‘Don’t treat people’s lives as commerce’: SC pulls up Centre and hospitals over medicine mark-ups

The Supreme Court questioned why medicines could be sold to patients at prices far above procurement costs. It criticised the Centre for taking years to cap trade margins on selected anti-cancer medicines and for failing to adequately justify steep markups. The bench asked whether commercial concerns were being placed above patients’ lives.

It also called the NPPA’s record into question, saying the authority appeared “totally defunct” because it had not acted sooner against excessive markups. Hospitals faced scrutiny over selling medicines at high MRPs, even when their purchase costs were much lower. The court also suggested printing both MRP and PTR on packaging.

The case remains unresolved because the bench reserved its order. The ruling may clarify how far the Supreme Court can go in addressing medicine markups and whether wider price regulation is needed. Its impact could reach drug companies, hospitals, policymakers and patients’ out-of-pocket costs.

Procurement cost is what a hospital, retailer or dealer pays to obtain a medicine. It is the starting cost before later markups. A trade margin is the amount added by distributors or retailers to cover costs and earn returns. It is commonly expressed as a percentage of the selling price or MRP.

MRP means maximum retail price. It is the highest price printed for sale to the patient. PTR means price to retailer, the amount at which a supplier sells the medicine to the retailer. The PTR sits between the supplier’s price and the medicine’s MRP. The difference between these figures shows how much room exists for margins and other charges.

The court’s concern was that a high MRP can make a later margin cap less effective. If the original MRP is already inflated, a percentage limit may still leave the final price high. The bench therefore suggested displaying both MRP and PTR on packaging to improve transparency.

The article gives a striking example of the possible gap between a medicine’s purchase price and its patient charge. A medical dealer told the court he could procure a chemotherapy injection for ₹11,000. A hospital reportedly charged ₹1.3 lakh for the same injection. The figures show how dramatically markups can increase treatment costs.

The key mechanism is the chain between procurement and the final bill. A hospital may buy from a dealer or supplier, then charge the patient using an MRP that includes margins and possibly other commercial considerations. The court questioned why the initial MRP could be set far above the supply price and then increased annually.

The example also explains why the government’s 30% trade-margin cap drew scrutiny. The bench asked whether a cap would meaningfully reduce prices if the starting MRP was already inflated. The final ruling may determine whether broader controls are needed to limit such gaps.

The Centre introduced a targeted measure for selected non-scheduled anti-cancer medicines. Through a notification issued on 17 October, it capped trade margins at 30% of the medicine’s MRP. The measure aims to reduce the amount added by distributors and retailers before the medicine reaches patients.

According to the Centre’s submission, the change was expected to lower retail prices by 20-70%. The policy therefore focuses on a selected group rather than applying one rule to every medicine. It is part of the government’s broader preference for targeted intervention instead of comprehensive price controls.

The Supreme Court questioned whether the measure would deliver its promised benefit. It pointed out that a medicine’s original MRP could itself be substantially inflated. In that situation, a 30% margin limit may still leave patients paying a high price. The court’s final order will indicate whether this approach is sufficient or whether wider regulation is warranted.

The National Pharmaceutical Pricing Authority, or NPPA, is the public body involved in overseeing medicine pricing. In this case, its expected role was to address excessive markups and help ensure that medicines remain available at reasonable prices. Its intervention matters because patients often cannot judge whether a medicine’s price reflects its real supply cost.

The court focused on the authority’s delayed response to high prices. It questioned why action had taken so long and remarked that the NPPA seemed “totally defunct,” while acknowledging the court’s respect for the institution. The criticism followed concerns about hospitals charging far above procurement costs.

The NPPA’s future role may come under closer scrutiny after the Supreme Court’s order. The court could clarify how actively pricing authorities should respond to inflated MRPs and trade margins. It also suggested showing MRP and PTR on medicine packaging, which could give regulators and patients more information about pricing gaps.

The Centre supports targeted price controls because it says medicine policy must balance several goals. These include keeping essential medicines affordable, encouraging innovation, preserving competition, supporting industry growth and protecting employment. Its approach focuses on selected medicines or specific problems rather than imposing the same margin rule across the entire market.

The government warned that comprehensive controls could have unintended effects. Excessive regulation, it argued, might reduce investment and affect the availability of medicines. Hospitals also said lower medicine margins could push private facilities to raise charges for other services, because they must fund operating theatres, MRI machines, catheterisation laboratories and medical staff.

The Supreme Court is testing whether that balance adequately protects patients. It questioned why commercial considerations should outweigh the lives of poorer citizens and whether the existing framework controls inflated MRPs. The eventual ruling could determine whether targeted action remains the policy or whether broader price regulation becomes necessary.

Normal market competition works poorly when buyers cannot easily compare prices or refuse a purchase. Patients needing treatment may have little choice about which medicine to buy, especially during serious illness. The Supreme Court said they also have limited bargaining power and little information about what hospitals and retailers paid.

That information gap allows a medicine’s MRP and later markups to remain difficult to challenge. The court questioned why the initial MRP could be fixed far above the supply price and then increased annually. It suggested that packaging should show both MRP and PTR, helping reveal the difference between the listed retail price and the retailer’s purchase price.

The case highlights why relying only on market forces may not protect patients. The government’s margin cap could reduce prices for selected anti-cancer medicines, but the court questioned whether it goes far enough when MRPs are already inflated. Its final ruling may support stronger transparency or broader regulation.