The Supreme Court on Monday called for a broader examination of drug pricing in the country, questioning why the Centre’s proposed regulation of trade margins was limited to cancer medicines and urging it to consider excessive markups across the pharmaceutical market, including medical devices.
The Centre, which has earlier come under severe criticism from the top court for steep markup of cancer drugs by hospitals, said that the government has taken an important decision to cap the trade margin on anti-cancer drugs at 30 per cent of the MRP, which is expected to result in annual savings of approximately Rs 2,500 crore to patients.
A bench of Justices Vikram Nath and Sandeep Mehta said that the Centre's response was insufficient and flagged that a single saline drip was sold in market for Rs 270 while its actual cost was Rs 11.
"There is hardly anything to be happy about. There is actually nothing for the benefit of the patients," the bench observed as Solicitor General Tushar Mehta and Additional Solicitor General Aishwarya Bhati, appearing for the Centre, tried to explain the regime in place.
Mehta said that the government has taken an important step to cap the trade margin on anti-cancer drugs at 30 per cent of the MRP, which would result in savings of approximately Rs 2,500 crore to patients.
Justice Nath told the solicitor general that the court fails to understand that if the government can cap the price of anti-cancer drugs, then why can it not bring all the medicines under this regime.
"We understand that there are transportation costs, raw material cost, R&D cost and all other ancillary costs, but all these are included in the MRP. What is the logic behind allowing them to sell 400 times the actual cost? How can you allow this?" the bench observed.
Bhati said that the cost of medicines in India was the lowest in the world and that is the reason a lot of people come to the country for treatment.
Justice Mehta said that the cost of an India-made cardiac stent is around Rs 5,000 but it is sold by hospitals for more than Rs 25,000 and similarly, the cost of common antibiotic Azithromycin is sold at over Rs 70 while its actual cost is around Rs 28.
Tushar Mehta said that the medicines cannot be capped beyond a limit as higher margins enable them to reach far-flung areas.
Justice Mehta said, "If the DPCO [Drugs (Prices Control) Order]-approved medicines do not reach customers, then it is the duty of the government to ensure it reaches the patient. The actual dispute is what medicine should be in the DPCO controlled list and what should not be."
The bench gave time to Tushar Mehta to come out with modalities for capping the price of medicines and posted the matter for further hearing on October 27.
"We will be strengthening the hands of the government. Nothing else. Whatever you have to do, do it by October 27," the bench observed.
The Centre, in its 551-page detailed affidavit, said the national list of essential medicines (NLEМ) is prepared and published by the Ministry of Health and Family Welfare. The NLEM was last published in 2011, 2015 and, most recently, in 2022, it added.
"The NLEM is drawn up by the Standing National Committee on Medicines, consisting of all stakeholders and experts, which considers, inter alia, the Essential Medicines List of the World Health Organization, the drugs used in the National Health Programmes, the Indian Pharmacopoeia and the National Formulary," it said, adding that the NLEM, 2022 comprises 388 drugs and more than 900 formulations.
On price fixation of medicines, the Centre said the ceiling price of a scheduled formulation, i.e., a medicine included in Schedule-I to the DPCO, 2013, is fixed on the basis of market data by taking the simple average of the price to the retailer of all the brands and generic versions of the medicine having a market share of more than or equal to one percent of the total market turnover on the basis of the moving annual turnover of that medicine, and adding a margin of 16 per cent to the said simple average.
"The ceiling price so fixed becomes the MRP, i.e., the price above which the drug cannot be sold in the market. However, the manufacturer is at liberty to give an appropriate margin to the wholesaler and the retailer within the ceiling price," it said, adding that the ceiling prices of 935 formulations have been fixed till date.
For the non-scheduled formulations, the Centre said that the manufacturer is at liberty to fix the initial launch price, and while fixing such launch price, the manufacturer takes into account the existing competition. Given the competitive market in the sector, it may, in general, be difficult for a manufacturer to fix such prices arbitrarily, the Centre further said.
"The NPPA monitors the MRP of all non-scheduled formulations so as to ensure that no manufacturer increases the MRP of a nonscheduled drug by more than 10 per cent of the MRP prevailing during the preceding twelve months," it said.
On September 29, the top court said it is carnage while voicing its concern over a steep markup of ten times on cancer drugs by hospitals and batted for a uniform 16 per cent margin on all medicines.
It asked the Centre to look into the issue of hospitals mandating the purchase of medicines from their chemists and said it is the common man who suffers from this system.
The top court was hearing petitions concerning regulation of medicine prices, generic prescriptions and controls on medical devices under the DPCO, 2013.