Essential Medicines in India: Affordability, Price Regulation and Access

GS Paper II: Issues relating to the development and management of Social Sector/Services relating to Health.

Context: The Supreme Court has questioned large disparities between the price to retailer and the Maximum Retail Price (MRP) of essential medicines, particularly cancer drugs, bringing the affordability, regulation and transparency of medicine pricing into focus.

About Essential Medicines

• WHO Definition: Essential medicines are those that satisfy the priority healthcare needs of a population, selected on the basis of public-health relevance, evidence of efficacy and safety, and comparative cost-effectiveness.
• Three Core Requirements: Essential medicines should be available in adequate quantities, assured quality and affordable prices.
• WHO Model List: The World Health Organization (WHO) Model List of Essential Medicines provides guidance to countries in developing or updating their national essential-medicine lists.
• India’s NLEM: India maintains the National List of Essential Medicines (NLEM). The NLEM 2022 contains 384 medicines across 27 therapeutic categories, covering areas including cancer, diabetes, cardiovascular diseases and infectious diseases.

Best Online Coaching for UPSC

Why Medicine Pricing Matters

• High Out-of-Pocket Expenditure: According to the National Health Accounts Estimates for India 2021–22, out-of-pocket expenditure accounted for around 39.4% of Total Health Expenditure.
• Chronic Diseases: For conditions such as diabetes, hypertension and cardiovascular diseases, patients may require medicines over prolonged periods, making affordability particularly important.
• Cancer Treatment: High-cost cancer medicines can create substantial financial pressure on households, especially where insurance coverage is inadequate.
• Poverty Risk: High medical expenditure can lead to distress borrowing, asset sales and impoverishment, making medicine affordability a social-protection issue as well as a health issue.

Recent Supreme Court Concern over Drug Mark-Ups

• Price Disparity: In September 2026, the Supreme Court questioned a major disparity between the price at which an essential cancer medicine was sold to retailers and the price charged to consumers. One reported example involved a ₹2,700 price to retailer and ₹27,000 consumer price.
• Retailer Margin: The Court questioned the operation of the 16% retailer margin under the Drugs (Prices Control) Order framework in the context of essential medicines and large mark-ups.
• Broader Issue: The controversy highlights the need to examine the entire chain involving manufacturer, distributor, wholesaler, retailer and hospital pharmacy, rather than looking only at the manufacturer’s price.

Regulatory Framework

• Drugs (Prices Control) Order, 2013: The DPCO, 2013 provides the principal framework for regulation of prices of scheduled formulations and controls certain price increases for non-scheduled formulations.
• National Pharmaceutical Pricing Authority: The National Pharmaceutical Pricing Authority (NPPA) implements the price-control framework, fixes and revises ceiling prices of scheduled formulations and monitors availability.
• Scheduled Formulations: Medicines included in the NLEM and falling within the relevant regulatory framework are subject to price-control provisions under the DPCO.
• Market-Based Pricing: Under the DPCO’s market-based pricing framework for scheduled formulations, the ceiling price is broadly derived from the average price to retailer of qualifying brands/generics, with the prescribed retailer margin incorporated.
• Non-Scheduled Medicines: Prices of non-scheduled formulations are not subject to the same ceiling-price mechanism, although their price increases are regulated within the applicable DPCO framework.

Why Do Medicine Prices Become High?

• Information Asymmetry: Patients often lack adequate information about generic alternatives, therapeutic equivalence and comparative prices.
• Supply-Chain Mark-Ups: Multiple layers between manufacturer and consumer can increase the final price.
• Hospital Pharmacies: In-house pharmacies may limit consumer choice where patients are required or strongly encouraged to purchase medicines from a particular outlet.
• Limited Price Transparency: Patients may find it difficult to determine the manufacturer’s price, distributor margin, retailer margin and final selling price.
• Weak Competition: Limited competition in particular therapeutic segments can reduce downward pressure on prices.
• Innovation Costs: Pharmaceutical research, particularly for complex diseases such as cancer, involves substantial Research and Development (R&D) expenditure, creating a policy challenge between affordability and incentives for innovation.

UPSC Online Coaching

The Affordability–Innovation Balance

• Affordability Imperative: Excessively high prices can restrict access to essential treatment and increase household financial hardship.
• Supply Sustainability: Excessively aggressive price controls can potentially reduce commercial incentives where prices become insufficient to cover production and distribution costs.
• Innovation Incentives: Pharmaceutical companies require adequate returns to sustain investment in R&D, clinical trials and new therapies.
• Balanced Regulation: The policy objective should therefore combine affordability, availability, quality, competition and innovation, rather than treating price reduction in isolation.

Global Approaches

• WHO/HAI Methodology: The WHO/Health Action International (HAI) methodology provides a framework for assessing medicine prices and availability across countries.
• Generic Competition: Greater use of quality-assured generic medicines and biosimilars can increase competition and reduce prices.
• Price Regulation: Countries employ mechanisms such as price regulation, mark-up regulation, competitive procurement and reference pricing.
• Price Transparency: Greater transparency across the pharmaceutical supply chain can help regulators identify excessive margins and improve consumer information.
• Public Procurement: Centralised or pooled procurement can leverage purchasing power to obtain medicines at lower prices.

Way Forward

• Rationalise Retail Margins: Review the existing retailer-margin structure for essential medicines while ensuring that lower margins do not disrupt availability.
• Real-Time Price Monitoring: Develop stronger digital systems to track manufacturer price, price to retailer, MRP and actual retail price.
• Strengthen Generic Ecosystem: Expand access to quality-assured generic medicines and biosimilars and improve public awareness about their appropriate use.
• Strengthen Jan Aushadhi: Expand Pradhan Mantri Bhartiya Janaushadhi Pariyojana outlets to improve access to lower-cost generic medicines.
• Hospital Pharmacy Transparency: Improve disclosure of medicine prices and mark-ups in institutional and hospital pharmacies.
• Protect Innovation: Combine price regulation with predictable intellectual-property and innovation incentives, particularly for high-cost and neglected therapeutic areas.
• Evidence-Based Regulation: Use medicine utilisation, availability, competition and affordability data to periodically review the price-control framework.

Click to Explore UPSC Offline Coaching

Conclusion

Affordable essential medicines are central to Universal Health Coverage and health equity. India’s challenge is not merely to reduce medicine prices, but to create a transparent and competitive pharmaceutical market that simultaneously ensures affordability, availability, quality and sustainable innovation.

Check Out UPSC CSE Books

Visit PW Store