Union government acknowledges hospital overcharging on medicines as malpractice in Supreme Court affidavit

NEW DELHI — The Union government has acknowledged before the Supreme Court that hospitals overcharging patients by levying high maximum retail prices (MRPs) on medicines and medical consumables constitutes a malpractice, according to an official affidavit.

The affidavit, filed by the Ministry of Chemicals and Fertilizers in response to a petition by Dr Sanjay Kulshrestha, states that patients face severe information asymmetries and hold a weak bargaining position when dealing with medical institutions. While the government noted that India’s broader pharmaceutical market remains competitive with globally low drug prices, it highlighted that treatment structures often expose direct-paying consumers to steep markups.

According to the government submission, hospitals frequently source medicines from manufacturers offering the highest trade margins and bill patients directly at MRP. Trade margins for anti-cancer drugs range from 170% to 700% or more, while hospital consumables carry markups between 100% and 1,000%. The affidavit noted that institutions show a distinct preference for products featuring high MRPs and wide margins alongside low distributor costs.

The legal challenge arrives against a backdrop of severe out-of-pocket health expenditures in India. The underlying petition references a Niti Aayog report alongside a 2020 statement by then-health minister Harsh Vardhan indicating that medical costs push an estimated six crore families below the poverty line annually. Unlike government healthcare schemes or insurance policies where rates are pre-negotiated and fixed, patients making direct payments face unshielded retail billing.

The government stated that it has already established ceiling prices for 935 scheduled formulations alongside retail price caps for 3,881 new drugs. Authorities are examining broader interventions and consulting stakeholders regarding potential price controls on medical consumables.