Drugmakers may bear sole responsibility for overpricing essential medicines under NPPA proposal

Mumbai: The National Pharmaceutical Pricing Authority (NPPA) has proposed drugmakers be held solely responsible for overpricing of essential medicines, potentially exempting retail chemists and hospitals from prosecution risks. Manufacturers are likely to contest this move.

For medicines that are part of the National List of Essential Medicines (NLEM), an upward or downward price revision is implemented from the day the revision orders are issued.

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However, pharma industry sources told ET retailers often continue selling medicines at prices higher than what's prescribed in the revised orders.

According to the current provisions of Para 26 of DPCO 2013, "no person is permitted to sell any formulation to any consumer at a price exceeding the price specified on the current price list or price indicated on the label of the container or the pack thereof, whichever is less."

A meeting of senior government officials earlier this week noted the revision to the draft guidelines was proposed in 2016 as an amendment to the Drug Price Control Order (DPCO) 2013.

Sources told ET that officials proposed to delete the specific provision which says: "Wherever there is strong evidence to establish that the dealer or retailer selling overpriced medicines has done so with the knowledge of the price reduction, NPPA will also take action against such dealer along with the manufacturers."

The deletion applies to billings made by nursing homes and hospitals as well, besides chemists.

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Unfair and Unjust: Industry

Top sources in the pharmaceutical industry said drugmakers are likely to oppose this unilateral move. Industry sources said the watchdog's proposal is biased and unfairly punishes drugmakers for violations by other parties.

"Even if retailers or hospitals are found wilfully selling medicines at prices before the revisions are made, they will not be prosecuted. This is not justified and needs to be thought through," a senior industry official told ET.

Under various provisions, the government is empowered to recover the overcharged amount along with a 15% penal interest.

Until March 2026, the pricing watchdog levied cumulative penalties of ₹8,447 crore, of which ₹1,582 crore has been recovered from drugmakers, its data shows. The body has thus far filed 2,737 cases of pricing violations.

The government follows a market-based pricing formula to fix the prices of essential medicines.

However, a recent parliamentary committee report has urged the government to switch to a cost-based pricing formula since the system lacked transparency and had limitations.

"The committee is of the view that pricing based on average retailer margins fails to deliver fair, sustainable pricing for novel interventions," the panel said in its recommendations. "The committee believes that pricing governance must strike a balance between the cost-based model and a value-based model to ensure both affordability and industry sustainability."