February 22, 2017 2:57:34 am
After analysing the margins or profit of various players involved in the stents trade, the National Pharmaceutical Pricing Authority (NPPA) has found that they were “exorbitant and irrational”, indicating “vulgar profiteering” by every player but mainly by the hospitals.
While the average maximum margin for manufacturers on a commonly used drug-eluting stent (DES) was 27 per cent, the distributors and hospitals were earning an average maximum margin of 196 per cent and 654 per cent on it, respectively.
“The trade margins confirmed the general perception that the margins were exorbitant and irrational, indicating vulgar profiteering at every level and mostly at the level of hospitals, and that the existing trade channel had failed to eliminate the chances of unethical practices in the context of a traumatised patient suffering heart ailment and reaching a hospital,” the NPPA said in a detailed note attached with the minutes of the February 13 meeting where the stent price cap was decided.
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On February 13, the NPPA capped the prices of coronary stents. The ceiling price of bare metal stents (BMS) has been fixed at Rs 7,260 per piece and that of DES and biodegradable stents has been fixed at Rs 29,600 apiece.
“The level of average margins ranging between maximum 436 per cent (for BMS) to 654 per cent (DES) at the level of hospitals indicated a failed market system where asymmetry of information has resulted in unethical practices…,” the NPPA noted.
The maximum trade margin for distributors was found to be 194 per cent for BMS and 196 per cent for DES. “In comparison, the margin at the level of manufacturers/importers was modest, in terms of average maximum of 56 per cent (for BMS) and 27 per cent (for DES),” the NPPA stated.
The detailed note explained as to how the stent price cap was decided. It included the presentations given by various stakeholders — Indian stent manufacturers, multinational stent manufacturers, importers, civil society representatives, hospital associations, nursing home associations, distributors and various industry associations.
While giving their arguments, Indian manufacturers, multinational manufacturers and importers emphasised “the need for a higher price cap and mentioned that huge margins are paid to distributors and hospitals (including doctors) in the existing business model”.
The hospital associations, nursing home associations and related institutions claimed in front of the NPPA that they “needed to invest substantially on capital investment — construction and running of the healthcare facilities” and therefore, there is the “need to realise returns for various services including cardiac procedures and any margin taken by them is only legitimate returns…”
During discussions, the hospital and nursing home associations themselves “expressed apprehension that capping of stent prices may not result in passing on of benefits to consumers, as charges of other heads might increase, include multiple ‘stenting’, prolonged hospitalistion and even angioplasties getting converted to bypass surgeries, etc.” This apprehension was expressed by civil society groups as well.
The NPPA noted that healthcare providers were against the idea of price cap or treating them as “retailers”. However, the NPPA did not find any merit in keeping margin for hospitals as they are not “legal entities as retailers and the margins at the levels of Price to Hospitals are too exorbitant…”
Moreover, the NPPA stated: “It was unanimously held that since hospitals are not doing any value addition in the supply chain nor having any financial stake in the trade, hospitals need to be dissociated from the trade channel for the fixation of the prices of coronary stents, except for minimal hospital handling charges, which could be reasonably built within the ceiling price.”
The ceiling price of Rs 29,600 for DES included the ‘overall trade margin’ that was decided at 8 per cent. The NPPA felt that this 8 per cent adequately covered profits for distributor and ‘hospital handling charges’, which did not need to be separately indicated or accounted for.
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