A Parliamentary Standing Committee has recommended a comprehensive review of the pricing framework for non-scheduled medicines, while asking the government to examine the feasibility of reintroducing cost-based pricing in cases where significant price disparities or unusually high mark-ups are observed. The recommendations are part of the 33rd Report of the Standing Committee on Chemicals and Fertilizers on the role, functions and duties of the National Pharmaceutical Pricing Authority (NPPA), presented in the Lok Sabha on Thursday. The committee noted that nearly 82% of the pharmaceutical market comprises non-scheduled formulations, whose prices are fixed by manufacturers, while the NPPA only monitors price increases under the provisions of the Drugs (Prices Control) Order (DPCO), 2013. "Noting that the huge market share (approximately 82%) belongs to the non-scheduled formulations whose prices are fixed by manufacturers themselves... the Committee have desired that the Department undertake, alongwith the Ministry/Department concerned and other stakeholders, a comprehensive review of the extant categorization of medicines to plug any possibility of arbitrary or unjustified fixation in initial prices of non-scheduled formulations," the report stated.
The Centre is examining a proposal to formally incorporate trade margin rationalisation (TMR) into the Drug Price Control Order (DPCO), 2013, potentially widening the government's mechanism for controlling medicine prices beyond the existing framework of ceiling prices. According to the Department of Pharmaceuticals (DoP), no timeframe has been fixed for taking a final decision, though the matter is under active examination. The department told a parliamentary committee examining the functioning of the National Pharmaceutical Pricing Authority (NPPA) that "There is no set timeframe for finalising the policy decision on TMR integration into DPCO, 2013. However, the matter is under active examination of the Department." The committee has now recommended that the Department finalise, within a clearly defined timeframe, the proposed enabling provision for incorporating a permanent Trade Margin Rationalisation (TMR) framework into the DPCO, 2013 after completing stakeholder consultations. The deliberations assume significance as non-scheduled formulations account for around 82% of the domestic pharmaceutical market by value, while scheduled formulations constitute approximately 18%.
Citing Pharmarack data for 2024-25 covering around 98,000 stock-keeping units, the department revealed that around 87% of the non-scheduled market had a weighted average markup of up to 45%. Only around 4% had a weighted average markup exceeding 100% of the price to distributor. For commonly used dosage forms such as tablets, capsules, sachets, gums and strips, the average combined markup accruing to distributors, stockists, wholesalers and retailers was around 43%. The committee noted that "the Department's own observation that 'something needs to be done to contain these huge margins that are there in the distribution channel in some cases' and urged the Department to initiate corrective measures." The database captures price points only at distributor and retailer levels, not separately capturing margins earned by intermediate participants such as stockists and wholesalers.
The committee observed significant gaps in pharmaceutical market data, noting that sales through hospitals, dispensing doctors, Jan Aushadhi outlets, trade generics and direct-to-e-commerce supplies are not captured by Pharmarack. It recommended expanding the data collection framework to include these segments to provide a more comprehensive view of the pharmaceutical market. The committee also took note of the shift from cost-based pricing to market-based pricing under the DPCO, 2013 and recommended that the Ministry examine the feasibility of reintroducing a cost-based pricing mechanism through suitable statutory amendments wherever substantial price disparities or abnormally high mark-ups are noticed. The Indian Federation of Pharma Generics estimates that India has around 7,500 MSME pharmaceutical manufacturers, accounting for approximately 10% of the pharmaceutical market.
Pharmaceutical industry associations and consumer groups have supported the proposed TMR framework, while making recommendations on margin calculation methods, percentage caps, phased implementation and sales data periods. However, MSME pharmaceutical manufacturers warned that applying TMR to non-scheduled formulations could disproportionately affect smaller companies, lead to employment losses and disrupt medicine availability in remote areas. Such companies often depend on small traders to market and distribute products in low-volume regions, where the need to provide margins at multiple channel stages results in high aggregate trade margins. The department said it was engaging with stakeholders to address these concerns while preparing a policy proposal and possible amendments to DPCO 2013. Some stakeholders have also raised concerns about the scope and implementation of the framework.
DPCO 2013 was issued under Section 3 of the Essential Commodities Act, 1955, and the department has held consultations with stakeholders using feedback and experience from earlier TMR pilots to examine inclusion of suitable enabling provisions. The TMR mechanism seeks to regulate the difference between the price charged by a manufacturer to a distributor and the final price paid by a consumer, unlike conventional price control which fixes ceiling prices. The government has previously used TMR as a pilot for 42 high-priced anti-cancer medicines and capped trade margins on oxygen concentrators and medical devices at 70% of distributor price during the Covid-19 pandemic. The department said it would take into account stakeholder suggestions and conduct detailed market analysis before formulating policy on appropriate trade margins across therapeutic categories.
