Centre caps cancer-drug trade margins at 30 percent of MRP, covering 110 medicines

The Centre has decided to cap trade margins on all non-scheduled anti-cancer drugs at 30 percent of the maximum retail price, senior officials told Business Standard on Thursday. The cap covers 110 medicines, branded and generic, domestic and imported. Thirty-five of them are patented. Officials said the change could cut some MRPs by as much as 70 percent and save patients about Rs 2,500 crore a year.

A committee of the Directorate General of Health Services found trade margins on cancer drugs at outlets running from 170 percent to 700 percent, one official said. Those are the gaps the cap is written against. A 30 percent ceiling on the margin between the price to the trade and the printed MRP leaves far less room than a 700 percent mark-up. The Department of Pharmaceuticals and the National Pharmaceutical Pricing Authority are the bodies that would operate the rule, as they did with an earlier, smaller version.

The 2019 precedent, and what it saved

In 2019 the NPPA capped trade margins at 30 percent for 42 non-scheduled anti-cancer medicines. The government says that round cut the MRPs of 526 brands by about 50 percent on average and saved patients about Rs 984 crore a year. The new decision is the same instrument on a longer list: 110 drugs rather than 42, and an official savings estimate of Rs 2,500 crore rather than Rs 984 crore. India Today reported the same figures and the same scope, including patented and non-patented products outside the scheduled price-control list.

Non-scheduled drugs are the formulations that do not sit under a ceiling in the Drugs (Prices Control) Order, 2013. Makers may raise those prices by up to 10 percent over a rolling 12 months. Officials put non-scheduled products at about 82 percent of the domestic pharmaceutical market. Cancer medicines in that 82 percent are the ones this cap reaches. Scheduled cancer drugs already have a different control, a ceiling price, and are outside this margin rule.

The court date four days away

The decision lands while the Supreme Court is looking at high mark-ups on essential medicines. A bench of Justices Vikram Nath and Sandeep Mehta has questioned the split in the DPCO between scheduled and non-scheduled drugs, and has asked whether medicines classed as non-essential should stay outside price control. The next hearing is on 12 October. The cap does not answer that question. It uses the margin tool the 2019 order already used, on a list the DGHS committee has sized at 110.

What a patient will see, if the estimate holds, is a lower printed price on brands whose trade margin was the large part of the MRP. The official caveat is in the phrase up to 70 percent. A brand already close to a 30 percent margin moves less than a brand at 700 percent. The Rs 2,500 crore figure is an annual patient saving estimated by officials, not a sum already returned at a pharmacy counter. AIOCD, the chemists' body, welcomed a 30 percent cap in comments reported on Thursday, which matters because the margin being cut is the trade margin, the part that sits with distributors and retailers.

The open point is the date the cap binds at the counter, which the Thursday briefings did not fix, and the list of 110 names, which officials described but did not publish in the reports. Until that list is out, the verified decision is the rate, the count, the patented subset, the 2019 comparison, and a court hearing on Monday.