Ensuring fair and transparent pharmaceutical pricing was a key promise of Sri Lanka’s ruling government’s election manifesto, and that promise is finally being delivered. On 21 October 2025, Sri Lanka’s parliament approved a new pricing reform for pharmaceutical products, paving the way for the introduction of maximum retail prices (MRPs) and maximum ceiling prices (MCPs) for all medicine categories, excluding those manufactured domestically. Driven by unpredictable medicine shortages, as well as high and irregular drug prices, the reform aims to ensure a fair and transparent pricing framework to guarantee accessibility for all citizens. The key question now is whether the new pricing reform will prove to be effective in meeting the expectations of both the public and pharmaceutical industry stakeholders.
The 2022 financial crisis in Sri Lanka triggered an opportunity to re-evaluate the current drug price setting and regulation policies. For years, the National Medicines Regulatory Authority (NMRA) faced legal challenges, primarily from the Sri Lanka Chamber of the Pharmaceutical Industry (SLCPI) and the National Chamber of Pharmaceutical Manufacturers of Sri Lanka (NCPMSL), preventing it from expanding the list of regulated medicines beyond the 60 drugs that it regulated, leaving many essential drugs outside the purview of price control. The industry’s expectations are clear: a transparent and well-defined drug price formula, with regular review periods to replace ad hoc price controls.
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Under the new refined Medicines (Pricing Mechanism for Medicines) Regulations, the NMRA holds explicit legal authority to impose and control prices for all medicines in Sri Lanka, essentially replacing the previous fragmented approach. The reform introduces a standardized formula to determine MRP and MCP for all existing and imported medicines.
According to the details under the Gazette Extraordinary No.2446/34, the MRP will be determined based on the cost, insurance, and freight (CIF) value; the supply chain total markup (SCTM); and duties and taxes, if applicable. For every new imported medicine registration, the applicant will be required to submit pricing details, including the requested MRP. The CIF will take into account external/international reference prices (ERPs) and internal reference prices (IRPs). Sri Lanka’s ERP system references three neighboring markets with similar socioeconomic conditions—India, Bangladesh, and Pakistan—plus the country of origin (COO). Prices from official sources, including the British National Formulary (BNF) and any other recognised international platforms and databases will also be taken into account. For internal reference pricing, the CIF will take into account prices from the following:
- Previously approved MRPs for similar products
- Current retail price of the product in Sri Lanka
- Ministry of Health (MoH) / Medical Supply Division tender prices
- State pharmaceutical corporation prices
- Any other recognized international platforms and databases
Once the CIF is determined, it will form the base of the SCTM, which is expressed as a percentage of the verified CIF. The SCTM can be adjusted based on affordability and the availability of medicines, as well as to ensure market sustainability. Once the CIF and SCTM are calculated, duties and taxes (if applicable) will be applied to produce the final MRP. The MRP of all medicines will be reviewed and revised at the point of new registration, re-registration, renewal, or an issuance of a new import license.
The rules for determining the MCP of each medicine are slightly different. The MCP will be calculated by the following three criteria:
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By GlobalData- Identify the market share by value of different brands or generic versions of a particular medicine using an international recognised information portal or database. Substantial market share will be considered as 80% of the market value for MCP calculation
- Use the median retail prices of the relevant dosage form and strength of the particular medicine from retail pharmacies, as well as the state pharmaceutical corporation
- Use ERPs and IRPs
In terms of review, the NMRA will follow strict guidelines, reviewing the MRP and MCP every six months. This will ensure that drug prices remain affordable for the public and sustainable for industry stakeholders, and will prevent inconsistencies in the fixed prices. The MCP and MRP can be revised based on market conditions, exchange rate fluctuations, steep local currency depreciation by ±5%, feedback from the industry to improve access to medicines, and individual manufacturer requests.
Following the approval of the new pricing reform, the NMRA has initially imposed MRPs on 500 medicines. This is a significant jump from only 60 medicines that were price-controlled by the government.
As with many major policy reforms, the newly introduced drug pricing framework has unsurprisingly received criticism from the NCPMSL and SLCPI. Local manufacturers contend that the reform could negatively impact those operating under the government’s buy-back agreement. The buy-back agreement is a scheme where the Sri Lankan Government partners with local manufacturers to purchase a guaranteed portion of their production of medicines. This arrangement ensures predictable demand and somewhat stable revenue for local producers. However, the introduction of MRP and MCP for imported medicines could distort market comparisons, such that if imported medicines are capped at lower prices, hospitals and pharmacies may show preference towards imported drugs. The NMRA has ensured that the domestic market will not be impacted by the MRP and MCP framework.
The second point of contention is that the reform mirrors the current medicine pricing system of the neighboring market, India, as the National Pharmaceutical Pricing Authority (NPPA) only sets a ceiling price for all scheduled medicines (those
listed on the national essential medicines list). The NPPA monitors the prices of non-scheduled medicines but does not enforce maximum ceiling prices, while newly registered innovative on-patent drugs are generally exempt from price control for a period of five years from their date of marketing authorization in order to encourage innovation. According to the NCPMSL, this similar system is not viable in Sri Lanka due to the country’s high production costs and higher drug prices when compared to India.
Despite the criticism, the government remains confident that the new drug pricing formula will significantly reduce the cost of medicines, offering long-awaited financial relief to the public.
