The Supreme Court on Monday observed that capping trade margins on anti-cancer drugs would address only the “tip of the iceberg”, urging the Centre to consider extending its proposed pricing measures to a wider range of medicines available in the market.

The observation came from a bench of Justices Vikram Nath and Sandeep Mehta while hearing a petition concerning the high prices of cancer and critical care drugs.

Solicitor General Tushar Mehta informed the Court that the Union Government had proposed capping trade margins at 30% for certain listed anti-cancer drugs. According to the Centre, the measure could reduce their maximum retail prices (MRP) by 20% to 70% and generate annual savings of approximately ₹2,500 crore for consumers.

Mehta submitted that the proposal followed an assessment by an expert committee constituted by the Ministry of Health and Family Welfare. He described the approach as a “dispassionate” assessment aimed at balancing consumer interests with those of the pharmaceutical industry.

The Centre said the selection of drugs for margin capping would depend on factors such as commercial viability, availability and the feasibility of distribution. Citing paracetamol as an example, it argued that imposing a margin cap without considering these factors could make certain medicines unavailable in rural areas.

The government maintained that a 30% trade margin cap would be reasonable for the identified anti-cancer drugs. It also highlighted the expected benefits, including lower medicine prices, reduced out-of-pocket expenditure and improved affordability and availability.

Taking note of the proposal, the Supreme Court indicated that the exercise should not be confined to anti-cancer medicines.

“We want to look at pricing on entire market for drugs, not just cancer drugs,” the bench observed, describing the proposed restrictions on anti-cancer drugs as “the tip of the iceberg”.

The Court also sought an explanation for instances where the maximum retail price of certain medicines was reportedly fixed at nearly 400 times the price at which they were sold to distributors. It asked the Centre to justify, from the consumer's perspective, why trade margins should be capped for some medicines while others remained outside the proposed framework.

The bench had previously suggested extending the standard 16% retail margin prescribed under the Drugs (Prices Control) Order, 2013, for scheduled drugs to non-scheduled medicines, including those dispensed in hospitals.

Opposing a blanket approach to price regulation, Mehta submitted that the government needed to strike a balance between affordability and the availability of medicines.

“We do not want to control the entire range of drugs,” he argued, adding that India already had among the lowest medicine prices globally.

The Centre cautioned that excessive regulatory intervention could adversely affect the pharmaceutical market, undermine the commercial viability of distribution networks and ultimately lead to shortages of medicines.

The Supreme Court has scheduled the matter for further hearing on October 27. It has asked the Centre to consult stakeholders on the proposed 30% margin cap and reconsider whether the framework should cover a wider range of medicines. The government is also expected to explain the basis for including certain drugs while excluding others from the proposed restrictions.