New Delhi: The Union government has proposed capping trade margins at 30% for selected anti-cancer drugs, estimating that the move could reduce maximum retail prices (MRPs) by 20–70% and save consumers around Rs 2,500 crore annually. The Supreme Court, however, has said the proposal does not go far enough and urged the Centre to examine medicine pricing across the wider pharmaceutical market.

A bench of Justices Vikram Nath and Sandeep Mehta was hearing a petition concerning the high prices of cancer and critical-care medicines. Taking note of the government’s proposal, the court described anti-cancer drugs as merely the “tip of the iceberg” and asked why the proposed controls should not cover a broader range of medicines.

The court has directed the Centre to return after consulting stakeholders and provide reasons for including certain drugs under the proposed cap while excluding others. The matter has been scheduled for further hearing on October 27.

Centre proposes 30% trade margin cap

Solicitor General Tushar Mehta presented the government’s proposal to cap trade margins at 30% for anti-cancer medicines identified by an expert committee constituted by the Ministry of Health and Family Welfare.

Mehta described the proposal as a considered assessment intended to balance the interests of consumers with those of the pharmaceutical industry. The government said the cap would apply to selected medicines rather than the entire range of drugs available in the country.

The selection of medicines would depend on several factors, including commercial viability, availability and the ability of distributors to ensure that medicines reach patients across different regions.

According to the Centre, the proposed cap could bring down MRPs by 20–70% for the medicines covered. It also estimated annual savings of around Rs 2,500 crore, alongside improved affordability and access for patients who require expensive cancer treatments.

The government maintained that a 30% margin would be a reasonable limit for the selected medicines. The proposal is intended to reduce excessive mark-ups without making the supply and distribution of essential drugs commercially unviable.

However, the proposal remains under consideration, and the Supreme Court has sought a broader explanation of the government’s approach to drug-price regulation.

Supreme Court seeks wider price controls

The bench said that limiting the exercise to anti-cancer medicines would address only a part of the problem. It indicated that the government should examine pricing across the pharmaceutical market, rather than focus exclusively on one category of drugs.

“We want to look at pricing on entire market for drugs, not just cancer drugs,” the bench observed.

The judges also questioned instances in which the maximum retail price of certain medicines was reportedly fixed at as much as 400 times the price charged to sellers.

The court sought an explanation for such large differences and stressed that the government’s decisions on which medicines to regulate, and which to leave outside the proposed framework, should be supported by reasons that serve consumer interests.

The observations bring the broader issue of medicine affordability into focus. While price regulation can help limit the burden on patients, the court’s questions suggest that the government may need to explain how it evaluates mark-ups across different categories of medicines.

The bench has asked the Centre to consider whether the proposed framework should cover a wider range of drugs and to justify the criteria used to determine which medicines qualify for price controls.

Earlier proposal suggested a uniform 16% retail margin

During an earlier hearing, the Supreme Court had suggested applying a uniform retail margin of 16% to non-scheduled medicines, including medicines dispensed in hospitals.

The 16% retail margin is prescribed under the Drugs (Prices Control) Order, 2013, for scheduled drugs. The court had raised the possibility of extending a similar standard to non-scheduled medicines, which are not subject to the same price-control framework.

The latest proposal from the Centre takes a different approach by suggesting a 30% trade margin cap for selected anti-cancer drugs identified by an expert committee.

The distinction between the two approaches is significant. A uniform margin limit would seek to establish a common benchmark across a broader group of medicines, while the government’s proposal would apply a cap only to specified drugs selected after considering factors such as availability and distribution.

The Supreme Court’s latest observations indicate that the scope of the proposal remains a key issue. The Centre will need to explain why a selective approach is appropriate and whether additional medicines should be included.

Centre warns against affecting medicine availability

The government has argued that drug-price regulation must account for the practical challenges involved in manufacturing, supplying and distributing medicines.

Mehta told the court that there needed to be a balance between affordability and availability. He cautioned that excessive intervention could affect market viability, discourage distribution and ultimately make some medicines difficult to obtain.

To illustrate its argument, the Centre referred to paracetamol and submitted that imposing a margin cap without considering local distribution conditions could make the drug unavailable in rural areas.

The government’s position is that medicines must remain commercially viable for manufacturers, wholesalers, retailers and distributors, particularly when supplies need to reach remote locations.

The Centre also argued that India already has comparatively low medicine prices and warned that broader intervention could have unintended consequences for the market.

“We do not want to control the entire range of drugs,” Mehta submitted on behalf of the government.

The court’s questions, however, underline the need for the government to demonstrate why particular medicines require price controls and why others should remain outside the proposed framework.

Why medicine margins matter to patients

The difference between the price at which a medicine is sold to a retailer and its final MRP can significantly affect what patients pay.

Trade margins are part of the distribution chain, covering the commercial returns available to wholesalers and retailers. Where mark-ups are high, the final price paid by a patient may be substantially greater than the price at which the medicine entered the distribution network.

For patients undergoing cancer treatment or requiring critical-care medicines, even a partial reduction in prices can make a meaningful difference to treatment expenses.

The Centre’s projected savings of Rs 2,500 crore annually reflect the potential scale of the proposed intervention. Its estimate of a 20–70% reduction in MRP applies to the medicines expected to be covered, rather than necessarily to every anti-cancer drug on the market.

The eventual impact will depend on which medicines are included, how the margin cap is implemented and whether the revised prices translate into savings for patients.

The Supreme Court’s wider concerns also raise questions about the pricing of medicines outside cancer treatment, particularly where large differences between seller prices and MRPs require further explanation.

Stakeholder consultations to determine next steps

The Supreme Court has asked the Centre to consult stakeholders before the next hearing on October 27. The government is expected to return with further details about its proposal and explain the basis for selecting medicines for margin capping.

The consultations will be important in assessing how price controls could affect manufacturers, distributors, pharmacies, hospitals and patients. They may also help the government explain how it intends to protect affordability without disrupting the supply of essential medicines.

The central issue is whether a cap limited to selected anti-cancer drugs can adequately address the pricing concerns raised in the petition, or whether a broader framework is required.

The Centre has emphasised the risks of imposing controls without considering availability and distribution. The court, meanwhile, has sought a wider examination of the pharmaceutical market and clearer reasons for the proposed exclusions.

What happens next?

The government’s 30% trade margin cap proposal could reduce the cost of selected anti-cancer medicines if implemented as envisaged. The projected savings and price reductions, however, remain estimates associated with the proposal rather than realised outcomes.

At the October 27 hearing, the Supreme Court is expected to consider the Centre’s response following stakeholder consultations and its explanation of why the proposed controls cover only certain medicines.

The outcome could shape the next stage of the debate over medicine pricing in India. For now, the court has made clear that the discussion cannot end with anti-cancer drugs alone: the government must also address the wider question of how medicine prices and trade margins should be assessed across the market.