Supreme Court asks Centre why the 30% margin cap covers only cancer drugs

What happened in court

On Monday, October 12, a Supreme Court bench of Justices Vikram Nath and Sandeep Mehta asked the Centre why a 30% cap on trade margins applies only to anti-cancer drugs when other medicines and devices also carry high margins, according to the Free Press Journal. The hearing was on petitions about the regulation of medicine prices, generic prescriptions and controls on medical devices under the Drugs (Prices Control) Order (DPCO), 2013, as described by Kashmir Observer (PTI).

Solicitor General Tushar Mehta told the court the Centre would publish a list of cancer medicines covered by the cap, which would be updated periodically, and that inexpensive formulations would fall outside it, the Free Press Journal reported. The Centre said the cap would save patients about Rs 2,500 crore a year, according to Kashmir Observer. The bench called the Centre's response "hardly anything to be happy about", as reported by The Navhind Times.

The examples the bench cited

According to the reports, the judges pointed to gaps between cost and price:

• A saline drip sold at Rs 270 against an actual cost of Rs 11 (Kashmir Observer).
• An India-made cardiac stent that costs about Rs 5,000 and is sold for over Rs 25,000. Business Today describes the Rs 5,000 as the price supplied to retailers. Mehta said stent prices are already capped.
• The antibiotic azithromycin, with an MRP of Rs 78.29 against a price to the stockist of Rs 28.50, the Free Press Journal reported. Kashmir Observer gives the figures as over Rs 70 against about Rs 28.

The bench said it understood costs such as transport, raw materials and research, but noted that these are already included in the MRP, per The Navhind Times.

What the Centre argued

Additional Solicitor General Aishwarya Bhati argued that pricing must balance affordability, availability and market forces, that India already has some of the lowest medicine prices, and that heavy intervention could hurt availability, the Free Press Journal reported. Tushar Mehta said prices cannot be capped beyond a certain limit because higher margins help medicines reach remote areas. Senior Advocate Kapil Sibal, for the Indian Pharmaceutical Alliance, argued that such high mark-ups are not common across most formulations. The Free Press Journal reported that the bench remained unconvinced by the availability argument.

The legal background

The petitioner seeks mandatory prescription of generic medicines, stricter initial price controls on non-scheduled drugs and MRP caps on medical devices. He submitted that the National Pharmaceutical Pricing Authority (NPPA) fixes ceiling prices for only about 1,000 scheduled medicines, and that roughly 82% of medicines in the market fall outside that group.

In a 551-page affidavit, the Centre said ceiling prices have been fixed for 935 scheduled formulations. For non-scheduled formulations, manufacturers set the launch price and the NPPA monitors that the MRP does not rise more than 10% over the previous twelve months (Kashmir Observer).

What happens next

The court gave the Solicitor General time to set out how medicine prices could be capped and listed the matter for October 27. Kashmir Observer reported the bench as saying it intended to support the government's hand in this. Five days after the hearing, the NPPA notified the 30% cap on 137 cancer drugs, effective November 9, according to Business Today.