Who Regulates Medicine Prices in India?

Medicine prices in India are regulated by the National Pharmaceutical Pricing Authority (NPPA) under the Department of Pharmaceuticals. However, there is often a large difference between the price at which medicines are supplied to retailers and the final price paid by patients. This raises concerns about the affordability of medicines.

Why in the News?

• In September 2026, the Supreme Court of India questioned the huge difference between the purchase price and MRP of medicines.
• It highlighted an example of a cancer medicine supplied to a retailer for ₹2,700, while its MRP was ₹27,000.
• On October 17, 2026, the NPPA announced a 30% cap on trade margins for 137 anti-cancer drugs, effective from November 9, 2026.

Evolution of Medicine Price Regulation in India

1962: The first statutory drug price controls were introduced under the Defence of India Act during the Sino-Indian War.

• Further price-Control measures were introduced in 1963 and 1966.
• Different Drugs (Prices Control) Orders (DPCOs) were introduced in 1970, 1979, 1987 and 1995.
• Earlier, India followed cost-based pricing, which considered manufacturing costs and permissible profit margins.
• 1997: The NPPA was established on August 29, 1997, to regulate medicine prices.
• 2012: The National Pharmaceutical Pricing Policy introduced a shift from cost-based pricing to market-based pricing.
• 2013: This approach was implemented through DPCO 2013 under the Essential Commodities Act, 1955.

National Pharmaceutical Pricing Authority (NPPA)

The NPPA functions under the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers.

Major Functions:

• Fixes and revises prices of scheduled medicines.
• Monitors the availability of medicines and identifies shortages.
• Investigates cases of overcharging and recovers excess amounts.
• Collects market data and advises the government on pharmaceutical pricing policies.
• Regulates the prices of selected medical devices, such as coronary stents and knee implants.

Role of CDSCO

• The Central Drugs Standard Control Organisation (CDSCO) regulates drug approval, licensing, and quality.
• It functions under the Drugs and Cosmetics Act, 1940.
• Thus, drug approval and price regulation are handled by separate authorities.

Which Medicines Come Under Price Control?

Under DPCO 2013, medicines are divided into two categories:

1. Scheduled Formulations

• These medicines are listed under Schedule I of DPCO 2013.
• They largely correspond to medicines included in the National List of Essential Medicines (NLEM).
• The latest NLEM was released in 2022.
• It includes 388 medicines across 29 therapeutic categories, covering infections, diabetes, cardiovascular diseases, and cancer.
• The NPPA fixes their ceiling prices.

2. Non-Scheduled Formulations

• These medicines generally do not have routine ceiling prices.
• However, manufacturers cannot ordinarily increase their MRPs by more than 10% over the preceding 12 months.
• The government can intervene in exceptional cases in the public interest.

How are Medicine Prices Fixed?

India follows two major pricing mechanisms.

1. Market-Based Pricing

Under Paragraph 4 of DPCO 2013, the NPPA fixes ceiling prices for scheduled medicines.

Method of Calculation:

• The NPPA identifies brands and generic versions having at least 1% of the formulation's market turnover.
• Their prices to retailers are averaged without considering their individual market shares.
• A 16% retailer margin is added to the average price.
• The resulting amount becomes the ceiling price.

Example:

Annual Revision: Ceiling prices are revised annually based on the Wholesale Price Index (WPI).

Limitations:

• It uses existing market prices to determine the ceiling price.
• If prevailing prices are already high, the system may continue to support inflated prices.
• It does not independently assess manufacturing costs or the therapeutic benefits of medicines.
• Therefore, a medicine may comply with the ceiling price but remain unaffordable.

2. Trade Margin Rationalisation (TMR)

The NPPA uses Trade Margin Rationalisation (TMR) to control excessive margins in the medicine supply chain.

• It is implemented under Paragraph 19 of DPCO 2013.
• The NPPA has capped trade margins at 30% of the MRP, excluding GST, for 137 identified anti-cancer drugs.
• The calculation is based on the manufacturer's price to stockists or distributors rather than the average market price.

Example:

If the stockist price of a medicine is ₹7,000, the maximum pre-tax MRP can be ₹10,000.

Significance:

• It covers patented medicines unless specifically exempted under DPCO provisions.
• This is important because newer targeted therapies and immunotherapies are often expensive.
• A similar intervention in 2019 covered 42 cancer drugs and reportedly reduced MRPs across 526 brands.

Limitation: A 30% trade margin cap does not mean that medicine prices will fall by 30%. It only controls the margin between the manufacturer's selling price and the final retail price.

How is Price Regulation Enforced?

The NPPA works with State Drug Controllers and Price Monitoring and Resource Units (PMRUs).

• PMRUs monitor medicine prices and availability.
• They collect market information and support enforcement activities.
• The Integrated Pharmaceutical Database Management System supports electronic price reporting and monitoring.
• Pharmacies and hospitals must display updated medicine price lists.
• Consumers can check notified prices through Pharma Sahi Daam and report suspected overcharging to the NPPA or State Drug Controllers.

Global Practices in Medicine Price Regulation

• Under the US Inflation Reduction Act, the first 10 negotiated medicine prices became effective in January 2026. They were 38–79% below their 2023 list prices.
• European countries consider the clinical benefits and cost-effectiveness of medicines while determining prices or reimbursement.

Challenges and Way Forward

1. Coordination Between Authorities

• Drug approval and pricing are handled by separate authorities.
• Better coordination between CDSCO and NPPA is needed to connect medicine approval with affordability.

2. Need for Clinical and Economic Assessment

• Medicine prices should not depend only on existing market prices.
• Pharmacoeconomic assessment can help evaluate the cost-effectiveness and therapeutic benefits of medicines.

3. Transparency in Pricing

• Market-based pricing requires reliable and transparent market data.
• Regular review is needed to prevent already high prices from continuing.

4. Better Compliance

• Hospitals and pharmacies must follow applicable pricing rules.
• Procurement discounts should not lead to unfair pricing for patients.

Conclusion

India regulates medicine prices through the NPPA and DPCO 2013. However, legal price control does not always ensure affordability. The pricing system needs better transparency, coordination, and assessment of the therapeutic value of medicines. The ultimate objective should be to ensure that patients can access essential medicines without facing financial hardship.