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India’s drug pricing framework—once hailed for ensuring some of the world’s cheapest medicines—is facing questions over its opacity and unpredictability, finds a study commissioned by the country’s drug price watchdog, the National Pharmaceutical Pricing Authority (NPPA). The multi-jurisdictional study, conducted by Delhi-based Bridge Policy Think Tank along with the Bangalore Bio-innovation Centre and Gujarat National Law University (GNLU), warns that while affordability of mass-consumed drugs is largely achieved, India’s system lacks transparency in price-setting and fails to cover treatments for rare and specialised diseases adequately. Titled “Multi-Jurisdictional Study on Drug Pricing Policies With a Focus on Achieving Affordable Access to Medicines in India”, the report, accessed by News18, highlights a key paradox in India’s pharmaceutical landscape—low prices for common generics coexist with insufficient mechanisms for high-cost, low-volume therapies. “Multiple sellers sell the same drug in India. This leads to many players in the market but may not lead to perfect price fixation…,” the study pointed out, while adding that “the patient does not have complete information of the quality vis-à-vis the price of all other options available in the market. This makes the retail formulations market skew towards a branded generic market.” The study, undertaken by the Bridge Policy Think Tank in collaboration with the Bangalore Bioinnovation Centre and Gujarat National Law University (GNLU), was submitted to the NPPA in April 2025. However, the report has not yet been released by the NPPA, which is an arm under the Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers. “India’s real challenge lies in rare and serious diseases where treatment options are limited and costs are prohibitive. The country needs structured government negotiations, targeted subsidies, and incentives for research and innovation so that cell and gene therapies can eventually become accessible and locally produced,” Kritika Krishnamurthy, honorary director of the think tank, Bridge Policy, told News18. Cracks in the Cost Curve The Drug Price Control Order (DPCO) of 2013 in India shifted the scenario from a cost-based to a market-based pricing system to better reflect production realities. However, the change has not resolved the fundamental problems of data opacity and inconsistent application. “Market-based pricing was introduced under the policy since cost-based pricing posed issues in calculation due to varying production costs as well as the complexity of obtaining data from manufacturers,” the study pointed out. The study observes that, despite India’s vast generic ecosystem, there is limited clarity for manufacturers on how ceiling prices are derived. Both pricing models—cost-based and market-based—leave stakeholders uncertain. “The pricing methodologies used for determining prices remain opaque,” said the reference notes along with the study, adding that “it makes the system difficult for new entrants to navigate.” The report links this opacity to broader healthcare financing gaps, observing that the affordability of drugs cannot be viewed in isolation from access to health coverage. “Institutional players like insurance companies are unable to influence drug prices and improve transparency owing to the low health insurance penetration in India.” It finds that 48.8 per cent of India’s total health expenditure continues to be borne directly by households, highlighting the limited scope of public financing. “Out-of-pocket expenditure still constitutes a significant portion of healthcare expenditure, accounting for 48.8% of the total health expenditure.” This dependence on private spending, the report notes, makes patients “the most impacted group of stakeholders” and reinforces inequities in access. Schemes That Stop Short The study points out that while flagship schemes such as Ayushman Bharat–Pradhan Mantri Jan Arogya Yojana (PM-JAY), the Central Government Health Scheme (CGHS), and the National Health Mission (NHM) have expanded institutional and hospital care, they do little to cover the cost of medicines. It notes that Ayushman Bharat’s insurance coverage is focused on secondary and tertiary care hospitalisation, not outpatient drug reimbursement. As a result, patients with chronic or rare conditions must rely heavily on personal funds for medicines. The report adds that in the absence of adequate drug coverage, India’s insurance framework “fails to influence market behaviour or incentivise rational pricing”. Learning from Global Models Comparing India’s system with other jurisdictions, the NPPA study highlights structured negotiation mechanisms used internationally to balance innovation and affordability. “Countries such as Australia, Germany, and China… proactively engage in negotiations with pharmaceutical companies.” “When we began the study, our focus was on affordability. But we soon realised that access is not only about cost — it is also about systems. Countries like Sri Lanka and Thailand show how efficient inventory management and public distribution networks can make medicines easily available to people,” Krishnamurthy recalled. In Australia, for instance, the Pharmaceutical Benefits Scheme (PBS) ensures government-subsidised access to medicines, while Germany ties reimbursement rates to systematic benefit assessments. The study calls such models examples of proactive state intervention that ensure price transparency and accountability. India, by contrast, lacks an institutional mechanism for negotiating the prices of expensive or low-volume therapies. While its drug price regulator caps prices for drugs listed under the National List of Essential Medicines (NLEM), there is no dedicated framework for high-cost or emerging treatments. The Road Ahead The NPPA-commissioned study concludes that while India’s pricing controls have ensured affordability in essential medicines, the next phase of reform must focus on clarity, inclusiveness, and accountability. It calls for a stronger link between pricing decisions, health insurance frameworks, and patient access. By integrating structured negotiations, expanding the list of regulated drugs, and investing in public health financing, the report argues that India can move towards a more transparent and equitable pharmaceutical system.
