Pricing pain points

Controls in health care are needed but come with risks

The government’s admission before the Supreme Court that hospitals routinely overcharge customers for drugs and other products offers a faint hope for a healthier drug-price control regime. But establishing a comprehensive one could be tricky. Western countries that impose limits on drug-pricing margins and manufacturers’ costs — such as Canada or nations of the European Union — do so via near-universal health care programmes that involve bulk (and in that sense monopoly) purchases. India’s health system, on the other hand, is increasingly driven by private-sector delivery, where monitoring price caps is a challenging proposition and largely depends on forbearance on the part of hospitals, clinics and chemists. Nevertheless, the problem is serious enough for the government to consider some level of intervention following the public-interest litigation (PIL), seeking the apex court’s intervention to regulate the prices of generic medicines, drugs and medical equipment. The affidavit had stated that hospital markups on many drugs range between 170 per cent and 700 per cent,  while those on consumables range from 100 per cent to 1,000 per cent. The court itself had described as “dacoity” the markup on the maximum retail price of a range of life-saving drugs, especially cancer drugs. The government has acknowledged that the information asymmetry between patient and hospital is the chief reason for this blatant price gouging. At least part of the problem lies in the government’s drug price-control regime. Medicines are divided into “scheduled” drugs, which are essential medicines that have ceiling prices set by the government — such as insulin, some antibiotics and anti-depressants, tuberculosis medications — and “non-scheduled” drugs, which allow manufacturers to set prices. Over 80 per cent of drugs fall in the non-scheduled category — and that includes cancer drugs. Facing up to this incontrovertible evidence of these pricing practices — that can often tip families into bankruptcy — the government machinery has moved to address the issue. With effect from November 9, 2026, the National Pharmaceutical Pricing Authority (NPPA) has capped the trade margins on 137 anti-cancer drugs at 30 per cent of the maximum retail price (MRP). The intervention is expected to lower the MRP on life-saving cancer drugs by up to 70 per cent. A parliamentary standing committee has recommended — not for the first time — standardising private-hospital costs, capping room rents to three-star hotel rates, and enforcing mandatory disclosure of upfront costs of medical procedures.

 

The obvious question is the efficacy with which such diktats can be imposed. Drug-price control runs the risk of being self-defeating. The supply of key molecules for several bulk drugs shifted to China after price controls made them unprofitable for local manufacturers. Today, India imports two-thirds of its active pharmaceutical ingredients from China, the impact of which was keenly felt during the Covid lockdown. Countries with price-control regimes have also felt the impact of manufacturers’ reluctance to introduce the latest drugs into those markets. The government, therefore, needs to navigate between producer and retail profiteering and patients’ interests. Widely disseminated education and a multilingual campaign on patient rights and price policies would go a long way in bridging the information gap. The fact that the NPPA falls under the Ministry of Chemicals and Fertilisers rather than the Ministry of Health and Family Welfare, which is responsible for health care delivery, suggests a fundamental policy disconnect, which too should be addressed.