Kerala HC Backs Drugs Controller's Power to Act Against Misleading Pharmacy Discount Boards

The matter arose from a circular issued by the Office of the Drugs Controller on September 4, 2024. The circular required applicants seeking a fresh drug licence, as well as those applying for renewal, to incorporate an undertaking in the affidavit submitted with their applications concerning the display of discount boards at their pharmacies. The circular also sought changes to the wording of the undertaking relating to misleading claims about medicines and discount advertisements.

The circular was challenged by pharmacy operators, who argued that they were legally entitled to sell medicines below the MRP and inform customers about the discounts being offered. They contended that the Drugs and Cosmetics Act, 1940, and the Drugs Rules, 1945, do not prohibit the sale of medicines below the MRP or prevent dealers from transparently informing consumers about discounts. The petitioners maintained that they offered medicines at reduced prices by giving up a portion of their profits and that they disclosed the discounts through booklets containing details of medicines and the percentage of discount available.

The petitioners argued that the restriction on discount boards interfered with their right to conduct business because such displays allowed customers to know about the lower prices available at their pharmacies. They also relied on provisions concerning the Maximum Retail Price and ceiling price, arguing that the legal restrictions prevent medicines from being sold above the applicable MRP but do not prevent retailers from reducing the selling price below that amount.

A connected petition was filed by a person who sought implementation of the Drugs Controller's circular after raising concerns about discount advertisements displayed outside medical shops in the Chalakkudy municipal area. The petitioner alleged that boards offering discounts or rebates of 50% to 60% of the MRP were misleading consumers. The contention was that customers could be attracted to pharmacies by large discount claims but, after reaching the shop, might receive only a small discount or no discount at all.

The Drugs Control Department maintained that it was not opposed to genuine discounts. According to the department, offering medicines at lower prices can make treatment more affordable for the public. Its objection was specifically to misleading advertisements and vague discount claims displayed through boards outside pharmacies. The department pointed out that some advertisements projected discounts of as much as 80%, which could attract unsuspecting customers.

The department also raised concerns regarding the source of certain medicines being sold by some pharmacies outside Kerala, with questions being raised about the quality of such products. The authorities stated that an action plan had been discussed to address the concerns. They also referred to Paragraphs 24(4) and 25(3) of the Drugs Price Control Order, 2013, under which retailers and dealers are required to display the price list supplied by the manufacturer rather than simply putting up boards announcing discount sales.

According to the Drugs Controller, the circular was prompted by concerns that consumers were being misled by large discount claims and could ultimately end up paying the MRP despite being attracted by advertisements suggesting substantial savings. The department maintained that the circular did not prevent retailers from providing details of medicines sold at discounted prices. What was being restricted was the display of vague discount percentages or misleading claims that could misrepresent the actual price benefit available to consumers.

During the proceedings, the department also stated that it had not taken action under the circular up to March 25, 2026, and had instead decided to revise the wording of the undertaking required from licensees. The revised undertaking states: “We undertake that we shall not display any discount boards containing misleading or vague claims regarding the price of drugs.”

The case was heard by Justice Bechu Kurian Thomas of the Kerala High Court in M/s. Pharmadude Pharmacy Vannappuram v. State of Kerala and connected cases. The proceedings involved W.P.(C) Nos. 39706 of 2024, 41978 of 2024 and 1447 of 2025, with the judgment delivered on June 19, 2026. Two petitions challenged the Drugs Controller's circular, while the third sought its implementation.

The court examined the provisions governing the sale price of medicines and observed that the applicable rules prohibit a person from selling a drug at a price higher than its MRP, but do not prevent a retailer from reducing the selling price. The court therefore rejected the argument that the authorities were compelling pharmacies to stop providing discounts. It found that the regulatory action was directed specifically at misleading display boards and advertisements concerning discounts, rather than genuine reductions in medicine prices.

The court further held that licensing authorities have regulatory powers to prescribe appropriate conditions while granting or renewing drug licences. It observed that the purpose of discount boards is to inform the public about available price reductions, but such advertisements can also create a possibility of misleading consumers. In view of this, the licensing authority was entitled to require applicants to provide an undertaking aimed at preventing misleading advertisements. The court held that requiring the additional wording in the affidavit could not be treated as an unlawful restriction on the right to conduct business.

The High Court also recognised the significant role of the Drugs Controller in drug licensing and held that the authority's decision to impose a condition intended to protect the public did not provide sufficient grounds for judicial interference. The court referred to the Supreme Court's observations concerning the specialised role of regulatory authorities and held that the Drugs Controller's regulatory judgment in this matter warranted consideration.

The court consequently upheld the revised undertaking requiring licensees not to display discount boards containing misleading or vague claims regarding drug prices. It found that the condition did not prevent pharmacies from giving discounts and did not unlawfully prejudice pharmacy operators. The petitions challenging the circular were dismissed, while the connected petition seeking implementation of the circular was allowed, leaving the authorities free to take appropriate action against licensees who fail to comply with the stipulated condition.

The proceedings also recorded examples relied upon by the pharmacy operators to demonstrate that discounts are offered through various outlets. These included Neethi Medical Stores at Anjal, operated by the Kerala Consumer Federation, which was stated to offer discounts ranging from 14% to 70%; Karunya Community Pharmacy at Kozhikode, operated by the Kerala Medical Services Corporation, with discounts of up to 93%; and Maveli Medicals at Pazhavangadi, operated by the Civil Supplies Corporation (Supplyco), with discounts ranging from 13% to 75%.

The petitioners also produced material concerning Pradhan Mantri Bharatiya Janaushadhi Kendras, including an example showing rebates of up to 80%, and a Janaushadhi Kendra at Avanakuzhi where discounts ranging from 50% to 90% were displayed. They also referred to Aswas Community Pharmacy, where discounts ranging from 15% to 65% were offered. The petitioners produced a booklet containing medicine details, manufacturers and discount percentages offered at their shops, along with customer bills and manufacturer price lists maintained at their pharmacies.

The case therefore does not amount to a blanket prohibition on discounted medicines in Kerala. Instead, the regulatory condition concerns the manner in which discounts are advertised. Pharmacies may continue to sell medicines below the MRP and offer legitimate price reductions, but they are required to avoid vague, exaggerated or misleading discount claims that could create a false impression among consumers about the actual price at which medicines are being sold, reports The Hindu.