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The math of the 30% cap on 137 cancer drug margins, and what it means for patient bills
The government is using an emergency power to cut what the supply chain adds to the price of cancer drugs. New prices apply from November 9.
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From November 9, the government will use an emergency power to cap what distributors, chemists and hospitals can add to the price of 137 cancer drugs that have no price ceiling, though the cap leaves the price manufacturers charge untouched.
The National Pharmaceutical Pricing Authority (NPPA), the regulator that sets and monitors drug prices, capped the trade margin on these drugs at 30% of the maximum retail price (MRP), excluding goods and services tax (GST), on October 17. The trade margin is the share taken by everyone between the manufacturer and the patient. NPPA expects MRPs to fall by up to 70%, depending on each drug's current margin. Aishwarya Bhati, an additional solicitor general representing the government, told the Supreme Court on October 12 that patients were expected to save about ₹2,500 crore a year.
What the order does
An expert committee under the Directorate General of Health Services (DGHS), the health ministry's technical wing, chose the 137 drugs. The health ministry set it up on October 9, and it included oncologists, hospital experts and government officials. The government told the Supreme Court that the list would include "all drugs approved for the treatment of cancer, except those which are inexpensive". NPPA's minutes say the list "could be updated periodically", depending on market developments and public-health considerations.
The list includes abemaciclib, abiraterone acetate, afatinib, anastrozole, bevacizumab, cabazitaxel, cetuximab, crizotinib, nivolumab, pembrolizumab, palbociclib, sunitinib and venetoclax. Nivolumab and pembrolizumab are immunotherapy drugs, which help the body's immune system attack cancer cells. The cap covers branded and generic medicines, both imported and made in India.
Manufacturers have seven days from the October 17 gazette notification to report revised prices to NPPA. From November 9, chemists and hospitals must charge the new prices and display them, and hospitals must also post them on their websites. Much of the supply of cancer drugs goes straight to hospitals, so the order makes hospitals responsible for charging the revised prices. State drug controllers will enforce the order. Companies must keep production and supply of the listed drugs at current levels, to prevent shortages.
The cap follows concerns the Supreme Court raised while hearing two petitions, filed by advocate Kishan Chand Jain and medical practitioner Sanjay Kulshrestha, that seek regulation of the prices of non-scheduled medicines. At an earlier hearing, a bench of Justices Vikram Nath and Sandeep Mehta expressed concern that an anti-cancer drug with an MRP of ₹27,000 was being supplied to retailers for ₹2,700. On October 12, the government disclosed the cap in an affidavit, and the bench told it to show urgency in regulating the prices of life-saving drugs and devices. The court will hear the case again on October 27.
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Why most medicines have no price ceiling
India controls drug prices through the Drugs (Prices Control) Order, 2013 (DPCO), which the Centre issues under Section 3 of the Essential Commodities Act, 1955.
The DPCO splits medicines into two groups. Scheduled drugs are those on the National List of Essential Medicines, which was last issued in 2022 and has 388 drugs in more than 900 formulations. NPPA sets a ceiling price for each formulation, and the ceiling builds in a 16% margin for the retailer.
Everything else is non-scheduled. The company can set whatever launch price it likes, and after that may raise it by no more than 10% in any 12 months.
Non-scheduled drugs make up about 82% of the market, according to a report the parliamentary standing committee on chemicals and fertilisers presented on August 6.
Cancer drugs fall in both groups. In 2019, NPPA counted 57 anti-cancer drugs already under ceiling prices. The 137 drugs in the new order are all non-scheduled.
Where the margins came from
For a non-scheduled drug, the printed MRP need bear no relation to what the distributor, chemist or hospital actually pays. The Department of Pharmaceuticals told the Supreme Court that hospitals tend to buy from the manufacturers offering the highest margins, and that mark-ups on cancer drugs ranged from 170% to 700% or more. Patients, who pay the printed MRP, end up paying that mark-up.
The bench has cited similar gaps outside cancer care. On October 12, it pointed to a saline drip line supplied to retailers at ₹11 and priced at ₹270 for patients, and an Indian-made cardiac stent supplied at ₹5,000 and sold at ₹25,000. "How does the manufacturer fix a price and sell it at a price to retailer (PTR) which is one-tenth or one-fifth of the MRP. We believe the MRP includes all components of cost, including research and development," the bench said.
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How a 30% cap works
The trade margin is the gap between the MRP and the price at which the manufacturer sells a drug to the stockist or distributor, the first link in the supply chain. That price is known as the price to stockist or price to distributor (PTS/PTD). The order says the gap can be no more than 30% of the MRP, excluding GST. NPPA's minutes put this as a mark-up of 42.86% on the PTS/PTD, so the pre-tax MRP can be no more than about 1.43 times the price the manufacturer charges.
Take a drug sold to the distributor at ₹1,000 with a pre-tax MRP of ₹4,000. The supply chain's share is 75% of what the patient pays before tax. Under the cap, the pre-tax MRP cannot exceed about ₹1,430, a cut of roughly 64%. A drug sold at ₹1,000 with a pre-tax MRP of ₹1,300 already falls within the cap and does not change. The saving on each drug depends on its existing margin, which is why the government told the court to expect cuts of between 20% and 70%.
To work out each drug's revised MRP, NPPA will use the PTS/PTD for March 2026, calculated from the manufacturer's net sales realisation, the revenue it actually received after discounts, and the quantity it sold that month. The reference is therefore the average price per unit the manufacturer actually received. For a medicine with no sales in March, the calculation will use sales from April 2025 to March 2026. Sales to government buyers are excluded.
When the government has used this power
NPPA is acting under Paragraph 19 of the DPCO, which lets the government fix the price of any drug, scheduled or not, in public interest. NPPA's minutes say "extraordinary circumstances warrant intervention under Paragraph 19 of DPCO, 2013 in public interest". The government has used the power a handful of times:
- 2014: MRPs capped on 106 non-scheduled drugs for diabetes and heart disease
- February 2017: ceiling prices for coronary stents
- August 2017: ceiling prices for knee implants
- February 2019: a 30% trade margin cap on 42 cancer drugs
- 2021: trade margins capped on oxygen concentrators, pulse oximeters, blood pressure monitors, nebulisers, digital thermometers and glucometers during the Covid-19 pandemic
The 2019 cap was a pilot, and the new order builds on it. NPPA says the MRPs of 526 brands fell by up to 90%. The government's affidavit put the annual saving to patients at about ₹984 crore, based on information provided by companies.
The government has also cut taxes on cancer drugs. In 2024, it removed customs duty on trastuzumab, osimertinib and durvalumab, cut their GST from 12% to 5%, and directed manufacturers to lower their MRPs.
What the cap will not fix
The manufacturer's price. The cap limits the margin above the price at which the manufacturer sells to the distributor. Bhati told the court the cap would cut excessive trade mark-ups without directly reducing the manufacturer's selling price. A drug the manufacturer prices high stays expensive.
Hospital charges. The order relies on hospitals to charge the new prices and on state drug controllers to check that they do. The cap covers only the listed drugs. The Supreme Court has also questioned what private hospitals charge for other drugs and devices, pointing out that the bills of patients covered by the Central Government Health Scheme (CGHS) and other state schemes are paid from public funds.
Other medicines. The bench has asked why the cap stops at cancer drugs. The government's affidavit argued that a single margin would not suit all medical products, citing cheap drugs, low-sales areas, cold-chain products and slow-moving stock. Bhati told the court that drug companies' concerns needed to be considered. Senior advocate Kapil Sibal appeared for pharmaceutical companies, and an association of private hospitals has applied to be heard.
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What patients can do
From November 9, patients can check revised prices on NPPA's Pharma Sahi Daam app and website. Chemists and hospitals must display the new prices, and hospitals must post them online. Patients can report overcharging to NPPA, which acts on complaints.
