The Economic Times - 24 February 2026
The promise of EU-India FTA for Indian patients: A case for price regulation
By Harshita Mathur
The recent EU-India Free Trade Agreement (FTA) has been hailed by health care practitioners and industry experts as a gamechanger predicting drugs to become nearly 10-20% cheaper. Considering that medical inflation in India, driven by high out-of-pocket expenditure, is globally the highest, it is imperative that our policymakers ensure that the stated cuts in import duty and tariffs on drugs and high-tech medical devices reflect in the patient bills. But, is our regulatory framework ready?
In India, maximum retail prices of drugs are regulated by the National Pharmaceutical Pricing Authority (NPPA) as per the provisions of Drug Price Control Order (DPCO), 2013 as applicable to drugs included in the National List of Essential Medicines, 2022 (NLEM). Major industry leaders have indicated the improved affordability of GLP-1 class drugs like Semaglutide and Tirzepatide as a big win for the diabetics and metabolic disease patients. What’s important is, that Semaglutide is not yet included in the NLEM and is not accessible at public facilities which means it is still outside the regulatory net of ceiling prices in India while the WHO included it in its Model list of Essential medicines in 2025. An immediate revision of our NLEM accommodating newer medications should be in order.
Next, our drug pricing mechanism is itself a possible barrier. The ‘ceiling prices’ for the scheduled drugs under the DPCO, 2013 are market-based unlike the DPCO, 1995, which had a cost- based pricing mechanism. Hence, for instance, while tariff cuts from 11% to zero would lower production costs of Cancer and Rare Disease Biologics, it wouldn’t necessarily mean a cut in the price at which it retails. The ceiling price is derived taking the simple average prices of brands with more than 1% market share and allows a mark-up (Maximum allowable post manufacture cost) of 16% as retailer commission linking further revision of these prices of scheduled drugs to the Wholesale Price index. For the non-scheduled drugs, allowable increase is capped at 10% of maximum retail price during the preceding 12 months. This mechanism does not factor in the actual costs and the ceiling prices are indirectly determined by the price range that the top selling manufacturers roughly agree upon. Metformin, the first-line type-2 diabetes drug, is an example where cartelization by pharmaceutical firms to influence the ceiling price has been found previously.
Another glaring gap in our price fixation strategy is that Fixed dose combination (FDC) approach doesn’t cover the dose combination variants directly, so while the API may be available at lesser cost, strength/dosage combinations could be altered to easily evade price fixation. Case on point is a multinational brand that more than doubled the capped price of a 500 mg pain reliever for ‘advanced’ formulation @ Rs 30 for 15 tablets claiming the advanced formulation is a novel drug for faster release and hence exempt from price control. Upon intervention, the firm had to slash their prices as per the NPPA’s fixation of the key ingredient paracetamol. Though NPPA could enforce the ceiling price, the patients had already lost the battle at the pharmacy counters. Not to forget, 86% of the fines imposed by NPPA remain unrealised out of which 71% is under litigation as of September 2025.
The FTA has also been publicized to result in lower costs of surgical procedures through deeper tech collaboration. As per reports, prices of kidney transplant surgeries have soared by 70% between 2020-2024 and tariff cuts on high-end surgical equipment from 27.5 % to zero seems a big relief. Nevertheless, we lack an independent regulator to enforce standardised pricing for procedures. In February 2024 the apex court directed the Centre to finalise procedure rates as per the Clinical Establishments Rules, 2012. The said case is still ongoing and private healthcare experts’ associations have heavily contested the mandate legally. In the absence of a regulator, it is only the private hospitals that stand to profiteer from any slash in input costs.
Another reason to call for price regulation is that patient information asymmetry in pharmaceutical markets often leads to the costlier branded drug being sold more due to the presumption of better efficacy and prescription habits of practitioners et al. This is worse for niche lifesaving drugs where the patient has no bargaining power in a distress purchase. In reality, pharmaceutical companies and the practitioners are the decision-makers as to which drug the patients buy. In absence of regulation, the imported drugs may replace the larger market share swiftly bringing costlier drugs replacing low-cost options available hitherto reducing choice and competitive pricing both.
It is equally necessary to protect our domestic industry from foreign competition while we strive to become the global hub for off-patent lifesaving drugs and biotherapies. Arbitrage deterrence too should be a top of the list priority of our policy makers alongside quality norms to prevent counterfeit drugs flooding the market.
Beyond doubt, the EU-India FTA shall improve access to imported specialized drugs and equipment insofar as a broader band of items shall find their way into the Indian markets and advance treatment lines clinically. But no matter how efficacious or innovative a drug is, public access is always qualified by affordability. It is thus imperative for us optimally align our regulatory framework to ensure the intended promise of the FTA is realised in our pharmacy receipts.
The author is an IAS officer
