Essential Medicines in India: NLEM, DPCO and Drug Price Control

What does “essential” mean here?

An essential medicine is one that meets the main health needs of a population. It must work, be safe, and be affordable. It must also be available at all times, in the right dose.

The idea comes from the World Health Organization (WHO). It published its first Model List of Essential Medicines in 1977. Countries use it as a guide to build their own lists.

Why does a country need its own list?

Diseases differ from place to place. India needs strong cover for tuberculosis, malaria and diabetes. A national list also gives the Government a clear base for buying medicines and fixing prices.

In India the list does one more job. It decides which medicines fall under strict price control.

How many medicines has each edition listed?

India issued its first national list in 1996. It has since been revised several times. The table shows the counts.

How does a medicine get on or off the list?

An expert body reviews each medicine. In 2018 the Government set up the Standing National Committee on Medicines for this work. It looks at disease burden, safety, proof of benefit and cost.

Medicines that are unsafe, outdated or replaced by better ones get dropped. Newer ones that meet the tests get added. The 2015 revision itself suggested a fresh review every three years. In practice the gaps have been longer.

What is the chain of rules?

The law starts with the Essential Commodities Act, 1955. It lets the Government control prices of items it declares essential. The Drugs (Prices Control) Order, 2013 uses that power for medicines.

The NPPA applies the order. It fixes ceiling prices and watches the market. The figure shows the chain.

How is a ceiling price worked out?

For a scheduled medicine, the NPPA takes the prices of brands that hold at least 1 per cent of the market. It averages them. A retail margin is then added. No seller may charge more than the result.

Each year the ceiling changes with the Wholesale Price Index (WPI). For 2026 the rise was about 0.65 per cent, from 1 April.

What about drugs outside the list?

Medicines not in Schedule I are called non-scheduled. The NPPA does not fix their prices. A maker may raise the maximum retail price by 10 per cent a year. Anything above that can lead to action.

Most of the market is non-scheduled. One committee summary puts it at about 82 per cent. The NPPA directly controls the rest.

What is paragraph 19?

Paragraph 19 is a special power. In the public interest, the Government may fix a ceiling or retail price for any drug. It can use this for medicines and devices outside the list.

The Government used it for coronary stents, which cut their prices sharply. It used it again for knee implants. Prices fell by large margins.

What is trade margin rationalisation?

The trade margin is the gap between what a medicine costs the seller and the price the patient pays. It can be very large for some drugs. In 2019 the Government capped the margin on a set of anti-cancer medicines outside the list.

Prices of those drugs fell. The Standing Committee has since asked for a permanent rule in the order.

What is Jan Aushadhi?

The Pradhan Mantri Bhartiya Janaushadhi Pariyojana sells quality generic medicines at low prices through dedicated stores called Kendras. The Department of Pharmaceuticals runs it.

The number of Kendras was about 20,000 (20,149 on 30 June 2026), with a target of 25,000 by March 2027. (Source: PIB)

How do patents change prices?

A patent gives a maker the sole right to sell a new medicine for 20 years. During that time there are no cheap copies. Prices stay high.

Section 3(d) of the Patents Act, 1970 blocks ever-greening. It denies a patent to a small change in a known substance, unless it shows clearly better effect.

What is a compulsory licence?

A compulsory licence lets another firm make a patented medicine without the owner’s consent. The Government grants it when the medicine is too costly or too scarce.

India has granted one so far. In 2012 it allowed Natco to make a generic version of the cancer drug Nexavar.

What is a generic medicine?

A generic medicine has the same active ingredient as a brand-name medicine. It has the same strength and the same form, such as a tablet or syrup. It is taken the same way.

The brand firm sells first, under a patent. When the patent ends or is set aside, other firms may make the same salt. They compete, and the price falls.

A generic maker does not repeat the costly research. It only has to show that its copy works the same way.

How do we know a generic works the same way?

The usual test is called bioequivalence. It checks that the generic enters the blood at the same speed and in the same amount as the brand.

Some simple forms may skip the test. Natco argues that a plain oral solution with the same active ingredient at the same concentration is exempt under WHO guidelines. This argument is at the heart of the Kerala dispute. (Source: Onmanorama)

How does the Government push generics?

Jan Aushadhi, described above, sells quality generics through its Kendras.

The National Medical Commission tried a stronger step in August 2023. Its new rules said doctors must prescribe by generic name. Doctors’ groups objected, citing doubts about generic quality. On 24 August 2023 the Commission put the rules on hold. (Source: South First)

The older code of ethics already asks doctors to prescribe by generic name. (Source: NMC)

Does a patent always block a generic?

No. A court can let a generic firm go ahead while the patent itself is challenged. This is what happened with risdiplam, a drug for spinal muscular atrophy (SMA).

Roche holds the patent on its brand, Evrysdi. Natco argued that the patent lacked novelty and could be revoked. On 9 October 2025 a Delhi High Court bench refused to stop Natco. It weighed the credible challenge and the public need for an affordable drug. (Source: KEI)

This was a court case. It was not a compulsory licence, which is a Government grant under the Patents Act.

What is the case for caps?

Caps make a basic medicine cheaper on day one. A patient with a long illness saves money every month. Out-of-pocket spending on medicines is a large cause of household debt.

What is the case against caps?

Makers say a low cap can leave no profit. They may then cut supply or reduce quality. Some critics also say a list-based system misses new medicines that patients really need.

A Standing Committee report in 2026 raised another worry. Much of the overcharging found by the NPPA remains unrecovered, because firms take the matter to court.

Essential medicines and price control in the news

• [News] On 22 October 2026 Kerala’s former health ministers questioned the switch to a generic drug for SMA. According to the hospital superintendent, bottles marked “Physician’s sample/Clinical trials only” had reached six patients at a state hospital. They were taken back after parents objected. He said the labelled bottles were free samples supplied by Natco. Health Minister K Muraleedharan said the drug is safe. So what: a generic can be legal and cheap, yet still face questions on labels and trust. (Source: Onmanorama) (Source: The News Minute)
• [News] On 5 July 2026 Kerala decided to buy Natco’s generic risdiplam, called Natsmart, for its KARE programme. KARE treats 109 children. Roche’s Evrysdi costs about Rs 5.2 lakh a bottle. Natsmart was launched at Rs 15,900. The Kerala High Court let the tender go ahead on 30 September. The state’s technical committee said no separate safety or efficacy study was needed, though a bioequivalence study could be done. So what: this is a live test of generic substitution for a rare disease. (Source: Onmanorama)
• [Data] On 6 August 2026 a Standing Committee on Chemicals and Fertilizers presented a report on the NPPA. It said about 85 per cent of overcharging demands, worth Rs 8,526 crore, were unrecovered as of 2025. It noted that no deadline exists for a permanent trade margin rule. It asked the Government to consider cost-based pricing. So what: this is Mains material on weak enforcement. (Source: PRS India)
• [Data] From 1 April 2026 the ceiling prices of scheduled medicines rose by about 0.65 per cent, in line with the Wholesale Price Index. So what: the yearly change shows how ceiling prices are linked to inflation. (Source: Medical Dialogues)