Government admits hospital drug overpricing is malpractice, seeks Supreme Court price caps

The Indian government, through an affidavit submitted to the Supreme Court, admitted that hospitals’ practice of charging patients the maximum retail price (MRP) for medicines and consumables constitutes a malpractice. The Chemicals and Fertilisers Ministry emphasized that patients have limited negotiating ability and scant knowledge of drug alternatives, creating information asymmetries that allow hospitals to apply margins ranging from 170% to over 700% on anti-cancer drugs and up to 1000% on supplies.

While the market is competitive and many drugs are inexpensive to produce, the ministry argued that regulation is needed to protect consumers. It cited existing ceiling prices for 935 scheduled formulations and retail caps on 3,881 new drugs, and said it is consulting stakeholders to devise further measures. The affidavit was filed in response to a Supreme Court plea by Dr Sanjay Kulshrestha, who cited a Niti Aayog study and a 2020 statement by former health minister Harsh Vardhan linking health costs to six crore families falling below the poverty line. The government also noted that hospital-supplied consumables are often billed separately at MRP for out-of-pocket patients, contrary to package rates negotiated under government schemes.