Supreme Court Calls Tenfold Markup on Cancer Drug ‘Broad Daylight Dacoity’, Faults Silent Regulators

The news

New Delhi. The Supreme Court on Tuesday, September 22, expressed shock at the overpricing of essential cancer medicines, terming it a “broad daylight dacoity” against patients, The Hindu reports (PTI). The Bench of Justices Vikram Nath and Sandeep Mehta noted that one drug carried a maximum retail price (MRP) of ₹27,000 although it was supplied to retailers for ₹2,700. “The MRP is 10 times the rate at which it is provided to the retailers. If this is not extortion, then what it is?” the Bench asked, adding: “It is very surprising that the authorities who are supposed to take action on this are silent.” The court was hearing two petitions on drug-related issues, one of them seeking strict price control over medicines. The paper does not name the drug or the petitioners. The MRP is the highest legal selling price, printed on the pack by the company itself; the gap between it and the price to the retailer is the “trade margin” kept by the distribution chain. An Indian Express op-ed the same day by Abhay Shukla, national co-convenor of Jan Swasthya Abhiyan, shows the same pattern in hospitals, citing Maharashtra Food and Drug Administration (FDA) commissioner Tukaram Mundhe: a drip set that costs a hospital ₹11 carries a printed price of ₹325, and a syringe bought for under ₹7 is marked at ₹57. An audit of bills of critical patients in private hospitals across Maharashtra, facilitated by Jan Arogya Abhiyan, found that not one of 46 medicine brands was billed within the 10% markup on purchase price fixed during the pandemic; for nearly half, patients paid more than 150% above the hospital’s cost, and the most common margin was 200-400%. In 2016, a Department of Pharmaceuticals committee chaired by Sudhansh Pant called high MRPs “a tool to cheat the helpless consumer” and recommended capping trade margins on all medicines and implants, price-controlled or not, at 35% to 50% depending on price. Ten years on, Mr. Shukla writes, only 18% of medicines are price-controlled. He asks for bills showing both the hospital’s purchase price and its charge, statutory price control over all essential medicines and consumables through the Drug Price Control Order, and enforcement of the patient’s right to buy medicines outside the hospital pharmacy. The syllabus link is GS2 on health and GS3 on pricing and consumer protection.

Static syllabus linkage

1. The Drugs (Prices Control) Order, 2013 is issued under the Essential Commodities Act, not the drug law. The Drugs (Prices Control) Order, 2013 (DPCO) is made by the Union government under Section 3 of the Essential Commodities Act, 1955, which allows control of the production, supply and price of essential commodities. Its First Schedule lists “scheduled formulations”, which are the medicines in the National List of Essential Medicines (NLEM); the current NLEM, of 2022, has 384 medicines. For these, a ceiling price is fixed as the simple average of the price to retailer of all brands with at least 1% market share, plus a 16% retailer margin, and the ceiling is revised every year in line with the Wholesale Price Index. For all other, “non-scheduled”, formulations the company fixes its own MRP, but may raise it by no more than 10% in any twelve months.
2. The National Pharmaceutical Pricing Authority enforces prices; it can also act beyond the essential list. The National Pharmaceutical Pricing Authority (NPPA) was set up in 1997 and is an attached office of the Department of Pharmaceuticals in the Ministry of Chemicals and Fertilizers. It fixes ceiling prices under the DPCO, monitors prices of all medicines and recovers overcharged amounts from companies. Paragraph 19 of the DPCO lets the government fix or revise the price of any drug, scheduled or not, in extraordinary circumstances in the public interest. This power was used in 2019 to cap the trade margin at 30% on 42 non-scheduled anti-cancer medicines, an approach known as trade margin rationalisation.
3. The Supreme Court has read a right to health into Article 21, and Article 47 makes public health a State duty. Article 47, a Directive Principle, says the State shall regard raising the level of nutrition and the standard of living and the improvement of public health as among its primary duties. The Supreme Court has held that the right to life under Article 21 includes the right to health and emergency medical care, notably in Parmanand Katara v. Union of India (1989) and Paschim Banga Khet Mazdoor Samity v. State of West Bengal (1996). “Drugs and poisons” are Entry 19 of the Concurrent List, while “public health and sanitation; hospitals and dispensaries” are Entry 6 of the State List. Pricing is therefore a Union matter, but regulating hospitals is largely for the States.
4. Consumer law and patients’ rights instruments give the patient a remedy against forced purchase. The Consumer Protection Act, 2019 defines “unfair trade practice” and provides a three-tier redressal system of District, State and National Consumer Disputes Redressal Commissions. The Charter of Patients’ Rights prepared by the National Human Rights Commission, cited in the op-ed as the National Patients’ Rights Charter, includes the right to choose the source of medicines and tests. The printing of MRP on packages is required under the Legal Metrology (Packaged Commodities) Rules, 2011. The Pradhan Mantri Bhartiya Janaushadhi Pariyojana sells quality generic medicines through Jan Aushadhi Kendras as a market-side check on branded prices.

Why UPSC loves this

1. GS2 asks about affordable health care; GS3 about pricing and regulation. The GS2 syllabus lists “issues relating to development and management of the social sector or services relating to health”. UPSC has repeatedly asked about universal health coverage and the burden of out-of-pocket spending, for which medicines are the largest single item. This story gives a concrete mechanism — the unregulated MRP — through which that burden is created, and a court’s statement that the regulator is silent.
2. Prelims tests the institutional map of drug pricing. Questions have been framed around which body fixes drug prices, under which law the price control order is issued, and what the NLEM is. The confusion between CDSCO (quality and approval, Health Ministry) and NPPA (prices, Department of Pharmaceuticals) is a classic trap, as is the fact that the DPCO flows from the Essential Commodities Act rather than the Drugs and Cosmetics Act.
3. Judicial activism in regulatory failure is a recurring Mains theme. The Bench’s remark that authorities “are silent” fits a larger pattern of the Supreme Court stepping in where regulators do not act. A Mains answer on judicial activism or on regulatory institutions can use this as a current example, with the caveat that courts can prod regulators but cannot run price control themselves.

Analysis

1. The problem is not a missing law but an unused one. The DPCO already contains Paragraph 19, and NPPA already used it in 2019 to cap trade margins on cancer drugs. The Pant committee’s 35-50% cap was a recommendation to extend that model across the market, and it has not been adopted for a decade. So when the Bench says the authorities “are silent”, it is describing a policy choice rather than a gap in power. The court’s remarks raise the political cost of that silence, which is often what moves a ministry. The honest counter-view is that the paper does not tell us which cancer drug was involved, whether it is scheduled, or whether it falls under the 2019 cap, so the case may also reveal weak monitoring rather than absent rules.
2. A high MRP is a sales tool aimed at the seller, not the buyer. Companies do not set a tenfold MRP expecting patients to shop around; they set it so that the retailer or hospital earns a large margin and therefore pushes that brand. This is why competition among brands can raise, rather than lower, the price paid by patients: the brands compete for the seller’s loyalty through margin. The patient, especially in cancer care or inside a hospital, has no bargaining power and often no time. A margin cap attacks this directly, because it removes the incentive to inflate the printed price. Price ceilings on the drug alone do not, as the Maharashtra consumables data show.
3. Only 18% coverage means price control protects a list, not a patient. The NLEM is built for a primary and secondary care system, so many newer cancer drugs, implants and hospital consumables sit outside it. A patient admitted to a private hospital pays for dozens of items, most of them non-scheduled, and the savings on the few scheduled ones can be swamped by markups on the rest. The pandemic-era 10% markup cap in Maharashtra, which the audit found was breached for every one of 46 brands, shows that a cap without billing transparency is not self-enforcing. Mr. Shukla’s proposal of printing the purchase price beside the charge is cheap and makes every bill an inspection report.
4. The industry’s counter-argument deserves an answer, not dismissal. Manufacturers argue that margins fund distribution to small towns, that price caps have led some companies to withdraw products or shift to non-scheduled combinations, and that aggressive control discourages investment in new drugs. There is some evidence that price control encourages such evasion, which is why a blanket margin cap is better than product-by-product ceilings: it leaves the base price to the company and only limits the markup. The 35-50% range recommended by the Pant committee already allows a reasonable distribution margin. The point is not to eliminate margins but to stop MRP being an arbitrary number.
5. Hospitals, a State subject, are the weakest link. Pricing is a Union matter, but hospitals are regulated by States, and many States have not adopted the Clinical Establishments (Registration and Regulation) Act, 2010 or enforce it weakly. The right to buy medicines outside the hospital pharmacy exists in Maharashtra FDA orders of 2016 and 2022 and has been upheld by the National Consumer Commission as a protection against unfair trade practice, yet patients rarely use it. A Union margin cap will reach retail pharmacies quickly, but hospital billing needs State FDAs to inspect bills. Without that pairing, the Supreme Court’s remarks will change headlines but not invoices.

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