Government to cap trade margins on cancer drugs at 30%, prices may fall by 70%

The Centre has decided to cap trade margins on non-scheduled anti-cancer medicines at 30 per cent of their maximum retail price (MRP), a move expected to significantly reduce the cost of cancer treatment and generate annual savings of around Rs 2,500 crore for patients, government sources said on Thursday.

The proposed measure will cover approximately 110 anti-cancer drugs, including 35 patented medicines, and extend to branded and generic formulations, domestically manufactured and imported drugs, and patented and non-patented medicines.

Officials said the initiative was intended to address excessive trade mark-ups in the pharmaceutical supply chain while ensuring that life-saving cancer medicines remained available to patients. Prices of some affected medicines could fall by as much as 70 per cent once the revised framework is implemented.

Panel to finalise list

An expert committee constituted under the Directorate General of Health Services (DGHS) is examining the medicines to be brought under the new framework. The panel is expected to submit its recommendations by October 14, following which the National Pharmaceutical Pricing Authority (NPPA) will issue the necessary notifications.

The revised pricing mechanism is expected to be implemented later this month.

Officials said the primary objective of trade margin rationalisation was to prevent practices in which medicines carrying higher profit margins were preferentially marketed or sold to patients.

Under the proposed system, the margins retained by intermediaries between procurement and retail sale will be restricted, preventing excessive additions to the final price paid by consumers.

Supreme Court raises concerns

The decision comes amid scrutiny by the Supreme Court over unusually high mark-ups on essential medicines, particularly drugs used in cancer treatment.

During a hearing on September 29, a bench of Justices Vikram Nath and Sandeep Mehta expressed concern over the substantial difference between procurement prices and the MRPs charged to patients.

The court referred to an anti-cancer medicine supplied to retailers for approximately Rs 2,700 but carrying an MRP of Rs 27,000, questioning the justification for such a steep increase.

The bench also raised the possibility of introducing a uniform trade margin of 16 per cent across medicines and asked the Centre to examine the issue.

The matter is scheduled to come up for further hearing on October 12.

Government sources, however, maintained that the proposed intervention was not directly linked to the pending proceedings and had been under consideration as part of a broader drug-pricing reform exercise since 2019.

Earlier intervention cut prices

In February 2019, the government introduced a 30 per cent trade margin cap on 42 non-scheduled anti-cancer medicines under the Drugs (Prices Control) Order, 2013.

The intervention affected 526 brands and resulted in an average reduction of approximately 50 per cent in their MRPs, generating estimated annual savings of Rs 984 crore for patients.

The latest proposal seeks to extend the mechanism to a substantially larger group of cancer medicines, including several expensive patented therapies that have remained outside direct price controls.

Unlike scheduled medicines, whose ceiling prices are regulated under the National List of Essential Medicines, non-scheduled formulations generally do not face direct government-fixed price ceilings, although annual MRP increases are restricted under existing regulations.

Officials said the government had identified unusually high trade margins in several cancer medicines, with mark-ups in some cases ranging from 170 per cent to 700 per cent.

The proposed restrictions are expected to reduce these disparities and make treatment more affordable for patients, particularly those paying for cancer medicines out of pocket.

Once the list is finalised and the new prices are notified, the revised rates will also apply to medicines supplied through hospitals, officials said.