Why In News?

The Supreme Court criticized the National Pharmaceutical Pricing Authority (NPPA) for uncontrolled essential medicine markups, ruling that economic policies cannot take precedence over citizens' lives.

What Is The National Pharmaceutical Pricing Authority (NPPA)?

Origin: Established in 1997 as an attached office under the Department of Pharmaceuticals (DoP), Ministry of Chemicals and Fertilizers, to enforce price controls, ensure drug availability, and eliminate predatory markups across essential formulations

Enforcement Mechanisms: Price controls are operationalized via the Drugs (Prices Control) Order (DPCO) promulgated under Section 3 of the Essential Commodities Act, 1955. 

  • Under DPCO 2013, ceiling prices for scheduled formulations in the National List of Essential Medicines (NLEM) are determined using the simple average price of brands holding >= 1% market share, adjusted annually via the Wholesale Price Index (WPI).

  • DPCO 2022 introduced dynamic weighted average pricing (WAP) tied to Consumer Price Index (CPI) inflation, extending price governance to orphan drugs and post-patent price drops of 50%. 

Scheduled v/s Non-Scheduled Drugs

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Scheduled Drugs

Non-Scheduled Drugs

Definition

Medicines explicitly listed in Schedule-I of the DPCO. They are drawn from the National List of Essential Medicines (NLEM).

Medicines not listed in Schedule-I of the DPCO or the NLEM.

Price Control

Subject to strict government-mandated ceiling prices.

Manufacturers are free to fix the initial launch price based on market forces.

Price Regulatory Body

Directly controlled and updated by the National Pharmaceutical Pricing Authority (NPPA).

Monitored by the NPPA, but not routinely price-capped.

Annual Price Increase Limits

Manufacturers cannot exceed the wholesale price index (WPI) increase allowed by the government for that year.

Manufacturers can increase the Maximum Retail Price (MRP) by up to 10% within a 12-month period.

Primary Objective

To ensure that essential and life-saving medicines remain affordable and accessible to the public.

To allow market competition for non-essential formulations while monitoring to prevent predatory pricing.

Examples

Vital antibiotics, insulin, select cardiac medications, and oncology drugs included in NLEM.

Brand-specific health supplements, cough syrups, or newer proprietary multi-drug combinations not on the essential list.

Constitutional Mandate Anchor Access To Essential Medicines 

Fundamental Right: The Constitution does not explicitly state a fundamental right to health; however, judicial interpretation has expanded Article 21 (Right to Life and Personal Liberty) to encompass the right to health and timely medical treatment. 

  • Life is construed not as mere animal existence, but as a dignified life requiring state provisioning of affordable life-saving drugs. 

Directive Principles: Article 38 (welfare social order), Article 39(e) (protecting worker health), Article 41 (public assistance during sickness), Article 42 (maternity relief), and Article 47 (primary duty of the state to raise nutrition levels and public health). 

Local Governance Integration: Article 243G read with the Eleventh Schedule constitutionally mandates Panchayats to implement public health, sanitation, and primary health center delivery.  

Judicial Intervention

  • In Paschim Bangal Khet Mazdoor Samity vs State of West Bengal (1996), the Supreme Court ruled that state-run hospitals are constitutionally obligated under Article 21 to provide emergency medical treatment. 

  • In Parmanand Katara vs Union of India (1989), the court declared medical preservation of human life paramount over procedural legal formalities.

  • In Novartis AG vs Union of India (2013), the Apex Court upheld Section 3(d) of the Patents Act, 1970 to prevent drug evergreening, ensuring public health priorities override secondary patent monopolies.  

What Are The Challenges In Drug Price Regulation?

Unregulated Launch Pricing: Under existing regulations, non-scheduled drugs lack initial launch price caps, allowing pharmaceutical firms and hospital procurement networks to fix arbitrary base prices and inflate trade margins.

  • Example: Supreme Court Hearing (October 2026) PIL by Kishan Chand Jain, a private hospital charged Rs 1,30,000 for a chemotherapy injection that had a Price to Stockist (PTS) dealer price of Rs 11,000.

Opacity in Price to Stockist (PTS) Data and Market Asymmetry: The absence of mandatory public disclosure for Price to Stockist (PTS) metrics prevents consumers and regulatory agencies from monitoring supply chain markup distortions. 

  • Example: Parliamentary Standing Committee on Chemicals and Fertilisers (2025), documented severe opacity in PTS data and recommended statutory trade margin rationalisation.

Multinational R&D Exit vs Access Paradox: Frequent price controls under DPCO combined with stringent patentability standards under Section 3(d) of the Patents Act, 1970 have eroded profitability for MNCs by 15–20%, triggering market exits. 

Under-Inclusivity of Non-Communicable Diseases (NCDs) in NLEM: The National List of Essential Medicines (NLEM) disproportionately covers acute anti-infectives, leaving chronic non-communicable diseases—which account for over 65% of national disease burden—largely outside scheduled price caps. 

Way Forward

Amending of DPCO for Trade Margin Rationalisation (TMR): Amend the Drugs (Prices Control) Order, 2013/2022 to establish permanent statutory trade margin capping across all non-scheduled formulations and medical devices. 

Operationalising Access-Innovation Balance Framework (AIBF): Establish a dedicated Pharmaceutical Innovation Fund funded via a micro-cess on patented drug sales to finance indigenous R&D for neglected tropical and chronic diseases. 

Institutionalizing Price Monitoring and Resource Units (PMRUs): Scale state-level PMRUs registered under the Societies Registration Act, 1860 across all 36 States and UTs to enforce real-time market surveillance against retail overcharging.

Mandatory Generic Prescriptions and PTS Transparency: Mandate generic drug prescriptions by medical practitioners alongside public digital portal disclosure of Price to Stockist (PTS) data. 

  • Example: Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) Model, delivering high-quality generic unbranded medicines at 50–90% lower costs than branded counterparts.

Conclusion

India must implement comprehensive trade margin rationalization to balance affordable healthcare under Article 21 with R&D incentives, securing its position as both a welfare state and the global pharmacy.

Source: THEHINDUBUSINESSLINE

PRACTICE QUESTION

Q. With reference to the National Pharmaceutical Pricing Authority (NPPA), consider the following statements:  

  1. It is an independent regulatory body functioning under the Ministry of Health and Family Welfare.  

  2. It was constituted in 1997 as an attached office of the Department of Pharmaceuticals.

  3. It derives its legal authority to regulate drug prices from the Drugs (Prices Control) Order (DPCO) issued under the Essential Commodities Act, 1955.  

Which of the statements given above are correct?

(A) 1 and 2 only

(B) 2 and 3 only

(C) 1 and 3 only

(D) 1, 2, and 3  

Answer:

Explanation:

Statement 1 is incorrect: The National Pharmaceutical Pricing Authority (NPPA) functions under the Ministry of Chemicals and Fertilizers (specifically its Department of Pharmaceuticals), not the Ministry of Health and Family Welfare. It is also an expert/regulatory body created via a government resolution rather than an independent statutory act.

Statement 2 is correct: It was constituted on August 29, 1997, as an attached office of the Department of Pharmaceuticals under the Ministry of Chemicals and Fertilizers.

Statement 3 is correct: It derives its legal authority to fix and regulate drug prices from the Drugs (Prices Control) Order (DPCO), which is issued by the government under Section 3 of the Essential Commodities Act, 1955.