Moneycontrol
Feb 15, 2017 05:06 PM IST | Source: Moneycontrol.com

NPPA caps stent prices: Will it break doctor-hospital nexus?

The moves of the pharmaceutical pricing watchdog does not come as a surprise and culminates a drawn out process that was initiated two years ago after allegations by political parties of unethical marketing practices and an alleged nexus between manufacturers and doctors.

NPPA caps stent prices: Will it break doctor-hospital nexus?
In perhaps one of its boldest moves, the National Pharmaceutical Pricing Authority slashed the prices of coronary stents to Rs 29600, approximately five times lower than the maximum rate charged for drug eluting stents, the variant that is used in about 90 percent angioplasties in India. The more advanced forms of biodegradable stents, introduced in India over the last two years, are also brought under the same bracket.

Prices of such stents to most patients undergoing heart procedures spanned between Rs 75000 and Rs 1.5 lakh, based on the make, the hospital charges and fees of the surgeon involved. In the same stroke, prices of the marginally used bare metal stents is capped by NPPA at Rs 7260, a cut from around Rs 25000 to Rs 30000, charged in private settings.

Some healthcare sector experts, however, expressed apprehensions on the ultimate effect of the order.  They believed the nexus between the doctors and hospitals may be difficult to break. “The hospitals may distribute the curtailed cost of stents to other overheads for patients and the benefits may not ultimately trickle down,” they maintained.

But the NPPA order has provided a few safeguards. It directed hospitals and nursing homes to bill the patients separately detailing particulars of costs, name of the maker and batch details.

The moves of the pharmaceutical pricing watchdog does not come as a surprise and culminates a drawn out process that was initiated two years ago after allegations by political parties of unethical marketing practices and an alleged nexus between manufacturers and doctors.

As expected, the industry has vehemently opposed the move. A statement from AdvaMed, an international group of device makers said it is deeply disappointed with the ceiling price for coronary stents, adding that the “notification completely disregards all stakeholder representations on the need to differentiate stents, based on their technological differences.” The group hinted that the controls on the pricing of stents may block innovation and set the sector back by at least a decade.

Similar concerns were raised by the Association of Indian Medical Device Industry, a group representing local device makers. Speaking to CNBC TV18, the official spokesperson of AIMED said the newly fixed pricing of the stents will impact local device makers adversely and that the industry was not expecting such deep cuts.

Those claims, however, contrast with the statements of Ananth Kumar, minister for chemicals and fertilizers. He noted that the stents had been sold in India with “a 400 percent profit margin.”

“Over 90 percent of stents implanted in India are DES (drug eluting stents), sold at an average price of Rs 1.21 lakh, while BMS (bare metal stents) are sold at an average price of Rs 45095,” according to the minister as quoted in media reports. Kumar claimed that price caps have been fixed after considering the manufacturing, research and marketing costs leaving room for “ethical” profits.”

The NPPA decision also puts the spotlight on the findings of the National Health Systems Resource Centre (NHSRC), a technical support institution under the ministry of health and family welfare that had submitted its report to the pharmaceutical pricing body in 2015. That NHSRC had recommended price of bare metal stents to be capped at Rs 19000 and that of drug eluting stents at Rs 28,000.

While the industry is fretting about the latest clamp down, a public health expert informed CNBC TV18 that the average landed price of stents may not be exceeding Rs 17000. “A ceiling of Rs 26900 may have still left room for profit margins to innovate and grow,” he remarked. It is the mark ups that get added at every point in the supply chain – from companies to distributors and then to hospitals - that significantly inflates the final cost to the patient and that needs to be fixed, he maintained.

Besides, in his view, the device makers may have the opportunity to make representations to claim a higher price if the technology is proven to benefit the patients, similar to the policies governing the pharmaceutical industry. But that may be a high wall to scale. A committee of cardiologists set up to categorize types of stents apparently found no clear evidence that could be used for a higher price cap.

However, an area that may be disputed is the immediate implementation of the price capping order by the NPPA. The Medical Technology Association of India has said the government should grant a transition time for relabeling up to 45 days to enable the supply chain get aligned to the newly fixed pricing. It held that the Drug Price Control Order 2013 allowed 45 days for scheduled formulations to change over to new notified prices.

With the NPPA wielding its axe firmly, it may draw flak from the industry and a legal tussle may not be ruled out.
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