82% Medicines Outside NPPA's Direct Price Control, Govt Panel Seeks Pricing Framework Review
New Delhi: A Parliamentary Standing Committee has called for a comprehensive review of India's pharmaceutical pricing framework, raising concerns over the large proportion of medicines whose initial prices are determined by manufacturers rather than being directly regulated by the government.
The committee has noted that nearly 82 percent of the pharmaceutical market comprises non-scheduled formulations, where manufacturers determine the initial prices and the National Pharmaceutical Pricing Authority (NPPA) primarily monitors subsequent price increases.
The recommendation forms part of the 33rd Report of the Standing Committee on Chemicals and Fertilizers on the functioning of the NPPA, which was tabled in Parliament on Thursday.
The panel observed that medicines directly regulated by the NPPA constitute only around 18 percent of the total pharmaceutical market. These scheduled formulations are included in the National List of Essential Medicines (NLEM) and are subject to government-notified price controls.
The committee expressed concern that the existing arrangement could provide manufacturers with considerable flexibility in setting the initial prices of non-scheduled medicines.
“The Committee cannot help but note that the huge market share (approximately 82%) belongs to the non-scheduled formulations whose prices are fixed by manufacturers themselves and NPPA only monitors prices as per the provisions of DPCO, 2013, under which manufacturers are required to not increase the maximum retail price (MRP) of such formulations by more than 10% of the MRP during the preceding 12 months. The Committee opine that this mechanism may allow manufacturers to launch non-scheduled formulations at arbitrary points.”
The committee has consequently asked the Department of Pharmaceuticals, in coordination with the concerned ministries, departments and other stakeholders, to undertake a detailed review of the existing classification of medicines.
“The Committee desire 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.”
Under the prevailing framework, the NPPA directly determines ceiling prices for medicines listed under the NLEM. Manufacturers are required to ensure that these scheduled formulations are not sold above the ceiling prices notified by the authority.
For medicines outside the NLEM, manufacturers have the freedom to determine the initial price at which the product enters the market. However, the DPCO, 2013 places a restriction on subsequent price increases.
Under the existing provisions, the MRP of non-scheduled formulations cannot be increased by more than 10 percent over the MRP applicable during the preceding 12 months.
Data provided by the Department of Pharmaceuticals showed that the average annual increase in prices of non-scheduled medicines between April 2020 and March 2025 stood at 5.6 percent. The department said this was broadly consistent with the movement of the Wholesale Price Index (WPI) and considerably below the permitted 10 percent increase.
The Department of Pharmaceuticals has defended the current pricing mechanism, stating that it is designed to maintain a balance between medicine affordability and availability and the need to encourage investment and growth within the pharmaceutical industry.
“The National Pharmaceuticals Pricing Policy, 2012 (NPPP, 2012) strives to achieve a balance between affordability and availability of drugs on the one hand and promotion of growth of industry on the other.”
During oral evidence before the committee, officials also cautioned that extending direct price regulation to all medicines could potentially affect investment in the pharmaceutical sector.
“If we reduce returns across the board on a particular sector, while immediate effect of that would be that prices may become lower, investment will also dry up because investors’ money comes with expectation of return and they will go wherever they can earn a higher return.”
According to government officials, excessive price controls could reduce incentives for investment in manufacturing infrastructure, technology and innovation, potentially affecting the sustainable availability of medicines. They maintained that the National Pharmaceutical Pricing Policy aims to balance affordability and availability with innovation, employment and industrial growth.
The committee also examined the transition from the earlier cost-based approach to the market-based pricing methodology introduced under the DPCO, 2013.
It questioned why manufacturing costs and cost audits are not considered while determining medicine prices and whether the existing approach could leave gaps in regulatory oversight.
The Department of Pharmaceuticals informed the committee that the current legal framework does not provide for cost-based price determination.
“As per the existing framework, the mandate of NPPA is to fix the prices based on market data… There is no provision in DPCO, 2013 to consider cost-based data.”
NPPA officials further stated that the authority does not presently have the power to undertake cost audits of pharmaceutical manufacturers.
“I have no power to do cost audit. The pricing used to be on cost basis earlier. Right now, it is based on the market data… If the changes come in the DPCO, if I am given the mandate, we will do that.”
Under the present methodology, the NPPA determines ceiling prices using market-based information. The calculation takes into account the average Price to Retailer (PTR) of brands holding at least a 1 percent market share, along with a 16 percent retailer margin.
The committee also raised concerns about the effectiveness of the consultation mechanism used before finalising retail prices for newly introduced medicines.
Between December 2022 and November 2025, the NPPA reportedly placed 1,426 draft working sheets in the public domain seeking comments and suggestions. However, the exercise received only around 30 representations, with 29 submissions coming from pharmaceutical companies and one from an industry association.
Of these representations, only six led to changes in the draft price calculations, raising questions about the extent of stakeholder participation and the effectiveness of the existing consultation process, reports South First.
The committee’s observations could lead to further examination of India’s medicine pricing framework, particularly the treatment of non-scheduled formulations, the methodology used for price fixation and the scope of regulatory oversight over initial medicine prices.
