Drug pricing by the pharmaceutical companies has been a matter of concern for the governments of the developing economies of the world for some years now. This is on account of two critical factors. 1.The pharmaceutical industry has emerged as a key sector of the national economies with the sharply rising expenditure on medicines by the people. 2. Tendency amongst the pharmaceutical producers to charge high prices for their products. On the one hand, the governments cannot afford to displease this industry by imposing too many curbs on their pricing strategies and on the other a totally free pricing policy could go against the social objectives of the governments. A balanced policy approach is therefore required in this industry and many countries including some of the developed ones have been taking such a stand of late. In India, the government has been following a Central policy on drug pricing since 1978 through what is called, Drug Price Control Order of the ministry of Chemicals and Fertilizers. DPCO has never been liked by the pharmaceutical industry in this country and there has been frequent violations of its pricing provisions in the past. Huge number of cases pending in various courts of the country challenging the provisions of DPCO is an indication of this government-industry tussle on drug pricing. It is high time the government has made a serious attempt to bring about a solution to end this raw in the interest of both the industry and the consumers. An attempt was made by the government, in this regard, three years ago by bringing Pharmaceutical Policy 2002. Shortly after, it was announced by the government, it got stuck in the Supreme Court with no possibility for an early settlement. A new policy approach towards the pharmaceutical industry is particularly important in an environment where the country's Patent Act has been changed now after 35 years. The decision of the Parliamentary Standing Committee on Chemicals and Fertilizers to call for an inter ministerial coordination to set up a mechanism to closely monitor drug prices and to take appropriate measures is a step in the right direction. The Committee has taken note of the fact that the product patent regime can have implications on drug prices from now onwards. The Committee has noted pockets of shortages exist and instances of charging high prices do take place in various parts of the country. Its suggestion for an effective monitoring of prices of drugs including that are not covered by the DPCO and its endorsement of the Sandhu Committee recommendations seeking a system of price negotiations of patented drugs are significant. Establishment of DPCO cells at state levels is another brilliant suggestion of the Sandhu Committee supported by the Parliamentary Committee. If unnecessary bureaucratic control can be avoided with effective price monitoring system, that may do a lot of good to the industry and the consumer.