Supreme Court wants cap on trade margin for all essential drugs and healthcare products

Even as the Center informed the Supreme Court on Monday (October 12, 2026) that it had decided to cap trade margins at 30% for non-scheduled cancer drugs, the court questioned why the benefit of such price regulation should be limited to cancer drugs and not extended to other essential drugs and medical products.

The development comes after Justices Vikram Nath and Sandeep Mehta expressed concern over the significant disparity between retail price (PTR) and maximum retail price (MRP) of certain drugs, especially cancer drugs, with markups going up to 1,000% in some cases. The bench suggested that such exorbitant surcharges amount to “daylight dacoits” and pose a huge financial burden on patients.

Appearing for the Centre, Solicitor General Tushar Mehta informed the Bench that the proposed 30% trade margin cap would apply to both patented and off-patent cancer drugs, with an expert committee headed by the Director General of Health Services tasked with identifying the drugs to be brought under its purview. The National Pharmaceutical Pricing Authority (NPPA) will review the committee’s recommendations before issuing a price notification to implement the cap.

The bench, however, said that while the intervention was laudable, it was inadequate and questioned why other drugs and medical devices could not also be included under the 16% retail margin prescribed under the DPCO, 2013.

“This is just the tip of the iceberg… this has come up only because of the unduly harsh observations we made during the earlier hearings. What about other drugs,” asked the Bench.

The Supreme Court was hearing petitions filed by advocate Kishan Chand Jain and pediatric surgeon Sanjay Kulshrestha seeking stricter enforcement of price controls under the DPCO to curb excessive margins across the pharmaceutical supply chain.

Justice Mehta pointed out steep markups on medical equipment and consumables and pointed out that a heart stent made in India costing around ₹5,000 was being sold by hospitals for more than ₹25,000. He gave an example of a saline drip line with an MRP of ₹11 that sells for ₹270.

“We understand that there are transportation costs, raw material costs, research and development costs and other incidental costs, but all these costs are included in the MRP. What is the logic of allowing them to sell at 400 times the actual cost? How can you afford that? What is the benefit to patients?” Bench noted.

“Balance in prices”

Additional Solicitor General Aishwarya Bhati, who is also appearing for the Centre, cautioned against a single cap for all drugs, arguing that low-value products often require higher margins to remain commercially viable for retailers. Excessive regulation could discourage retailers from stocking such drugs and affect their availability, particularly in rural areas, she said.

Ms. Bhati stressed the need to keep some room for market forces rather than subjecting the entire pharmaceutical sector to price controls.

“Higher margins in such cases are important to ensure the availability of such drugs to consumers… Our concern is that there has to be a balance in prices. There has to be some level of market play for drugs. We don’t want to control the entire drug ecosystem. The policy has been made with the view that there should be intervention only when necessary,” she said.

However, the Bench was not persuaded and observed that ensuring availability of price regulated drugs is the responsibility of the government.

“If the drugs approved by DPCO do not reach the customers, then it is the duty of the government to ensure that they reach (sic) the patient. The real dispute is which drugs should be on the DPCO-controlled list and which should not,” Justice Mehta observed.

Accordingly, the Bench gave the Center till October 27 to work out ways to curb drug prices, when the matter will be taken up next.

Center Affidavit

The Centre, in its 551-page affidavit, said the proposed Trade Margin Rationalization (TMR) is expected to reduce the MRP of cancer drugs by 20-70%, translating into estimated annual savings of around ₹2,500 crore. It said the measure will reduce patients’ out-of-pocket expenses and improve the affordability and availability of cancer drugs, while maintaining a 30% sales margin for the distribution chain.

The Center cited a similar NPPA crackdown in 2019, when a 30% cap on trade margin was imposed on 42 selected non-scheduled cancer drugs at the first point of sale. The margin was based on an industry practice assumption of 10% for distributors and 20% for retailers.

The measure, she said, resulted in a substantial reduction in MRP of 526 brands and annual savings of around ₹984 crore for patients, based on information provided by pharmaceutical companies. The Center said the 2019 exercise provided a policy and operational precedent for extending trade margin rationalization to a wider range of non-scheduled cancer drugs.

Detailing the existing price control mechanism, the center said the ceiling price of DPCO Schedule I drugs is determined by taking a simple average of the price for a retailer of brands and generic versions with a market share of at least 1% and adding a 16% margin.

“The ceiling price set in this way becomes the MRP, i.e. the price above which the drug cannot be sold on the market. However, the manufacturer can provide a reasonable margin to the wholesaler and retailer within the ceiling price,” he said, adding that ceiling prices have been set for 935 preparations so far.

For non-scheduled formulations, manufacturers may set an initial launch price in accordance with the NPPA’s regulation of subsequent price increases. The center said competition in the pharmaceutical market generally acts as a restraint against arbitrary pricing.

Published – 12 October 2026 21:40 IST