The Centre has acknowledged before the Supreme Court that hospitals charge patients exorbitant prices for medicines and medical consumables, with markups on anti-cancer drugs ranging from 170% to 700% or more.
In an affidavit filed by the Ministry of Chemicals and Fertilizers in a case concerning the regulation of medicine and medical consumable prices, the government described the practice as a “malpractice”, pointing to the unequal bargaining power between patients and hospitals.
The affidavit said patients have a “very low bargaining position vis-a-vis the hospital”, while their knowledge of medicines, their substitutes and their prices is also “very limited”.
The government’s submission comes amid growing judicial scrutiny of steep price disparities in essential medicines and allegations of excessive markups by hospitals and pharmaceutical companies.
“The Indian drug market is fairly competitive, with a large number of pharmaceutical companies in every drug segment, resulting in one of the lowest prices in the world,” the affidavit stated.
The Centre, however, said competition alone could not address pricing concerns in healthcare because patients have limited information about medicines and their alternatives and are at a disadvantage when negotiating with hospitals and other healthcare providers.
“Ordinarily, where there is substantial competition, there is no need to regulate prices. However, by their very nature, health treatment and pharmaceutical products involve information and bargaining asymmetries between patients on the one hand, and retail pharmacies, hospital pharmacies, hospitals providing treatment and doctors on the other,” the affidavit added.
CANCER DRUG PRICES MAY FALL BY UP TO 70%
The Centre has proposed capping trade margins on non-scheduled anti-cancer medicines at 30%, a move it said could reduce prices by 20% to 70% and save patients around Rs 2,500 crore annually.
The government told the court that the proposed measure seeks to curb excessive markups while allowing reasonable margins for those involved in the supply chain.
During an earlier hearing, the Solicitor General informed the court that the Centre would notify a list of cancer medicines covered by the proposed cap. The list would be revised periodically to include additional drugs based on market developments and public health needs, while inexpensive medicines would be excluded.
The Supreme Court, however, questioned why price-control measures were being considered only for cancer medicines and not extended to other drugs. It also asked how patients would benefit if manufacturers were allowed to determine medicine prices and called for a wider examination of drug pricing practices.
The government has said it is consulting stakeholders and is considering appropriate regulatory measures to address the problem.
HOSPITALS CHARGE UP TO 1,000% MARGINS ON CONSUMABLES
The Centre also flagged excessive markups on medical consumables used during hospital treatment, with margins ranging from 100% to 1,000% or more.
The affidavit said hospitals tend to procure consumables that carry high maximum retail prices (MRPs) and offer substantial margins despite having relatively low purchase costs.
The government described this as another area of concern, stating that margins of “100% to 1000% or more are prevalent” in the supply of hospital consumables. It also flagged a tendency among hospitals to purchase items with high MRPs and margins but low prices for distributors and hospitals.
While hospital supplies are generally included in treatment packages under government schemes and insurance, patients paying out of pocket are often billed separately for these items at their MRP, the affidavit said.
The ministry also pointed out that medical consumables range from items costing Re 1 to Rs 350 or more, making it difficult to impose a uniform profit margin across the category. A common margin, it said, could make it difficult for suppliers to recover the costs associated with selling low-priced items.
SUPREME COURT FLAGS MASSIVE PRICE DISPARITY
The affidavit follows the Supreme Court's concerns over the wide gap between the purchase prices and MRPs of essential cancer medicines.
During a hearing on September 22, the bench highlighted a case in which a medicine purchased by retailers for Rs 2,700 carried an MRP of Rs 27,000.
Questioning the disparity, the bench asked, “How can a patient be cheated?”
The bench also criticised the authorities over the pricing gap, observing, “It’s ultimately tax payer’s money,” and describing the matter as a “clear cut case of fraud” in the context of medicines purchased by hospitals and government reimbursements for patients treated under the AYUSH scheme.
The court has stressed that the issue requires broader scrutiny and should not be confined to anti-cancer medicines.
HOW MEDICINE PRICES ARE REGULATED IN INDIA
Drug prices in India are governed by the Drugs (Prices Control) Order, 2013, issued under the Essential Commodities Act, 1955.
The ceiling prices prescribed under the order apply to scheduled formulations, or medicines included in its First Schedule. For non-scheduled formulations, manufacturers generally determine the launch price, while annual increases in the MRP are restricted under the existing framework.
The Centre's proposed 30% trade-margin cap on non-scheduled anti-cancer medicines is aimed at addressing excessive markups in this segment. The broader question before the court is whether similar safeguards should be extended to other medicines and medical consumables to protect patients from inflated hospital bills.
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