Government Caps Cancer Drug Trade Margins At 30%, Supreme Court Asks: Why Regulate Only Cancer Medicines?

The Central Government has decided to cap trade margins on cancer drugs at 30% of the Maximum Retail Price (MRP). This move could make cancer treatment more affordable for patients. Solicitor General Tushar Mehta informed the Supreme Court of this decision on Monday. According to the government, the price cap could reduce the MRP of cancer drugs by 20% to 70%, which could potentially save patients around Rs. 2,500 crore every year. The National Pharmaceutical Pricing Authority (NPPA) approved the proposal during a meeting on October 8.

The government will identify the cancer drugs covered by the regulation, and new medicines to be added periodically based on market conditions and public needs. However, the Supreme Court has questioned why the government intends to regulate trade margins only on cancer drugs when there are similar concerns for other medicines and medical devices. A bench comprising Justice Vikram Nath and Justice Sandeep Mehta highlighted the wide gap between the prices at which products are supplied to retailers and the prices charged to patients.

The court also raised concerns about high margins on hospital consumables and their impact on medical decisions. The next hearing in the matter is scheduled for October 27.

Why Has The Government Decided To Cap Cancer Drug Margins?

The proposed regulation aims to address the difference between the price at which cancer drugs are sold to retailers and the MRP at which patients purchase them. The Centre's affidavit acknowledges complaints that hospitals sometimes buy medicines from companies offering higher trade margins and then sell them to patients at the MRP. In some cases, the margins have reportedly ranged from 170% to 700%, or even higher.

The Supreme Court had previously highlighted an example wherein a cancer drug available to retailers for around Rs. 2,700 carried an MRP of approximately Rs. 27,000. This ten-fold difference raised concerns about whether patients were paying unnecessarily high prices for essential treatment.

To finalise the list of medicines covered by the proposed cap, an expert committee headed by the Director General of Health Services has been constituted. According to the Department of Pharmaceuticals' affidavit, the committee has been asked to submit its recommendations within 10 to 15 days. The proposal is expected to cover approved cancer treatment drugs, while keeping affordable medicines as exceptions. The list will be updated periodically.

Supreme Court Questions Why Other Medicines Are Excluded

While the proposed cap could reduce cancer treatment costs, the Supreme Court wants the government to explain why similar restrictions cannot be considered for other medicines and medical devices.

During the hearing, Justice Sandeep Mehta cited the example of an Indian-made cardiac stent supplied to retailers for approximately Rs. 5,000 but carrying an MRP of Rs. 25,000. He observed that limiting the trade margin to 16% could significantly reduce the cost of medical procedures.

The bench also highlighted the pricing of a saline drip line. The product was reportedly sold for Rs. 270 despite having an MRP of just Rs. 11, raising questions about how such a large difference in prices could arise.

The court expressed concern that high margins on medicines and medical devices could influence doctors' decisions about which products to recommend or use. It questioned why manufacturers should be allowed to set MRPs that are many times higher than the prices at which products are supplied to retailers.

The Centre has said that drug pricing is only one part of a broader policy framework. Additional Solicitor General Aishwarya Bhati told the court that the government must balance affordability for patients with the availability of medicines and prevailing market conditions.

Why Does The Centre Oppose A Uniform Margin Cap?

The government has argued that applying the same trade margin limit to every medicine may not be practical because the costs involved in manufacturing, storing and distributing products vary.

According to the Centre's affidavit, expenses depend on factors such as sales volumes, transportation, geographical conditions and storage requirements. Some medicines also need special storage facilities or cold-chain arrangements to maintain their quality. The government has informed that imposing uniform limits could affect the supply of low-cost medicines, particularly in remote areas where sales volumes may be low. Associations representing small-scale drug manufacturers have also raised concerns about the possible impact on employment and medicine availability.

Under the Drugs (Price Control) Order, 2013, the government fixes ceiling prices for scheduled medicines by considering the average prices of branded and generic versions with a market share of at least 1%. A retailer margin of 16% is added when determining the ceiling price.

The affidavit states that ceiling prices have been fixed for 935 formulations, while retail prices have been fixed for 3,881 new drugs. For medicines outside the scheduled category, manufacturers can set the initial price, but the NPPA monitors subsequent increases. Generally, annual price increases cannot exceed 10% of the MRP during the preceding 12 months. The Centre reported that the actual increase for non-scheduled medicines was 5.6% in the 12 months ending April 2025. The government argues that these existing mechanisms must be considered before introducing wider restrictions.

Hospital Consumables Also Under Scrutiny

The Supreme Court's concerns extend beyond medicines to medical consumables used during hospital treatment. These include products such as tubing, drip lines and other essential supplies.

The Centre has acknowledged that high trade margins on these products can increase the financial burden on patients who pay for treatment themselves. While the costs of consumables may be included in packages under government health schemes and insurance plans, patients paying out of pocket may be charged separately according to the MRP. The government has noted that consumable prices can range from around Rs. 1 to Rs. 350 or more. Applying a uniform percentage-based margin to all such products could affect cheaper items differently because procurement, distribution, nursing and administrative costs vary.

The Centre is also examining complaints that retailers sometimes promote local brands offering higher margins. It plans to consider further action after consulting the relevant stakeholders.

What Happens Next?

The Supreme Court's questions have brought wider attention to the pricing of medicines and medical devices in India. While the proposed 30% trade margin cap could reduce the cost of cancer drugs, the court wants the government to examine whether similar measures are needed for other products.

The key challenge is to prevent excessive pricing without disrupting the supply of essential medicines, especially in areas where distribution is expensive or demand is limited.

The next hearing, scheduled for October 27, is expected to bring further attention to the government's approach to drug pricing and the possibility of extending regulation beyond cancer medicines.