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Relevance: GS-II (Health & Governance) | Source: The Indian Express
The News: The Supreme Court recently slammed the massive profits hospitals make on medicines, calling it “daylight robbery.” They asked the government a simple question: If the law limits a pharmacy’s profit to 16% on essential life-saving drugs, why isn’t this rule used for all medicines to protect patients?
1. The Two Rules of Medicine Pricing
India divides medicines into two groups, which creates a massive legal loophole:
- The Strict List (Scheduled Drugs): The government strictly controls the prices of about 390 highly essential drugs. Retailers are only allowed a maximum 16% profit margin. But here is the catch: these make up only 20% of all medicines sold.
- The Free Market (Non-Scheduled Drugs): For the remaining 80% of medicines, pharma companies can launch them at any price they want. The only rule is that they cannot raise the price by more than 10% the following year.
2. How the System Gets Exploited
- Fake Starting Prices: Since the government doesn’t control the starting price of those 80% “free market” drugs, companies just set the launch price artificially high. Capping the yearly increase at 10% doesn’t help if the medicine was completely overpriced on day one.
- Hospital Profiteering: Corporate hospitals heavily exploit this. They buy medicines cheaply in bulk from manufacturers but charge admitted patients the maximum printed price. Because of this markup, pharmacy charges alone often make up 30% to 40% of a critically ill patient’s total hospital bill.
Practice MCQ
Q. Consider the following statements regarding drug price regulation in India:
- The NPPA directly fixes the maximum retail price (MRP) for all pharmaceutical drugs sold in the Indian market.
- For non-scheduled formulations, pharmaceutical companies are prohibited from increasing the MRP by more than 10% in a 12-month period.
Which of the statements given above is/are correct?
(a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2
Answer: (b) 2 only
Hint: Statement 1 is incorrect because the NPPA directly fixes prices only for “scheduled” drugs (the strict list of essential medicines), not all drugs. Statement 2 is correct, as this 10% annual limit is the only major pricing rule for the remaining “non-scheduled” drugs.
Hint: Statement 1 is incorrect because the NPPA directly fixes prices only for “scheduled” drugs (the strict list of essential medicines), not all drugs. Statement 2 is correct, as this 10% annual limit is the only major pricing rule for the remaining “non-scheduled” drugs.
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