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Supreme Court Directs States to Regulate Overpricing in Private Hospitals; Calls for Policy Action

A bench comprising Justices Surya Kant and N Kotiswar Singh issued the directive while hearing a Public Interest Litigation (PIL) challenging the alleged unfair pricing practices of private hospitals. The court, however, refrained from issuing a blanket order, stressing the need for state-specific solutions to address the issue.

• By Pooja Chaturvedi Sah
• New Delhi
• Mar 05, 2025

News

The Supreme Court has directed all state governments to formulate policies to prevent the overpricing of medicines and medical devices in private hospitals, amid growing concerns over patients being forced to purchase essential medical supplies at inflated rates from in-house pharmacies.

A bench comprising Justices Surya Kant and N Kotiswar Singh issued the directive while hearing a Public Interest Litigation (PIL) challenging the alleged unfair pricing practices of private hospitals. The court, however, refrained from issuing a blanket order, stressing the need for state-specific solutions to address the issue.

“We dispose of this petition with direction to all state governments to consider this issue and take appropriate policy decisions as they deem fit,” the bench ruled.

Private Hospitals Accused of Forcing Patients to Buy Expensive Medicines

The PIL, filed by petitioner Siddharth Dalmia, raised serious concerns about private hospitals allegedly compelling patients to buy medicines, implants, and medical devices exclusively from their in-house pharmacies, often at exorbitant rates.

The petition argued that this practice amounts to “blackmail,” depriving patients of their right to fair pricing. The petitioners recounted personal experiences of being financially burdened during medical treatments due to such hospital policies.

“The course of treatment was continuing when the petition was filed in 2018… we are informed that the patient (relative of petitioner) has recovered… petitioners allege that during treatment, they realised that there is a sort of organised system in hospitals for compelling patients to buy medicines and other things only from pharmacies run by the hospitals or with whom they have collaboration,” the court observed.

The Supreme Court acknowledged the issue but questioned how such practices could be effectively regulated without unintended consequences.

Government Defends Existing Measures, Court Highlights Gaps

The Union government and several state governments defended their stance, stating that regulatory mechanisms are already in place to ensure affordable healthcare. They pointed to initiatives such as the National Council for Clinical Establishments, Amrit pharmacies, and Jan Aushadhi stores, which provide lower-cost medicines in government hospitals.

The central government also argued that there is no legal compulsion for patients to purchase medicines from hospital-linked pharmacies.

However, the Supreme Court noted that while government hospitals have such initiatives, private healthcare facilities remain largely unregulated in this regard.

“In proportion to the population of this country, states have not been able to deliver requisite medical infrastructure to cater to the needs of all kinds of patients. The states have therefore facilitated and promoted private entities to come forward in the medical field,” the court remarked, acknowledging the crucial role of private hospitals in India’s healthcare system.

Despite this, the court stressed that the absence of price regulation in private hospitals leaves patients vulnerable to financial exploitation.

Supreme Court Cautions Against Blanket Orders

While the court recognized the issue, it expressed skepticism about the feasibility of strict judicial intervention. The bench noted that an order regulating pricing in private hospitals could prove difficult to enforce and could deter investment in the healthcare sector.

“We agree with you… but how to regulate this?” the bench questioned, emphasizing the challenges of implementing a universal directive.

The court further noted that patients often hesitate to complain about such pricing practices out of fear of disrupting their ongoing treatment.

“When a patient is in the hospital, what is their priority? They do not want to annoy the doctor or anyone else because their priority is to save the patient,” the bench observed.

The judges also acknowledged the stark contrast between government and private hospitals, noting that premier institutions like AIIMS operate under immense pressure to provide affordable treatment.

“Go to AIIMS and you will realise — even the Supreme Court pales in comparison to them. They work for hours and hours without respite,” the court noted.

Out-of-Pocket Healthcare Expenditure Still High in India

The case comes against the backdrop of India’s persistently high out-of-pocket expenditure (OOPE) on healthcare. According to the Economic Survey 2024-25, OOPE in India was 39.4% in 2021-22, a decline from 64% in 2013-14. However, this remains significantly higher than the 35% benchmark recommended by health experts four years ago.

With the private sector playing a dominant role in India’s healthcare system, concerns about affordability continue to rise. The Supreme Court’s directive now places the responsibility on state governments to strike a balance between regulating costs and ensuring that private hospitals can function efficiently.

Next Steps: States to Formulate Policies on Medical Pricing

The Supreme Court has left it to individual state governments to take appropriate action, emphasizing the need for a balanced approach that prevents financial exploitation without stifling private healthcare investments.

While the ruling does not impose immediate restrictions, it signals a growing push for regulatory oversight in private hospitals. It remains to be seen how states will respond to the directive and what measures they will introduce to curb unfair pricing in healthcare.

With rising medical costs affecting millions of patients, the debate over regulating private healthcare pricing is likely to continue, putting pressure on state governments to act swiftly.