A ceiling price for a scheduled drug is the average price to retailer plus a 16 per cent margin, and an overcharge is deposited with interest

A ceiling price for a scheduled formulation under the Drugs (Prices Control) Order, 2013 (DPCO), made under section 3 of the Essential Commodities Act, 1955, is the simple average of the prices to retailer of every brand and generic version with a market share of at least one per cent of total market turnover, plus a retailer margin of 16 per cent, revised each 1 April by the annual wholesale price index (WPI), which for the revision from 1 April 2026 was 0.64956 per cent, the index for 2025 over 2024. A manufacturer that sells above it is liable to deposit the overcharged amount with interest. A price order can go to the Central Government for review within thirty days, a demand has no appeal under the Order and may be brought before a High Court under Article 226 of the Constitution, and contravention is an offence under section 7 of the Act.

How is a ceiling price calculated?

Paragraph 4(1) of the DPCO works in two steps. First it takes the Average Price to Retailer, written P(s): the sum of the prices to retailer of every brand and generic version of the medicine whose market share is "more than or equal to one percent" of the total market turnover, divided by the number of those brands and versions. "Price to retailer" in paragraph 2(1)(y) includes duties and excludes local taxes. Second, the ceiling price P(c) is P(s) multiplied by (1 + M/100), where M, the margin to retailer, is 16. The figure is per unit of dosage listed in the First Schedule, which is the National List of Essential Medicines (NLEM) 2022.

Paragraph 5 applies the same formula to a new drug already available in the domestic market; one not available in it is priced on pharmacoeconomics with the sixteen per cent margin, and one on an off-patent molecule at half the paragraph 4 price under paragraph 5(3). An existing manufacturer launching a new drug needs prior approval in Form I under paragraph 15(2), except that since 30 June 2026 another existing manufacturer launching the same new drug within twelve months of its price fixation only intimates the launch in Form IA within one month.

What does the annual wholesale price index revision do?

Paragraph 16(1) requires the Government to revise ceiling prices by the WPI for the preceding calendar year and notify them on 1 April. Paragraph 16(2) lets a manufacturer raise the maximum retail price (MRP) once a year, in April, on the same index, without prior approval. A fall in the index works the other way under paragraph 16(4): the MRP must come down, within forty-five days of the notification for stock already in the market, with Form II filed within fifteen days.

For 2026 the National Pharmaceutical Pricing Authority (NPPA) issued Statutory Order (S.O.) 1575(E) on 25 March 2026. It fixes the ceiling prices of 767 scheduled formulations under NLEM 2022, from 1 April 2026, "inclusive of" a WPI revision of 0.64956 per cent for 2025 over 2024.

What does an overcharging demand consist of?

Paragraph 14(1) bars a sale above the ceiling price plus local taxes, and paragraph 14(2) makes a manufacturer that sells above it "liable to deposit the overcharged amount along with interest thereon from the date of such overcharging." The same liability recurs, with interest from the date of overcharging for a failed Form II report of a WPI revision in paragraph 16(3) and (5) and a new drug sold above its price under paragraph 15(6), from the date of launch where Form I approval was not sought under paragraph 15(5), and from the date of increase for a non-scheduled formulation under paragraph 20(2); paragraphs 15 and 20 add a penalty. Paragraph 13(1) requires an existing MRP to come down to the ceiling, with forty-five days for stock already in the market. The Order does not define "overcharged amount" and does not state a rate of interest.

The Drugs (Prices Control) Amendment Order, 2026 adds two limits on the amount. Paragraph 14(2) now carries a proviso: for formulations produced or available in the market before the date of the ceiling notification, a manufacturer that shows compliance with paragraph 24 and the Government's guidelines is liable only for the stock traded through the distributor or retailer found to have overcharged. A further proviso to paragraph 24(1) applies where the manufacturer produces documentary evidence, on demand, of sufficient effort to disseminate the revised price to all stakeholders, including a revised price list to dealers and retailers and an advertisement in at least two national newspapers, each within two weeks of the notification, a revised price list in Form V or VI, a Drugs (Prices Control) Order section on the company's homepage, and batch-wise production and stock details; the overcharged amount is then calculated solely on the stock handled by each retailer, distributor or stockist found selling that batch above the ceiling.

Which formulations does the ceiling not reach?

A formulation outside the First Schedule is non-scheduled, and paragraph 20(1) has the Government monitor the MRP of all drugs, non-scheduled formulations included, and ensure that no manufacturer raises it by more than ten per cent of the MRP over the preceding twelve months; an increase beyond it is reduced to that level for the next twelve months. Paragraph 20(2) makes the manufacturer liable to deposit the overcharged amount with interest from the date of the increase, in addition to the penalty.

What does the arithmetic look like?

An illustration. The tablet, brands, prices, dates and sales below are hypothetical, and the interest rate is assumed. Every price is in INR per tablet and excludes tax.

A scheduled 500 mg tablet. Four brands hold one per cent or more of
the moving annual turnover; a fifth, with 0.8 per cent, is left out.

Step 1, paragraph 4(1)
  Prices to retailer, brands A to D   4.00   4.60   5.20   6.00
  Sum 19.80, divided by 4: P(s)                       4.95
Step 2
  P(c) = 4.95 x (1 + 16/100)                          5.742
  Notified ceiling price, two decimals                5.74

Notified 15 January 2026; forty-five days end 1 March 2026
WPI revision from 1 April 2026 at 0.64956 per cent
  5.74 x 1.0064956 = 5.777, notified as               5.78

Brand D, price to retailer 6.00, prints its MRP at 6.40 a tablet
before tax, 64.00 a strip, and sells at it until 30 September 2026.
  2 March to 31 March 2026 (30 days), 3,00,000 tablets
    excess 6.40 - 5.74 = 0.66             INR 1,98,000
  1 April to 30 September 2026 (183 days), 18,00,000 tablets
    excess 6.40 - 5.78 = 0.62             INR 11,16,000
  Overcharged amount                      INR 13,14,000

Interest assumed at 15 per cent simple a year, the section 7A rate,
run from overcharging as paragraph 14(2) says, each period's amount
taken as overcharged on its last day, paid on 31 December 2026
  INR 1,98,000 x 15/100 x 275/365         INR 22,377
  INR 11,16,000 x 15/100 x 92/365         INR 42,194
  Interest                                INR 64,571
  Deposit                                 INR 13,78,571

The fifth brand never enters the average. The WPI step lifts the ceiling by four paise a tablet. The paragraph 14(2) proviso is confined by its words to stock produced or available before the ceiling notification; the paragraph 24(1) proviso carries no such limit, and the amending Order took effect on 30 June 2026, partway through the second period above.

How is a ceiling price or a demand challenged?

Paragraph 31 lets "any person aggrieved" by a notification or order under paragraphs 4, 5 and 6 apply to the Government for review within thirty days of publication in the Official Gazette or of receiving the order. Its proviso bars any manufacturer from selling above the ceiling or retail price under review while the application is pending.

Neither the Order nor the Act provides an appeal from a demand under paragraph 14(2). Article 226(1) of the Constitution lets a High Court issue directions, orders or writs, including certiorari and mandamus, to any person or authority for the enforcement of rights in Part III "and for any other purpose". Section 7A(3) of the Essential Commodities Act, 1955 provides that "no court, tribunal or other authority shall grant any injunction or make any order prohibiting or restraining any Government from recovering any amount as an arrear of land revenue or as a public demand" under section 7A(1).

What follows a contravention?

The DPCO is an order under section 3 of the Essential Commodities Act, 1955, whose section 3(2)(c) lets an order control the price at which an essential commodity may be bought or sold, and the Schedule to the Act lists drugs. Section 7(1)(a)(ii) punishes contravention of such an order with imprisonment of not less than three months and up to seven years and a fine, though the court may for adequate and special reasons record a shorter term. For a company, section 10(1) makes the persons in charge of the business guilty with it, unless a person proves absence of knowledge or all due diligence.

A sum payable under a section 3 order that is not paid is recoverable with simple interest at fifteen per cent a year from the date of default to the date of recovery, "as an arrear of land revenue or as a public demand", and sub-section (4) refunds it with the same interest if a competent court declares the order invalid.

What remains unsettled?

Four points.

The rate and the starting day of interest. Paragraph 14(2) speaks of interest "from the date of such overcharging" and names no rate; section 7A(1) names fifteen per cent, but runs from the date of default in paying. Whether the two coincide for a demand that runs from the date of overcharging is not stated in either text.

What "overcharged amount" measures. The Order does not define it, and the illustration reads it as excess per unit multiplied by units sold, which the words permit but do not prescribe.

How far the 2026 provisos reach. The paragraph 14(2) proviso turns on compliance with paragraph 24 and "such other guidelines as may be issued", and no such guidelines are in the record; whether the five items of evidence in the paragraph 24(1) proviso suffice for the paragraph 14(2) proviso as well is not stated. Nor does the amending Order, in force from 30 June 2026, say whether either proviso applies to overcharging before that date.

Whether paragraph 31 reaches a demand. It names notifications and orders under paragraphs 4, 5 and 6, not an overcharging demand under paragraph 14(2), so whether a demand can be taken to review at all is left to those words; and section 7A(3) leaves open how far an interim order against recovery can be made in a writ petition, given that article 226(3) governs interim orders.