Published Aug 09, 2026 | 7:00 AM ⚊ Updated Aug 09, 2026 | 7:00 AM
Non-scheduled formulations are priced by manufacturers, while the NPPA only monitors annual price increases.
Synopsis: A Parliamentary Standing Committee has recommended reviewing India’s medicine pricing policy after finding that only 18 percent of the pharmaceutical market is under direct government price control. It said manufacturers determine prices for the remaining 82 percent of medicines and called for measures to prevent arbitrary initial pricing while keeping medicines affordable.
A Parliamentary Standing Committee has recommended a review of India’s medicine pricing framework after noting that around 82 percent of the country’s pharmaceutical market consists of medicines whose prices are fixed by manufacturers rather than directly regulated by the government.
The panel said the current mechanism may allow manufacturers to launch non-scheduled formulations at arbitrary initial prices and called for a comprehensive review of the existing policy to address the issue.
The recommendation is part of the 33rd Report of the Standing Committee on Chemicals and Fertilizers on the functioning of the National Pharmaceutical Pricing Authority (NPPA), tabled in Parliament on Thursday.
The committee noted that medicines whose prices are directly regulated by the NPPA account for only 18 percent of the overall pharmaceutical market. These medicines, known as scheduled formulations, are covered under the National List of Essential Medicines (NLEM). The remaining medicines, classified as non-scheduled formulations, are priced by manufacturers, while the NPPA only monitors annual price increases.
In its observations, the committee said the large share of medicines outside direct price control warranted a policy review.
“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 recommended that the Department of Pharmaceuticals, along with the concerned ministries/departments and other stakeholders, undertake a comprehensive review of the existing categorisation 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.”
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The NPPA fixes ceiling prices only for medicines included in the National List of Essential Medicines, which are considered essential for public health. Manufacturers cannot sell these medicines above the ceiling price notified by the regulator.
However, for medicines that are not part of the NLEM, companies are free to determine the initial launch price. Under the Drugs (Prices Control) Order (DPCO), 2013, the NPPA can only ensure that the Maximum Retail Price (MRP) of these medicines does not increase by more than 10 percent during the preceding 12 months.
According to the Department of Pharmaceuticals, the average annual price increase for non-scheduled medicines between April 2020 and March 2025 was 5.6 percent, broadly in line with the increase in the Wholesale Price Index and significantly lower than the maximum permissible increase of 10 percent.
The Department of Pharmaceuticals defended the current framework, saying it seeks to strike a balance between making medicines affordable and ensuring that the pharmaceutical industry continues to invest in manufacturing and innovation.
“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, department officials argued that bringing all medicines under direct price control could have unintended consequences.
“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.”
Officials said excessive regulation could discourage fresh investment in manufacturing capacity, technology and innovation, affecting the long-term availability of medicines. They added that the National Pharmaceutical Pricing Policy seeks to balance affordability, availability, innovation, employment and industrial growth rather than focusing only on price control.
The committee also revisited India’s shift from cost-based pricing to market-based pricing under the Drugs (Prices Control) Order, 2013.
It asked why the NPPA does not use manufacturing costs or cost audits while fixing medicine prices and whether the present framework leaves scope for regulatory gaps.
The Department replied that the existing law does not permit cost-based pricing.
“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 also clarified that the authority does not have powers to conduct cost audits.
“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 existing methodology, the NPPA fixes ceiling prices using market data by calculating the average Price to Retailer (PTR) of brands with at least a 1 percent market share and adding a 16 percent retailer margin.
The committee also questioned the effectiveness of the consultation process followed before retail prices of new medicines are notified.
Between December 2022 and November 2025, the NPPA uploaded 1,426 draft working sheets inviting public comments. However, it received only about 30 representations, of which 29 came from pharmaceutical companies and one from an industry association. Only six of those representations resulted in revisions to the draft price calculations.
