Supreme Court wants cap on trade margin for all essential medicines and medical products

Even as the Centre 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 confined to cancer drugs and not extended to other essential medicines and medical products.

The development comes after a Bench of Justices Vikram Nath and Sandeep Mehta expressed concern over stark disparities between the price to retailer (PTR) and the maximum retail price (MRP) of certain medicines, particularly cancer drugs, with mark-ups in some instances soaring to 1,000%. The Bench had flagged that such exorbitant mark-ups constituted “broad daylight dacoity” and placed an enormous financial burden on patients.

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

The Bench, however, said that while the intervention was commendable, it was inadequate, and questioned why other medicines and medical devices could not also be brought within the 16% retailer margin prescribed under the Drugs (Prices Control) Order (DPCO), 2013.

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

The top court was hearing petitions filed by advocate Kishan Chand Jain and paediatric surgeon Sanjay Kulshrestha seeking stricter enforcement of price controls under the DPCO to curb disproportionate margins across the pharmaceutical supply chain.

Justice Mehta drew attention to steep markups on medical devices and consumables, pointing out that an India-made cardiac stent costing around ₹5,000 was being sold by hospitals for more than ₹25,000. He cited the example of a saline drip line carrying an MRP of ₹11 being sold for ₹270.

“We understand that there are transportation costs, raw material costs, R&D costs and other ancillary costs, but all these are included in the MRP. What is the logic behind allowing them to sell at 400 times the actual cost? How can you allow this? What is the benefit for the patients?” the Bench observed.

‘Balance in pricing’

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

“Higher margins in such cases are important for ensuring the availability of such medicines to consumers… Our concern is that there has to be a balance in pricing. There has to be some level of market play available for drugs. We do not want to control the entire ecosystem of drugs. The policy was framed with the outlook that there should be intervention only when necessary,” she submitted.

The Bench, however, was not persuaded, observing that ensuring the availability of price-controlled medicines was the government’s responsibility.

“If the DPCO -approved medicines do not reach customers, then it is the duty of the government to ensure it reaches [sic] the patient. The actual dispute is over which medicines should be on the DPCO-controlled list and which should not,” Justice Mehta observed.

Accordingly, the Bench gave the Centre until October 27 to work out the modalities for capping medicine prices, when the matter will be heard next.

Centre’s affidavit

The Centre, in its 551-page affidavit, said the proposed trade-margin rationalisation (TMR) was expected to reduce the MRP of anti-cancer drugs by 20% to 70%, translating into estimated annual savings of around ₹2,500 crore. It said the measure would reduce patients’ out-of-pocket expenditure and improve the affordability and accessibility of cancer medicines, while retaining a 30% trade margin for the distribution chain.

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

The measure, it said, led to a substantial reduction in the MRP of 526 brands and annual savings of around ₹984 crore for patients, based on information furnished by pharmaceutical companies. The Centre said the 2019 exercise provided a policy and operational precedent for extending trade-margin rationalisation to a wider range of non-scheduled anti-cancer medicines.

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

“The ceiling price so fixed becomes the MRP, i.e., the price above which the drug cannot be sold in the market. However, the manufacturer is at liberty to give an appropriate margin to the wholesaler and the retailer within the ceiling price,” it said, adding that ceiling prices had so far been fixed for 935 formulations.

For non-scheduled formulations, manufacturers are free to determine the initial launch price, subject to the NPPA’s regulation of subsequent price increases. The Centre said competition in the pharmaceutical market generally acted as a restraint against arbitrary pricing.