The Centre on Monday informed the Supreme Court that it had decided to cap trade margins on anti-cancer medicines at 30% of their maximum retail price (MRP), a move expected to generate annual savings of approximately Rs 2,500 crore for patients and substantially reduce the prices of several cancer treatments.
A bench of Justices Vikram Nath and Sandeep Mehta was informed by Solicitor General Tushar Mehta that the proposal had been considered at the 151st meeting of the National Pharmaceutical Pricing Authority (NPPA) on October 8. The government said the implementation process was underway and that an expert committee had been constituted to identify the medicines to which the revised trade-margin restrictions would apply.
In a 551-page affidavit, the Centre submitted that the proposed Trade Margin Rationalisation (TMR) framework could bring down the MRPs of anti-cancer medicines by approximately 20% to 70%, depending on their existing pricing structures.
๐๐ผ๐๐ฒ๐ฟ๐ป๐บ๐ฒ๐ป๐ ๐ผ๐๐๐น๐ถ๐ป๐ฒ๐ ๐ฝ๐ฟ๐ถ๐ฐ๐ถ๐ป๐ด ๐ฝ๐น๐ฎ๐ป
The government told the court that a comprehensive statutory and policy framework already existed for regulating medicine prices in India and that steps were being taken to address excessive trade margins without disrupting the availability of essential treatments.
"It is respectfully submitted that a comprehensive statutory and policy framework is in place for regulating the prices of drugs in the country and that the government has, in public interest, been taking calibrated and consultative steps, including by invoking its extraordinary powers under Paragraph 19 of the DPCO, 2013, to curb excessive trade margins, without compromising the availability of medicines," the affidavit stated.
The Centre said it had decided to restrict trade margins on anti-cancer drugs to 30% of the MRP, with the necessary administrative and regulatory steps being undertaken to implement the decision.
The proposed intervention is aimed at reducing the difference between the price at which medicines enter the distribution chain and the amount ultimately paid by patients.
๐๐ ๐ฝ๐ฒ๐ฟ๐ ๐ฝ๐ฎ๐ป๐ฒ๐น ๐๐ผ ๐ถ๐ฑ๐ฒ๐ป๐๐ถ๐ณ๐ ๐ฑ๐ฟ๐๐ด๐
The affidavit stated that the government would notify a list of medicines approved for cancer treatment to which the new trade-margin ceiling would apply.
The Ministry of Health and Family Welfare constituted an expert committee on October 9 under the chairmanship of the Director General of Health Services to recommend the eligible medicines. The committee has been asked to submit its recommendations within 10 to 15 days.
According to the government, the proposed list will cover drugs approved for cancer treatment, excluding those that are already inexpensive. It may also be periodically updated to include additional medicines based on market developments and public health considerations.
Once the expert committee submits its recommendations, the NPPA will examine the list and deliberate on the appropriate directions for implementing trade-margin rationalisation for non-scheduled anti-cancer medicines.
The authority will subsequently issue a price notification, along with instructions and procedures for manufacturers, to ensure that the financial benefits are passed on to patients.
The government said the proposed mechanism was expected to result in substantial reductions in retail prices while maintaining access to cancer medicines.
๐๐ฎ๐ฟ๐น๐ถ๐ฒ๐ฟ ๐บ๐ฒ๐ฎ๐๐๐ฟ๐ฒ ๐๐ฎ๐๐ฒ๐ฑ ๐ฅ๐ ๐ต๐ด๐ฐ ๐ฐ๐ฟ๐ผ๐ฟ๐ฒ
The Centre cited a similar intervention introduced in February 2019, when the NPPA imposed a 30% trade-margin ceiling at the first point of sale on 42 selected non-scheduled anti-cancer medicines.
The margin was determined on the basis of an industry-practice assumption of 10% for distributors and 20% for retailers.
According to the affidavit, the intervention resulted in reductions in the MRPs of 526 medicine brands and generated estimated annual savings of Rs 984 crore for patients, based on information submitted by pharmaceutical companies.
The government said the 2019 exercise demonstrated that trade-margin regulation could reduce medicine prices and provided an operational precedent for expanding the framework to a wider range of non-scheduled cancer treatments.
However, it acknowledged that pricing interventions must be carefully designed because changes affecting commercial margins could also influence the availability and distribution of medicines.
๐ฃ๐ฒ๐๐ถ๐๐ถ๐ผ๐ป๐ ๐พ๐๐ฒ๐๐๐ถ๐ผ๐ป ๐ฑ๐ฟ๐๐ด ๐ฝ๐ฟ๐ถ๐ฐ๐ถ๐ป๐ด
The Supreme Court is hearing petitions concerning the regulation of medicine prices, prescription of generic drugs and price controls on medical devices under the Drugs (Prices Control) Order, 2013.
Two petitions, including one filed by Kishan Chand Jain, have raised concerns about the pricing of non-scheduled medicines, which account for an estimated 80% or more of pharmaceutical formulations by number and value in the market.
While scheduled medicines are subject to government-prescribed ceiling prices, manufacturers of non-scheduled formulations have greater flexibility in fixing MRPs, subject to restrictions on annual price increases.
Under the existing framework, annual MRP increases for non-scheduled formulations are limited to 10%.
The petitions have highlighted the need for stronger regulatory mechanisms to address high medicine prices, particularly where distribution and retail margins contribute significantly to the final cost paid by patients.
๐๐ป๐ฑ๐๐๐๐ฟ๐ ๐ฏ๐ผ๐ฑ๐ถ๐ฒ๐ ๐ฟ๐ฎ๐ถ๐๐ฒ ๐ฐ๐ผ๐ป๐ฐ๐ฒ๐ฟ๐ป๐
The government informed the court that the proposed trade-margin rationalisation framework had received support from several pharmaceutical industry associations and consumer organisations.
However, stakeholders had made recommendations concerning the calculation formula, the permissible percentage of trade margins, the period of sales data to be considered and the possible impact on low-value and low-volume medicines.
Some industry groups also raised concerns about the scope and implementation of the proposed restrictions.
Associations representing micro, small and medium pharmaceutical manufacturers warned that extending trade-margin rationalisation to non-scheduled medicines could adversely affect smaller companies and their distribution networks.
According to the affidavit, these associations expressed apprehensions that the measure could lead to employment losses and affect medicine availability in remote areas.
They argued that smaller manufacturers often depended on multiple intermediaries and local traders to distribute their products, particularly in regions where larger pharmaceutical companies had limited reach.
The associations maintained that such distribution arrangements involved margins at several stages, even when the medicines were ultimately sold at competitive prices.
๐๐ฎ๐น๐ฎ๐ป๐ฐ๐ถ๐ป๐ด ๐ฐ๐ผ๐๐ ๐ฎ๐ป๐ฑ ๐ฎ๐๐ฎ๐ถ๐น๐ฎ๐ฏ๐ถ๐น๐ถ๐๐
The Centre acknowledged these concerns while maintaining that the proposed intervention was intended to address excessive margins and improve affordability for patients requiring cancer treatment.
It said the government had adopted a consultative approach to pharmaceutical price regulation, taking into account the interests of patients, manufacturers, distributors and retailers.
The affidavit emphasised that the objective was to reduce medicine prices without compromising supply, particularly in areas dependent on smaller manufacturers and distribution networks.
The proposed 30% ceiling will be implemented after the expert committee identifies the eligible drugs and the NPPA completes the necessary regulatory process.
The Supreme Court is continuing its examination of the broader questions surrounding pharmaceutical pricing, generic prescriptions and the regulation of medical devices, while the government's proposed anti-cancer drug pricing intervention moves towards implementation.