Inflated margins and price gouging are quite prevalent in Indian private healthcare market.
The defining moment of the week for the pharmaceutical and health sectors was the breakdown of Martin Shkreli at a federal court in Brooklyn, New York.
The court handed down a prison term of seven years to 34-year-old Shkreli, a former drug firm executive found guilty of duping investors by fudging accounts.
Shkreli shot to fame as a hedge fund manager who invested in -- and shorted -- pharmaceutical stocks, often controversially. He then moved on starting or outright buying pharma companies.
In summer of 2015, his company Turing Pharmaceuticals hiked the price of a generic anti-parasitic drug it had acquired by an astronomical 5000 percent (from USD 13.50 to USD 750 per pill).
The drug in question, Daraprim -- which Turing had acquired and whose patent acquired decades ago -- is used in treatment of parasitic infections more prevalent among HIV patients due to their weakened immune system. (Turing was able to get away with the generic's price hike by clamping down on its distribution)
Turing's move spawned criticism from doctors, activists and led to drug pricing practices becoming a subject of discussion during the US Presidential race in 2016. It also led to him being labelled by some as the "most hated man in America".
Shkreli's excesses and why is he relevant to India
In India, prices of most essential drugs are capped by the government. Even the extent of price hikes are regulated.
Despite that, many companies, especially in the healthcare space, are still able to inflate margins and indulge in price gouging.
What's worse is, such practices hurt patients in India much more than they would in the US, as healthcare here is largely met through patient's out-of-pocket expenses, and often push families into poverty or a debt trap.
The cost of outpatient treatment, which the poor prefer over hospitalisation, forms 65.3 percent of out-of-pocket expenditure in India, according to a 2016 Brookings study.
This week, the Indian drug price regulator – the National Pharmaceutical Pricing Authority (NPPA) analyzed and published the trade margins of the commonly used syringes and needles. It found that maximum retail prices (MRP) were inflated in certain cases by as much as over 1000 percent over the ex-factory or price to distributor (PTD).
Depending on the type of syringe, MRPs are marked up on average between 214 percent and 664 percent. The MRP on needles ranged from 57 percent to 356 percent.
The average markups were around 480 percent over PTD for commonly-used hypodermic disposable syringes.
This hasn't happened for the first time. NPPA has earlier found inflated margins and price gouging of cardiac stents and knee implants.
In stents, the price regulator found out that the trade margin enjoyed by distributors for sale to hospitals ranged anywhere between 13 percent and 196 percent, while the margin of hospital to patient was as high as 11 percent and 650 percent.
Similarly, the average trade margin ranged from 211 percent to 449 percent in certain orthopaedic knee implants.
NPPA which has sought bills from four hospitals in NCR regions last month found out the marked up retail prices of certain medicines were up as much as 12-fold from the rates at which they were purchased.
The NPPA findings clearly indicate that things aren't as fair and transparent as one would expect from pharma and healthcare industry.
This is an industry where the information and power asymmetry is highly skewed in favour of service providers and it directly deals with lives of people.With healthcare increasingly delivered through private providers, many raise capital with the promise of maximizing returns to shareholders. It's time for the regulators to keep vigil and curb such bad practices, lest we want to see an Indian Shkreli emerge.