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SC reserves verdict on trade margin cap, puts entire non-scheduled drug market and DPCO framework on edge
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Peethaambaran Kunnathoor, Chennai
November 13 , 2026
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The Indian pharmaceutical industry and the nationwide retail drug trade are bracing for a landmark regulatory shift after a Special Bench of the Supreme Court reserved its judgment on capping trade margins across all medicines at 30 per cent, signalling potential disruption to the existing Drugs (Prices Control) Order (DPCO), 2013 framework.
During the decisive hearing on October 27 before Justices Vikram Nath and Sandeep Mehta in Kishan Chand Jain vs Ethics and Medical Registration Board (EMRB) (heard alongside Dr. Sanjay Kulshrestha vs Union of India), the apex court sharply questioned the Centre's pricing policy and observed that all medicines should be treated as essential with trade margins capped at 30 percent. While the Court clarified that its oral observations do not constitute an immediate order and granted parties two weeks to file written submissions, the reserved verdict has triggered intense concern across manufacturers, distributors, hospital pharmacies, and the 12.40 lakh-strong retail chemist network.
For the pharmaceutical trade, the primary flashpoint is the Bench's scrutiny of why nearly 82 to 90 per cent of formulations remain outside direct ceiling price fixation under the National List of Essential Medicines (NLEM), governed only by the 10 per cent annual MRP increase cap under DPCO 2013. Questioning the wide gap between Price to Retailer (PTR) and printed Maximum Retail Price (MRP), citing instances where a drug procured at Rs. 2,700 carries an MRP of Rs. 27,000 or a Rs. 15 drip set is billed at Rs. 270, the Bench termed the National Pharmaceutical Pricing Authority (NPPA) 'totally defunct' for failing to rein in disproportionate markups.
The Centre, represented by Additional Solicitor General Aishwarya Bhati and Solicitor General Tushar Mehta, defended the existing dual-tier pricing model. The government argued that sustaining rural medicine availability, cold-chain logistics, short-expiry risks, and the economic viability of retail chemists on low-value drugs requires calibrated margins rather than blanket controls. However, the Court rejected the Centre's plea to refer the issue to an expert committee, noting that the NPPA had moved to cap margins at 30 percent on 137 non-scheduled anti-cancer drugs earlier in October only after judicial intervention.
Simultaneously, the Bench dismissed arguments advanced by senior advocate Mukul Rohatgi on behalf of private hospitals, which contended that pharmacy margins cross-subsidise 24x7 emergency care and government health schemes like CGHS, ESIS, and Ayushman Bharat. The judges maintained that hospitals must earn revenue from clinical services rather than inflated medicine MRPs, saying that high printed MRPs penalise outpatients buying from regular retail medical stores as well.
With the judgment now awaited, trade bodies including the All India Organisation of Chemists and Druggists (AIOCD) and pharmaceutical industry associations are closely watching whether the Court's final ruling will target hospital-level institutional markups or mandate a uniform 30 per cent Trade Margin Rationalisation (TMR) across the entire supply chain, a move that would fundamentally alter stockist-retailer margin structures, bonus schemes, and non-scheduled drug pricing across India.
Beyond structural trade margins, pharmaceutical stakeholders are equally concerned about how the final verdict will address the broader economic and social realities of healthcare access, including per capita consumer expenditure and the ultimate affordability of essential therapeutics for patients across urban and rural markets.
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