Essential Medicines

• Definition: Essential medicines meet the priority healthcare needs of a population and should be available in adequate quantities, assured quality, appropriate dosage forms and at affordable prices.
• WHO Model List: The World Health Organization (WHO) updates its Model List of Essential Medicines every two years; the 2025 list contains over 520 medicines, including 374 for children.
• India’s NLEM: The National List of Essential Medicines (NLEM), 2022 contains 388 medicines across 29 therapeutic categories and forms the basis for price regulation under the Drugs (Prices Control) Order, 2013.
• Health Significance: Essential medicines are critical for cancer, cardiovascular diseases, diabetes, infectious diseases and other major health conditions, particularly where prolonged treatment increases financial vulnerability.

Regulatory Framework

• Drugs (Prices Control) Order, 2013: Provides the framework for price fixation and regulation of scheduled medicines.
• National Pharmaceutical Pricing Authority (NPPA): Regulates medicine prices, monitors availability and affordability, and enforces provisions of the Drugs (Prices Control) Order.
• Price Regulation: As of 23 July 2026, the National Pharmaceutical Pricing Authority had fixed ceiling prices for 935 scheduled formulations.
• 16% Margin: Under the market-based pricing mechanism, the ceiling price is calculated by adding a 16% retailer margin to the average Price to Retailer (PTR) for scheduled formulations.
• Non-scheduled Medicines: Manufacturers cannot increase the Maximum Retail Price (MRP) of a non-scheduled formulation by more than 10% in 12 months under the Drugs (Prices Control) Order, 2013.

Why Price Regulation Matters

• Affordability: High medicine prices can restrict access to essential treatment, particularly for low-income households.
• Out-of-Pocket Expenditure: India’s National Health Accounts Estimates 2021–22 placed household Out-of-Pocket Expenditure (OOPE) on health at ₹3.56 lakh crore, or 39.4% of Total Health Expenditure.
• Financial Protection: Containing medicine prices can reduce the risk of catastrophic health expenditure and impoverishment.
• Equity: Affordable medicines promote access to treatment irrespective of income and purchasing capacity.
• Public Finance: Excessive medicine prices can increase expenditure under government-funded health programmes.
• Treatment Adherence: Affordable medicines support continuity and adherence, particularly in chronic diseases.

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Key Challenges

• Price–Availability Balance: Price controls must preserve incentives for continuous supply and market availability.
• Complex Supply Chain: Price differences may emerge across manufacturers, distributors, retailers and hospitals.
• Hospital Mark-ups: In-house hospital pharmacies can complicate price transparency and consumer choice.
• Information Asymmetry: Patients may lack information about prices, brands and therapeutic alternatives.
• Innovation Costs: Pharmaceutical research, particularly for new cancer and rare-disease therapies, involves substantial development costs.
• Regulatory Enforcement: Effective control requires real-time price data, monitoring and enforcement.
• High-cost Medicines: WHO notes that the high cost of newer essential medicines, particularly for cancer and other non-communicable diseases, remains a global affordability challenge.

Global Approaches to Medicine Affordability

• WHO Model List: Helps countries prioritise medicines based on public health relevance, efficacy, safety and cost-effectiveness.
• Price Regulation: WHO identifies measures such as price regulation, mark-up regulation, competitive tendering and reference pricing to improve affordability.
• Generic Competition: Greater use of quality-assured generic medicines and biosimilars can enhance competition and reduce costs.
• WHO–HAI Methodology: The World Health Organization–Health Action International methodology assesses medicine prices, availability, affordability and price components.

Way Forward

• Strengthen Price Monitoring: Develop real-time monitoring of PTR, MRP and transaction-level prices.
• Improve Supply-chain Transparency: Track mark-ups across manufacturers, distributors, retailers and hospitals.
• Rationalise Mark-ups: Review pricing margins for essential medicines while safeguarding availability and supply stability.
• Promote Generic Competition: Expand access to quality-assured generics and biosimilars.
• Strengthen Patient Choice: Provide patients with information on medicine prices and therapeutic alternatives.
• Target High-cost Diseases: Develop focused affordability mechanisms for cancer and other high-cost chronic treatments.
• Balance Regulation & Innovation: Combine price controls with measures supporting pharmaceutical research, manufacturing and availability.
• Stronger Enforcement: Improve coordination among the National Pharmaceutical Pricing Authority, drug regulators, hospitals and other stakeholders.

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Conclusion

Affordable essential medicines are fundamental to Universal Health Coverage (UHC), financial protection and health equity. India needs a pricing framework that balances affordability, availability, competition, transparency and pharmaceutical innovation.

News Source: The Hindu

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