The Supreme Court labelled the formula by which prices of essential medicines are currently being fixed in India as "unreasonable and irrational", the lawyer said.
The government currently caps the prices of more than 500 essential medicines. But the All India Drug Action Network (AIDAN), a group of NGOs, alleged in a public interest litigation that prices are fixed at very high levels, which makes drugs unaffordable for many.
AIDAN has also alleged that India's current national list of essential medicines does not include many life-saving drugs.
The court on Wednesday directed AIDAN to come up within six weeks with a comprehensive plan to regulate drug prices. The government will have to respond to that within six months, said Gopal Dabade, a member of the AIDAN.
Drug prices are a contentious issue in India, where a majority of people live on less than $2 a day and health insurance is scarce.
A parliamentary committee said in April that the scope of price control needed to be expanded to make all the drugs available in the country more affordable.
Wide-ranging price cuts over the past year have hit both local and foreign drugmakers in India and have been opposed by many in the industry, who have said drug prices in the country are already among the lowest in the world.
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