Price control & healthcare: Don’t confuse access with affordability

In a country where two-thirds of the population is denied access to quality healthcare today, it is important to quickly guarantee universal health coverage.

healthcare, drug price, insurance market
Once again, the focus is back on providing low-cost healthcare.

Once again, the focus is back on providing low-cost healthcare. Almost always, our solution to make healthcare coverage affordable is to cap prices of drugs, consultations and hospitalisation. With high out of pocket expenses and poor insurance coverage, it is always a seemingly simplistic solution that emerges from our policy-makers. Cut down the costs by capping prices and health coverage will improve—that’s what we have been led to believe on multiple occasions. This makes for quick fixes and political opportunism. Last month, we had the Prime Minister in London, blaming doctors for colluding with pharmaceutical firms in cheating poor patients.

In a country where two-thirds of the population is denied access to quality healthcare today, it is important to quickly guarantee universal health coverage. However, we must also be cautious not to confuse access with affordability. Simply making healthcare affordable will not counter the problem we have—a large part of the population denied access due to poor availability of hospitalisation, specialists and drugs. The first predicament, therefore, is to guarantee access and coverage.

Secondly, it is equally important to note that in the absence of a fully functioning public health system, it is the private sector that we must depend upon. The health system in our country is fashioned upon the National Health Service (NHS) of the UK, which provides state-funded high quality healthcare to the entire population. However, what we have in terms of infrastructure is hardly able to cover a fifth of the entire population. The private sector is large, and in the absence of regulation and poor implementation of standards, tends to cut corners and provide snobby treatment.

Thirdly, because of the absence of a smoothly functioning insurance market, out of pocket expenses go up to 70% of total costs. Most of this expenditure is on drugs. Therefore, it does make political sense to cut down drug costs. However, if this is done through government-ordered arbitrary price fixing, it could only result in drug firms pulling out products and, thereby, stocks will run dry. If hospitalisation costs are capped, patients will suffer long waiting periods and other hidden costs. Price caps have rarely worked in any sector; there is no proof they will work in the health sector.

Therefore, it is important that the state must focus on other innovative methods. Centralised drug procurement has been effectively used in states like Tamil Nadu to bring down costs. A well-functioning generics market, not like the often ignored and empty Jan Aushadhi centres, is required to give the poor access to inexpensive drugs. Primary health centres must be well-staffed, public health improved and supply chains should be made functional. The state must first realise that primary healthcare and public health are the government’s responsibility and must be guaranteed to all. The private sector can, at best, supplement this effort.

It has indeed become politically expedient to hit out against the entire fraternity of doctors and hospital care providers, and paint them as callous profiteers who are immune to human suffering. Instead of bringing in a strict and firm monitoring and regulatory mechanism, the government mostly takes the easiest way out through arbitrary price controls. Probably the best example that can be cited here to prove that price control doesn’t work is the government’s stand on pricing of stents and other medical implants. Stent price capping has resulted in eliminating the choice of stents that are unique in make, such as sleeker stents, or stents that can pass through a calcified lesion. Furthermore, there have been multiple reports which point to the fact that hospitals have cited no significant increase in the number of angioplasty procedures performed, after the move on stent price control.

Sure, price capping sounds all good when we look at it from a distance, but the ghost essentially sits in its details. The setback in terms of medical devices support from international players will majorly affect patients, whose lives are at stake because of a host of ailments. Moreover, there is a very small chunk of population that can afford to travel overseas, for quality treatment. Most importantly, constant innovation is what it takes to tackle disease and ill health. The legion of neglected diseases exits because there are various health problems that are unique to a region like ours, and solutions to those can’t be imported from elsewhere.

They will have to emerge from our laboratories and our drug firms, which must be incentivised to innovate and invest in research and development. We need to acknowledge that only 1% of the GDP is being spent by the government on healthcare, and that we are doing worse than most sub-Saharan countries. We need a far greater commitment from the state. We need more doctors and more medical schools. Blaming doctors for rising costs, while keeping their supply low, is not going to take us anywhere good.

By: Amir Ullah Khan

Economist and director of research, Aequitas

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