The Health Ministry’s CGHS wing issued an order to all empanelled hospitals in December last year, instructing them to accept medicines supplied by the CGHS or provide a purchase invoice for the medicines.
“In such cases, reimbursement will be based on the purchase invoice cost,” says the order, accessed by ThePrint.
The Association of Healthcare Providers of India (AHPI)—the country’s largest network of private hospitals, which includes nearly all corporate hospitals—plans to write to the government urging it to withdraw the order, saying it is squeezing the profit margins of many hospitals, particularly in high-cost cancer treatment.
“The hospitals do have a markup on medicines since drugs are procured in bulk by them, but it is mostly in the range of 10-20 percent, except for cancer drugs used in chemotherapy, where this margin can go up to 40 percent,” AHPI Director General Girdhar J. Gyani said to ThePrint.
Superspeciality hospitals treating cancer cases want the government to withdraw the order, saying it affected their viability, he added.
“The hospitals are not doing anything illegal, as the bill to the government is only at the maximum retail price (MRP) rate, which is the standard norm. In the benefit of a number of our members who are really seeing an impact on their revenue due to this order, we are planning to write to the government demanding its immediate rollback,” Gyani said.
Government officials told ThePrint that spiralling expenditure under the scheme prompted the December order.
“We are also seeing a number of CGHS beneficiaries availing new immunotherapy and targeted therapy drugs as part of chemotherapy for cancers and this really jacks up their medicine cost bills,” a senior government official in the Health Ministry, who wished to not be named, said to ThePrint.
Though cancer patients account for less than 5 percent of CGHS beneficiaries, treatment costs can be extremely high as immunotherapies and targeted therapies are prohibitively expensive. Their costs can go up to Rs 50 lakh a year in some cases.
“Since we know that hospitals have huge markups on these medicines, we thought of approving claims for medicines only at the procurement price in a bid to reduce our expenditure under the scheme,” said the official quoted above.
ThePrint reached out to Union Health Secretary Punya Salila Srivastava for her response via email. This story will be updated if and when she responds.
Over 47 lakh people across states are covered under the scheme, including Members of Parliament, judges of the Supreme Court and High Courts.
Beneficiaries receive healthcare facilities through a network of 455 CGHS wellness centres and nearly 2,500 hospitals in 80 cities, both government as well as private hospitals.
Beneficiaries need a referral for receiving medical care, both OPD and IPD, that is not provided by CGHS clinics.
The Health Ministry’s 2024-25 annual report shows that in the last fiscal year up to December 2024, the government spent Rs 6,316 crore on CGHS, 387 percent higher than Rs 1,296 crore in 2010-11, when the number of beneficiaries was 42 lakh people. The final expenditure for the full year is estimated at more than Rs 6,316 crore.
According to the report, per capita expenditure under the scheme, which started in 1954, rose from Rs 4,050 to Rs 13,438 between 2010-11 to 2024-2025 (till December, 2024).
Also, in the last financial year, nearly 60 percent of total CGHS spending went to private hospitals, the government said in reply to a question in Parliament this year.
Under CGHS norms, medicines are issued based on prescriptions from CGHS or other government doctors following the prescribed formulary and are supplied from dispensary stores in case of OPD patients. Medicines that are not available in the dispensary are procured through authorised local chemists and provided to patients.
But hospitalised beneficiaries can get medicines from the hospitals, which send itemised bills as claims to the Directorate of CGHS under the ministry.
Senior executives of some corporate hospitals told ThePrint that from a hospital management perspective, the CGHS order is operationally cumbersome and unlikely to achieve its intended goals of price transparency or cost containment.
“The core challenge lies not in how hospitals bill drugs, but in the escalating use of extremely high-cost immunotherapy agents in cancer treatment, particularly for CGHS and other government health insurance beneficiaries,” said Dr Dharminder Nagar, managing director of Paras Hospitals, a group present in many northern Indian cities.
These drugs are innovator molecules, often lacking generics, and pricing is controlled by a few global companies that effectively cartelise supply, Nagar said.
“Hospitals receive low margins on these drugs, and when combined with delayed CGHS and other government health insurance payments, this creates a severe cash flow crisis,” said Nagar, who is also a member of the Federation of Indian Chambers and Industries (FICCI) health services committee.
He said merely forcing cost-level billing doesn’t address the larger issue of unregulated use of unaffordable therapies without protocolised guardrails.
Another top Bengaluru-based hospital executive, who wished to not be named, said a more effective way to curb escalating CGHS bills could be to implement national clinical protocols that define when immunotherapy is appropriate.
“Also, hospitals should be permitted to offer bundled chemotherapy packages or margins should be capped in a transparent manner while increasing procedure-related reimbursements,” he said.
But patient rights advocates say that while there is evidence of excessive trade margins on cancer drugs sold to hospitals, there has been hardly any attempt to cap margins for hospital procurement prices.
“The CGHS is looking out for its beneficiaries and making sure it has to pay lesser for anti-cancer drugs because the government has to foot the bill, but why can’t the same rule be applied for every patient paying for these medicines?” asked Malini Aisola, co-convenor of the All India Drug Action Network (AIDAN).
AIDAN is an independent network of not-for-profits working to increase access and improve the rational use of essential medicines.
Prices of anti-cancer drugs, most of which are only available through hospitals, are artificially inflated and sold to patients at far higher rates than the pharmaceutical companies making them can afford to charge, Aisola said.
She added that most anti-cancer drugs are also outside any price control in India.
“The pricing mechanism of anti-cancer medicines, which are largely unaffordable to the majority of patients, needs thorough review and reform in the country,” Aisola stressed.
Medicines in India are widely categorised into two classes, scheduled and non-scheduled drugs. India’s drug price regulator, the National Pharmaceutical Pricing Authority (NPPA), fixes the ceiling price of scheduled medicines, which are included in the National List of Essential Medicines, in line with the provisions of the Drugs (Prices Control) Order, 2013.
In the case of non-scheduled medicines, a manufacturer is at liberty to fix the MRP but is not allowed to increase the MRP of such formulations by more than 10 percent a year.
In addition, under the Trade Margin Rationalisation (TMR) approach, the NPPA fixed trade margins of non-scheduled formulations of 42 select anti-cancer medicines in 2018.
But an AIDAN study showed that this approach did not result in substantial financial benefits to patients.
In late 2017, a first-of-its-kind NPPA report, which analysed treatment bills of four patients at four corporate hospitals in and around Delhi following overbilling complaints, said that hospitals made up to 1,700 percent profits on many consumables and drugs.
(Edited by Sugita Katyal)
