Govt issues new drug pricing method to regulate essential medicine prices
The pricing method has been formulated under Section 30 of the Drugs and Cosmetics Act, 2023, and will be mandatory for all approved allopathic medicines in the country.
The government has issued the Drug Pricing Method 2026 (Allopathic) to regulate the prices of essential and life-saving medicines, aiming to curb unreasonable price hikes and reduce the burden of healthcare costs on consumers.
The notification, issued by the Drug Administration-1 wing of the Ministry of Health and Family Welfare, was published in the gazette last Thursday. The pricing method has been formulated under Section 30 of the Drugs and Cosmetics Act, 2023, and will be mandatory for all approved allopathic medicines in the country.
Under the new framework, the government will fix the maximum retail price (MRP) of medicines listed in the National Essential Medicines List (NEML). Prices will be determined using a cost-plus benchmarking formula that takes into account raw material costs, primary packaging expenses, and a rational, category-based profit margin. According to the notification, the objective is to ensure that medicine prices remain within the purchasing capacity of the general public while safeguarding public health.
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For medicines not included in the essential list, the MRP will be set based on the median price prevailing in the market. The move is intended to reduce price disparities among different brands of the same medicine.
The policy also classifies newly approved medicines into two categories – patent and non-patent drugs. To encourage investment in research, innovation and advanced technology, higher profit margins will be allowed for biological and immunological medicines.
To prevent shortages of essential and life-saving drugs, pharmaceutical manufacturers will be required to produce and supply a minimum specified quantity of such medicines.
The government said the new pricing mechanism is expected to rein in irrational price increases, restore discipline in the pharmaceutical market and significantly reduce out-of-pocket healthcare expenditure for patients.
Earlier, on 8 January, the government announced the expansion of the National Essential Medicines List, adding 135 drugs and raising the total number to 295, and said their prices would be fixed soon. It also confirmed that the National Medicine Pricing Policy 2025 has been finalised.
