Some medicines supplied to hospitals at discounted institutional prices are billed to patients at markups as high as 52.6 times the procurement cost. The Karnataka Food Safety and Drug Administration (FSDA) has requested urgent central government intervention to address this gap between “landing costs” and the Maximum Retail Price (MRP) for high-value drugs and medical consumables.
Karnataka FSDA reports markups up to 5,165%
Investigations by the Karnataka FSDA revealed a recurring pattern where manufacturers supply items to hospitals at very low institutional prices while the packaging carries a substantially higher retail MRP. In several cases, patients are billed at or near this MRP despite the hospital’s lower acquisition cost.
Specific examples of these disparities include:
- Gufipol (Criticare): Landing cost of Rs 86 vs. MRP of Rs 4,528 (52.6 times the cost).
- Guficycline-50 injection (GUFI): Landing cost of Rs 160 vs. MRP of Rs 7,110 (44.4 times the cost).
- Terlitis: Landing cost of Rs 118 vs. MRP of Rs 4,416 (37.4 times the cost).
- Taxocare 120 mg (Intas): Landing cost of Rs 1,000 vs. MRP of Rs 21,617.6 (21.6 times the cost).
- Romy 250 mcg injection (Intas): Landing cost of Rs 1,650 vs. MRP of Rs 4,109 (2.5 times the cost).
Uttar Pradesh FSDA launches statewide pharmacy crackdown
In a separate but related action, the Uttar Pradesh Food Safety and Drug Administration (FSDA) conducted a special inspection campaign across 52 hospital pharmacies in 17 districts, including private hospitals and government medical colleges. The crackdown focused on the entire pricing chain, from the manufacturer’s printed MRP to the price paid by pharmacies and the final amount charged to patients.
The Uttar Pradesh FSDA found instances where manufacturers printed significantly higher MRPs despite pharmacies procuring the drugs at much lower costs. Officials detected discrepancies in Lucknow, Varanasi, and Noida, and have issued notices to hospitals, suppliers, and manufacturers to determine if they complied with the Drugs (Prices Control) Order, 2013. The inspections also uncovered deficiencies in cold-chain maintenance and temperature monitoring at pharmacies in Lucknow and Noida.
Hospital dispensaries bypass retail pharmacy pricing
Raghunath Reddy, president of the Karnataka Chemists and Druggists Association (KCDA), stated that critical-care and high-cost medicines often do not reach retail pharmacies because they are supplied directly through hospital dispensaries. This system leaves patients with little knowledge of the actual price of the medication, Reddy said.
Ravindra Bhusnur, vice-president of the Karnataka Pharma Retailers & Distributors Organisation, noted that while wholesalers typically receive margins of 8-10% and retailers 16-20%, the larger benefit of institutional discounts often remains with the hospital. Bhusnur and other representatives have urged the government and the National Pharmaceutical Pricing Authority to expand price controls to include more high-value and high-volume medicines.
Proposed reforms for institutional pricing transparency
Karnataka FSDA Commissioner K Srinivas has proposed several regulatory changes to ensure MRP does not serve as the sole benchmark for pricing in institutional settings. Srinivas suggested that the patient-facing price should be the lowest of the applicable statutory ceiling or notified retail price, the printed MRP, and the net institutional acquisition cost plus a prescribed maximum service margin and applicable taxes.
The proposed framework includes:
- Mandatory disclosure of the net institutional acquisition cost and permitted service margins on hospital bills.
- Quarterly electronic reporting and risk-based audits of procurement.
- A grievance channel and interest-bearing refunds for patients who were overcharged.
- Amendments to the Drugs (Prices Control) Order, 2013, to regulate trade margins on essential high-value consumables.
Drug prices exceed landing costs by up to 52.6x
| Drug Name | Landing Cost | MRP | Multiplier |
|---|---|---|---|
| Gufipol | Rs 86 | Rs 4,528 | 52.6x |
| Guficycline-50 | Rs 160 | Rs 7,110 | 44.4x |
| Terlitis | Rs 118 | Rs 4,416 | 37.4x |
| Taxocare 120 mg | Rs 1,000 | Rs 21,617.6 | 21.6x |
Common questions about hospital medicine pricing
Why are hospital medicines more expensive than retail pharmacy prices?
Many high-cost medicines are supplied via institutional channels directly to hospital dispensaries, bypassing retail pharmacies. This allows hospitals to procure drugs at heavily discounted “landing costs” while still billing patients at the printed MRP.
What is the Drug Price Control Order (DPCO)?
The DPCO is a government regulation that sets ceiling prices for essential medicines to ensure they remain affordable. The Karnataka and Uttar Pradesh FSDA are currently examining whether hospitals complied with the 2013 version of this order during their recent inspections.
How can patients verify if they are being overcharged?
Currently, patients generally only see the MRP on their bills. The Karnataka FSDA has proposed a new system that would require hospitals to list the actual institutional acquisition cost and the specific service margin on every patient bill to ensure transparency.
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