EU-India FTA Could Lower Drug Costs for Indian Patients, Strengthen Price Regulation Case

India, Feb 24 : The recently concluded EU-India Free Trade Agreement (FTA) has generated optimism within healthcare and pharmaceutical circles, with projections that certain medicines and medical devices could become 10–20% more affordable. However, public health experts caution that without robust drug price regulation, these projected savings may not translate into lower patient bills.

India continues to face some of the world’s highest medical inflation, largely driven by out-of-pocket expenditure. While reductions in import duties on medicines and high-end equipment are expected to reduce input costs, the country’s current pricing system may not automatically pass on these benefits to consumers.

Gaps in drug price regulation

At present, the maximum retail prices of essential medicines are regulated by the National Pharmaceutical Pricing Authority (NPPA) under the Drug Price Control Order (DPCO), 2013. Price ceilings apply only to medicines listed in the National List of Essential Medicines (NLEM), 2022.

Industry representatives have highlighted potential price relief for GLP-1 drugs such as semaglutide and tirzepatide, which are widely used to treat diabetes and metabolic disorders. However, semaglutide is not yet included in India’s NLEM, placing it outside the ceiling price framework despite being added to the World Health Organization’s Model List of Essential Medicines in 2025. Experts argue that timely revisions to the NLEM are necessary to bring newer therapies under regulatory oversight.

Market-based pricing concerns

India’s ceiling price mechanism under the DPCO, 2013 is market-based rather than cost-based. Prices are calculated using the simple average of brands with over 1% market share, along with a permitted post-manufacturing margin. As a result, even if tariffs fall sharply—for instance, from 11% to zero on certain biologics—the retail price may not necessarily decline proportionately.

Critics note that this structure allows prevailing market dynamics to shape ceiling prices rather than actual production costs. For non-scheduled drugs, annual price increases are capped at 10%, but the absence of cost-based calculations can limit the impact of tariff reductions.

Additionally, regulatory challenges persist. Fixed dose combinations may bypass price controls through formulation adjustments. In past cases involving pain relief drugs, price caps were initially circumvented through “advanced” formulations before regulatory intervention. Enforcement also remains a concern, with a significant share of penalties reportedly tied up in litigation.

Procedure costs and medical devices

The FTA is also expected to reduce tariffs on imported surgical equipment, potentially lowering hospital input costs. Between 2020 and 2024, the cost of procedures such as kidney transplants rose sharply. While duty cuts on high-end devices may provide relief, India currently lacks an independent regulator to standardise pricing for medical procedures across private hospitals.

The Supreme Court in 2024 directed the Centre to finalise procedure rates under the Clinical Establishments Rules, 2012, but implementation remains pending. Without enforceable pricing norms, experts warn that reductions in equipment costs may not translate into cheaper surgeries.

Information asymmetry and market dynamics

Health economists also point to patient information asymmetry in pharmaceutical markets. Branded drugs often dominate prescriptions due to perceived efficacy advantages, even when lower-cost alternatives exist. In life-saving or niche treatments, patients typically have limited bargaining power, making regulatory safeguards even more critical.

There are also concerns that imported high-cost medicines could displace affordable domestic options unless competitive checks and quality standards are maintained.

Aligning trade gains with public access

The EU-India FTA is widely viewed as an opportunity to expand access to advanced therapies and modern medical technologies. However, stakeholders stress that affordability remains central to healthcare access. Policymakers are being urged to update the essential medicines list, revisit pricing formulas, strengthen enforcement, and ensure transparency so that tariff reductions result in tangible savings for patients.

While trade liberalisation may widen treatment choices, experts maintain that only a responsive and effective drug price regulation framework can ensure the agreement’s benefits are reflected in pharmacy bills rather than absorbed elsewhere in the supply chain.