Medicine Procurement and Pricing Mechanisms in India

Overview

Medicine pricing and procurement in India are shaped by a mix of price control, regulatory oversight, and public distribution schemes. The aim is to keep essential drugs affordable while allowing a workable framework for pharmaceutical supply and compliance.

The system mainly operates through the Drugs (Prices Control) Order, public procurement support, and margin controls in selected segments of the market.

DPCO 2013 and Regulatory Framework

• NPPA role: The National Pharmaceutical Pricing Authority (NPPA), an attached office of the Department of Pharmaceuticals under the Ministry of Chemicals and Fertilizers, enforces the Drugs (Prices Control) Order (DPCO), 2013.
• Scheduled formulations: Medicines listed in the National List of Essential Medicines (NLEM) are treated as scheduled formulations, and the NPPA fixes ceiling prices for them.
• Non-scheduled formulations: These do not have an initial ceiling price, but manufacturers cannot raise the maximum retail price (MRP) by more than 10% in any 12-month period.
• Legal basis: These powers are exercised under Section 3 of the Essential Commodities Act, 1955, which allows the Union government to regulate essential medicines in the public interest.

Price Revision and WPI Linkage

• Annual adjustment: Ceiling prices of scheduled medicines are revised with reference to the Wholesale Price Index (WPI) of the preceding calendar year.
• 2025 adjustment: For the calendar year 2025 over 2024, the NPPA fixed the WPI adjustment at +0.64956%.
• Affected formulations: This revision applied to 907 scheduled formulations under DPCO 2013, effective 1 April 2026.
• Purpose: The WPI-based mechanism is intended to permit controlled price movement while protecting buyers from sharp increases.

Drugs (Prices Control) Amendment Order, 2026

• Notification date: The Ministry of Chemicals and Fertilizers notified the Drugs (Prices Control) Amendment Order, 2026, on 30 June 2026.
• Procedural updates: The amendment introduced changes to price fixation, overcharging rules, and compliance requirements.
• Form-IA: A new Form-IA was introduced to simplify filings for launching new drugs through compliance and procedural submissions to the NPPA.
• Overcharging liability: Manufacturers may be exempted from overcharging liability if they prove that revised ceiling prices were correctly communicated to distributors, stockists, and retailers.
• Follow-up action: After the notification, the NPPA began updating internal guidelines for processing overcharging cases, earlier issued in October 2016.

Trade Margin Rationalisation and Marketing Practices

• Trade Margin Rationalisation (TMR): TMR seeks to cap excessive retail margins, especially in high-markup categories such as life-saving and anti-cancer medicines.
• Policy objective: The measure is meant to reduce out-of-pocket spending by patients and improve affordability at the retail level.
• Parliamentary push: The Parliamentary Standing Committee on Chemicals and Fertilisers urged the Department of Pharmaceuticals to permanently incorporate TMR into DPCO 2013.
• Ethical marketing: The Uniform Code for Pharmaceutical Marketing Practices (UCPMP), 2024, amended in September 2025, requires pharmaceutical companies to file self-declarations and disclose annual marketing expenditure.

Medical Devices Bill and Sectoral Regulation

• Draft legislation: The Union Health Ministry circulated the revised draft Drugs, Medical Devices and Cosmetics Bill, 2026, in August 2026.
• Replacement law: The draft seeks to replace the Drugs and Cosmetics Act, 1940.
• Separate framework: It proposes a distinct statutory framework and advisory board for medical devices.
• Industry concern: Eleven major medical technology associations have opposed the draft over the use of pharmaceutical-centric terms and criminal liability provisions for medical devices.

Pradhan Mantri Bhartiya Janaushadhi Pariyojana

• Implementing agency: The Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) is implemented by the Pharmaceuticals & Medical Devices Bureau of India (PMBI) under the Department of Pharmaceuticals.
• Nature of scheme: It is a public procurement and retail scheme that promotes affordable generic medicines and surgical items.
• Janaushadhi Kendras: As of April 2026, more than 19,500 functional outlets were operating across India, with a target of 25,000 outlets.
• Price advantage: Medicines sold under the scheme are generally available at prices 50% to 90% lower than branded market alternatives.
• Supply support: A recent initiative incentivised outlet owners to stock 200 commonly used medicines to reduce local supply gaps.

Key Prelims Takeaways

• DPCO 2013: Scheduled formulations are price-controlled through ceiling prices, while non-scheduled formulations face a 10% annual MRP increase cap.
• NLEM link: Medicines included in the National List of Essential Medicines form the basis for scheduled price control.
• NPPA function: The NPPA is the key authority for fixing and monitoring drug prices under the DPCO framework.
• WPI mechanism: Scheduled drug prices are revised using the Wholesale Price Index of the previous calendar year.
• 2026 amendment: The Drugs (Prices Control) Amendment Order, 2026, added procedural changes, including Form-IA and revised overcharging rules.
• TMR objective: Trade Margin Rationalisation is aimed at reducing excessive retail margins in high-cost essential medicines.
• PMBJP role: The Janaushadhi scheme expands access to low-cost generic medicines through a nationwide retail network.