Law & Justice

Supreme Court Criticises Government and Hospitals Over High Medicine Mark‑Ups

By Krishna Yadav

The Supreme Court on Tuesday questioned the Centre’s failure to justify steep mark‑ups on medicines and asked why it took years to cap trade margins on selected anti‑cancer drugs. The bench, led by Justices Vikram Nath and Sandeep Mehta, reserved its order in a public interest litigation filed in 2023 by advocate and activist Kishan Chand Jain, which seeks affordable medicines and reforms in drug pricing and medical regulation.

The court also scrutinised hospitals’ pricing practices, asking why medicines were sold to patients at maximum retail prices (MRPs) that were far above their procurement costs. "The lives of people, Ms Bhati… don’t take it as commerce. Treat it as the life of the poorest citizen of this country," the bench told additional solicitor general Aishwarya Bhati, appearing for the Centre. "We have asked you no less than 30 times to tell us this justification," it added.

The hearing followed the government’s notification on 17 October that capped trade margins at 30 % of the MRP for selected non‑scheduled anti‑cancer medicines. The Centre said the measure would reduce retail prices by 20‑70 %. The bench criticised the National Pharmaceutical Pricing Authority (NPPA) for its delayed intervention and questioned whether the new measure would meaningfully lower prices when the original MRP was substantially inflated. "Your body seems to be totally defunct, with due respect," the bench remarked while questioning the authority’s record on addressing excessive mark‑ups.

The court cited a case in which a medical dealer could procure a chemotherapy injection for ₹11,000, but a hospital charged ₹1.3 lakh. It asked the government to explain the disparity and why it had taken so long to intervene. The final ruling will determine the extent to which the Supreme Court can intervene to address excessive medicine mark‑ups and whether broader price regulation is warranted.

Bhati argued that the government’s policy seeks to balance the availability of essential medicines at reasonable prices with innovation, competition, industry growth and employment. She said the policy favoured targeted interventions over comprehensive price controls, cautioning that excessive regulation could affect investment and the availability of medicines.

The bench questioned the adequacy of the existing framework, asking why a medicine’s initial MRP could be set far above its supply price and then be allowed to rise annually. "You at the initial level fix the MRP right up to the moon. Then you increase by 10 %," the bench remarked. It also challenged the government’s reliance on market forces to regulate prices, saying patients had limited bargaining power and little information about the prices at which hospitals and retailers procure medicines.

Senior advocate Mukul Rohatgi, appearing for hospitals, said medicine margins help private healthcare facilities cover the costs of operating theatres, catheterisation laboratories, MRI machines and round‑the‑clock medical staff. He warned that restricting medicine margins could force hospitals to raise charges for other services. Rohatgi noted that listed hospitals typically operate on profit margins of around 10 % and need to invest thousands of crores of rupees in upgrading equipment.

The bench suggested that medicine packaging display both the MRP and the price to retailer (PTR) to improve transparency. It also raised concerns about whether financial incentives arising from high medicine margins could encourage unnecessary procedures, though it clarified it was not making a definitive finding that such practices had occurred.