Fraud, broad daylight dacoity of patients: SC laments Exorbitant medicine pricing, flags tenfold retail price gap in essential cancer drugs
New Delhi: Noting the lack of adequate price controls on medicines, the Supreme Court recently flagged the wide disparity between the Price to Retailer (PTR) and Maximum Retail Price (MRP) of life-saving drugs, particularly cancer medicines.
A bench of Justices Vikram Nath and Sandeep Mehta questioned how a 10-fold difference between the PTR and MRP could be permitted and whether there should be a fixed criterion to limit the disparity. Referring to the impact of such pricing on patients, Justice Mehta described the practice as “absolute rampage and carnage and broad daylight dacoity with the patients.”
The top court bench of Justices Vikram Nath and Sandeep Mehta noted that while the essential cancer medicines are being sold to the retailer for Rs 2,700, the MRP for the same is Rs 27,000. The Apex Court bench held that it is nothing short of daylight robbery being committed on vulnerable patients by the drug manufacturers and retailers.
"There are essential medicines for cancer for which MRP is ₹27,000 and PTR is ₹2,700. That is absolute rampage and carnage and broad daylight dacoity with the patients. How can a patient be cheated for a medicine which the manufacturer sells to the retailer at ₹2,700 and MRP is printed at ₹27,000? It is surprising that the authorities who are supposed to take a decision on this are absolutely silent. We need not spell out the reasons for that," remarked Justice Mehta.
It was observed by the Apex Court bench that such inflated pricing structures ultimately result in a systemic, clear-cut fraud on the public exchequer, especially when the hospitals later get reimbursement for the medical expenses under the government health schemes like Pradhan Mantri Jan Arogya Yojana (PMJAY).
"When patients are taking treatment under Ayushman Bharat scheme, this whole price has to be paid by the taxpayers. Hospitals are buying medicines at these prices and then reimbursing from the government. It’s ultimately taxpayer’s money. There is a clear-cut case of fraud," observed the top court bench.
These observations were made by the Apex Court bench while hearing petitions that sought mandatory generic drug prescriptions, strict initial price controls on non-scheduled medicines, regulation of medicine price and maximum retail price caps on medical devices.
According to a Bar and Bench report, during the hearing, petitioner Kishan Chand Jain submitted that under the Drug Price Control Order (DPCO) of 2013, the ceiling prices for around 1,000 "scheduled" drugs are fixed by the National Pharmaceutical Pricing Authority (NPPA). Therefore, 82 per cent of medicines in the market are non-scheduled.
The petitioner pointed out that since there are no upfront price-fixation regulations for non-scheduled drugs at the initial launch stage, manufacturers assign arbitrarily inflated launch prices for offering massive profit margins to the retailers and private health establishments.
"There are two types of medicines under DPCO. 82% medicines are non-schedule medicines. There is no control on initial price fixation. We are not on ceiling prices. We are on price fixation of non-schedule medicines," argued the petitioner.
Illustrating the pricing anomaly using a common cholesterol-lowering statin as an example, Justice Mehta remarked, "A tablet of Rosuvas - a strip costs about ₹214 because it is not in the scheduled drugs controlled under DPCO. And if Rosuvas contains a combination of aspirin, it comes within DPCO scheduled medicines and costs ₹70. Though a combination should be costlier, the disparity is there."
The bench also addressed the broader impact of uncapped retail prices and questioned how such exorbitant margins could be justified when common citizens are forced to sell their homes and ornaments to access life-saving treatments.
"If that is not extortion, what else is it? A ₹100 medicine is being purchased by him for ₹2,000," remarked the bench.
At the outset, the bench opined that if all the medicines were brought within a unified price-fixation umbrella, the controversy surrounding mandatory generic prescriptions might become redundant.
"If all medicines are brought within that umbrella of price fixation, we may not need even a system of generic medicine. Everything will be at par," noted the Court.
Meanwhile, Senior Advocate Kapil Sibal appeared for the Indian Pharmaceutical Alliance (IPA) and pointed out that these massive profit margins are not retained by pharma companies as the inflation occurs primarily at the retail and hospital level.
"At what price it is sold to the stockist is the real issue," Sibal opined, as he urged the Court to examine the price at which the stockists and retailers receive these drugs.
On the other hand, Additional Solicitor General KM Nataraj appeared for the Union Government and submitted that the Government does not view this matter as adversarial and remains committed to ensuring affordable medicines reach every citizen.
"Whatever there is scope for improvement, definitely we'll try to improve. Medicine should reach the last person," he assured the bench, referring to the Jan Aushadhi Kendra initiative.
However, petitioner Jain questioned the reach of such government outlets, pointing out that out of a total pharmaceutical market of ₹2,500 billion (₹2.5 lakh crore), Jan Aushadhi Kendras account for only around ₹22 billion (₹2,200 crore), which is less than 1 per cent of overall medicine sales.
"The issue is, for those medicines which are not available in Jan Aushadhi Kendras, where does the patient go?" asked Justice Mehta.
According to a Live Law report, another petitioner, Dr. Kulshresthra, submitted that the corporate hospitals could require the patients to purchase medicines from their own hospital stores and then charge the full MRP. However, distinguishing such hospitals from traditional chemists, he submitted that in the case of traditional chemists, they often forego part of their profit. However, the corporate hospitals could charge the full MRP while asking patients to purchase the medicines from the hospital's pharmacy.
"One is the traditional, or the chemist shop. They, many times, forego their profit. But if the corporate hospitals, they accept full MRP with a rider that you have to purchase the medicine from the hospital shop, from the hospital store only," he submitted.
Further, he pointed out that the hospitals refuse taking responsibilities for administering a medicine purchased from elsewhere. Dr Kulshresthra contrasted the situation with hotels, arguing that in the case of hotels, it is the customer who decides whether the price is affordable before purchasing a service.
"These hospitals are not like five-star hotel. For a hotel, we will go by their affordability. But here, the poor patient also is compelled to go," he submitted.
In his plea, Kulshresthra prayed to the court to distinguish the role of the manufacturers from that of retailers in the pricing chain and submitted that the manufacturers may merely print the MRP, while the actual exploitation of patients takes place at the retailer's end.
Justice Mehta pointed to the role played by the high MRP itself as it enables the retailers to charge substantially more than the price at which they obtain the medicines.
He observed, "Why this permissibility of printing the MRP 10 times the actual cost of the medicine? Why this? This is the leverage to the retailer to charge anything he wants."
Further, he raised concerns regarding the effect of large discounts from the MRP on consumer confidence and noted, "One more thing which comes to mind, that if you have a MRP of say, Rs. 5,000, and if your chemist gives you the medicine for half, or maybe Rs. 2,000, then there will be a lack of confidence in the consumer."
In response, Kulshresthra said that it was a peculiar situation with regard to medicine and contrasted it with ordinary consumer products. He submitted, "But then he is giving me a genuine medicine. This is happening only in medicine…If you take a mobile phone, costing Rs. 50,000 on one shop, it may not be available in the same model, same company, same day, same city, it may not be available in Rs. 5,000. But in medicine, it is happening. The drug is costing Rs. 5,000, and it is available for Rs. 350 to my patient. Many of them are my patients."
Taking note of this, the Apex Court questioned why such a wide gap between the price at which a medicine is supplied to retailer and its MRP should be allowed and whether there should be a fixed criterion to limit the disparity.
The bench has listed the matter for further hearing on September 29 to consider the submissions of the respondents.
