Supreme Court Questions 10x Markup on Cancer Drugs at Hospitals
The Supreme Court has intensified its scrutiny of pharmaceutical pricing practices, specifically targeting the massive disparity between the cost of cancer drugs to retailers and the final price charged to patients. A bench comprising Justices Vikram Nath and Sandeep Mehta described the current pricing structure as carnage, citing instances where a cancer medication supplied to retailers for approximately Rs 2,700 to Rs 3,000 is sold to patients at a maximum retail price (MRP) of Rs 27,000.
Scrutiny of Hospital Pharmacy Practices
The bench directed its criticism toward corporate hospitals, questioning the common practice of mandating that patients purchase medicines exclusively from in-house pharmacies. The court observed that these institutions often refuse to guarantee treatment if patients attempt to procure drugs from external sources, effectively forcing them to pay inflated prices linked to the hospital's own pharmacy margins. Justice Mehta remarked that corporate hospitals operate as industries rather than service providers, placing an undue financial burden on the common man.
According to National Library of Medicine (PubMed), for National Institutes of Health, Cancer care in India causes catastrophic health expenditure for over 60 to 75 percent of affected households due to exorbitant out-of-pocket costs for specialized pharmaceuticals.
Taxpayer Burden and Regulatory Gaps
Beyond the immediate impact on patients, the court highlighted the broader implications for public funds. When patients receive treatment under government-sponsored health schemes, the inflated costs are ultimately reimbursed by the taxpayer. The bench questioned why a uniform margin, such as 16 percent on the MRP, cannot be applied across all pharmaceutical products to eliminate these discrepancies. The court also noted that the current distinction between scheduled and non-scheduled medicines under the Drugs (Prices Control) Order, 2013, provides manufacturers with excessive flexibility in setting prices for non-scheduled formulations, which reportedly account for over 80 percent of the market.
According to National Pharmaceutical Pricing Authority, on February 27, 2019, NPPA capped trade margins at 30% for 42 non-scheduled anti-cancer medicines under order S.O. 1041(E), reducing MRPs by up to 90% across 526 brands and saving patients ₹984 crore annually.
According to Verdictum, while scheduled drugs under DPCO 2013 restrict retailer margins to a statutory 16%, non-scheduled drugs allow un-capped commercial markups between PTR and MRP exceeding 900% (10x markup).
Government Response and Next Steps
Solicitor General Tushar Mehta, appearing for the Centre, acknowledged that the issue requires attention and that a balance must be struck between the interests of various stakeholders. He suggested that pharmaceutical manufacturers might not be the primary beneficiaries of these high markups, hinting that private hospitals may be absorbing a significant portion of the margins. The Solicitor General requested two weeks to consult with government officials and formulate a response. The Supreme Court has posted the matter for further hearing on October 12, having previously characterized the overpricing of essential cancer medicines as broad daylight dacoity.