The Union government has decided to cap trade margins on 110 expensive cancer medicines, including around 35 patented ones. Officials say it will cover branded, generic, domestically manufactured and imported versions. This is not the first time government is trying such a step. A 2019 pilot had demonstrated up to 91% reduction in MRP of 42 cancer medicines. The present step is likely to bring down marked prices of select cancer drugs by up to 70%, say officials.
Why necessary? Regulating prices is essential in a country with rising cancer burden. Survival improves with targeted and immunotherapy drugs, yet latest therapies remain out of reach for most. A real-world study from Tata Memorial Hospital had shown only 1.6% of patients who need such therapies are able to access them, with cost being one of most significant barriers. This issue of cost has also been raised in courts. Supreme Court recently questioned nearly ten-fold markup in some cancer drugs.
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What is trade margin rationalisation? Trade margin is essentially difference in price at which it is sold to stockists and its MRP. This gap is usually quite significant, sometimes going as high as 1000% of cost at first point of sale. Under trade margin rationalisation (TMR), instead of capping price of each medicine - and its different formulations, doses and brands - government caps percentage markup at which medicine can be sold in order to bring down cost to consumer. Very simply put, a 30% TMR would mean a medicine can carry MRP of only Rs 100 if it was sold to stockist for Rs 70.
Which drugs likely covered? While Director General of Health Services is yet to finalise list, it is likely to include commonly used but expensive cancer medicine. One consideration for selecting medicine is that it should be expensive. This is because 30% capping on trade margin for cheaper drugs can disincentivise companies because does not cover marketing costs.
How govt sets drug prices: Government fixes prices only for 'scheduled' drugs (National List of Essential Medicines). Ceiling price is based on average market price of most selling brands. For 'non-scheduled' drugs, only regulation is that companies cannot raise MRP by over 10% a year. It is second category where TMR will be applicable.
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How much could prices fall? At recent meeting of National Pharmaceutical Pricing Authority (NPPA) - body responsible for regulating medicine prices - experts said non-scheduled anti-cancer drugs carry average trade mark-up of approximately 170%, with mark-ups going up to 700% in certain cases. At present, annual turnover of cancer drugs is around Rs 12,500 crore. Of this, scheduled cancer drugs, whose prices are regulated, account for only around Rs 2,250 crore. Addressing huge markups on non-scheduled drugs, experts at NPPA meeting said move is expected to reduce MRP broadly in range of 20-70%, resulting in annual savings of approximately Rs 2,500.
What do experts say? Experts and patients' rights activists say there is still scope to game system as there is no control over price to stockists. A company may sell 1,000 vials at an inflated price to distributor and say it will give you 500 free, meaning company will be able to keep prices artificially inflated even if they abide by 30% margin capping, said one expert. They said capping should be based on manufacturing cost or cost at which product is imported. KM Gopakumar, co-convenor of Working Group on Access to Medicines and Treatments, said this is unlikely to make many of patented cancer drugs affordable. Despite such capping in 2019, prices remained high - monthly cost of ribociclib rose from Rs 58,000 in 2022 to Rs 78,000 in 2025 despite margin capping. Patented drugs face no competition and hence no pressure to reduce price. India needs TMR plus bulk procurement, plus compulsory licensing threat, plus insurance coverage.
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