The pharma-pricing regulator’s recent tactics have temporarily stalled the exit of high-end medical devices from India, but the arm-twisting does little to address the issue of overall healthcare costs.
Amir Ullah Khan
The pharma-pricing regulator’s recent tactics have temporarily stalled the exit of high-end medical devices from India, but the arm-twisting does little to address the issue of overall healthcare costs. Generations of Indian kids playing gully cricket have had to contend with an unspoken rule—the kid who owned the bat usually got to bat first, and in many cases, he would never be declared out, till he said so. The price of opposing this bullying—the owner of the bat would just walk away with his bat, and for all the other resource-starved kids, it would be “game over”. To those watching Indian healthcare, the actions of the National Pharmaceuticals Pricing Authority (NPPA) are reminiscent of the bat-bully—everyone must comply with the rules, and rules may be applied selectively. The price of objecting is far more than a lost evening of cricket, as device companies, hospitals and distributors are discovering. The biggest loss is for the audience, in this case the paying patient, who is being deprived of the experience of what good healthcare can deliver.
A few months after the NPPA announced the price-cuts in stents and orthopaedic implants, companies are pulling the plug on the innovative medical devices, wanting to exit because of they cannot sustain the prices set by NPPA. Hospitals are using their complex pricing structures to make up for the loss of margin on stents, knee and hip implants, evident in that the charges incurred by the patient remain the same. The government is watching the situation closely, though some departments are not on the same page, sensing that the fragile healthcare ecosystem is likely to go into shock.
So far, the NPPA has acted like a bat-bully—blocking companies from applying for better prices or seeking withdrawals of high-end products, pulling up hospitals, cornering other government departments to align, hoping that everyone else will behave, before the status quo changes and the government starts to question the basis of pricing decisions. In its haste, the regulator may have created a difficult position for itself, with a desi version of alternative facts. NPPA has responded to criticism by saying that all the decisions have been taken based on market data, analysis, facts and figures. But do some of the assertions hold under scrutiny, or are these just alternative facts?
Will device cos’ exit cause sudden shortage of devices?
Over the last eight months, the device industry has had applications for price revisions rejected, and companies wanting to withdraw products have been stalled. The general reason is that withdrawal would go against interest of public health safety, as it would create sudden shortage. This seems to have also pushed the department of pharmaceuticals to impose restrictions on withdrawal of some high-end stents. Market data is sketchy, so there may never be an objective answer on the degree of impact. But, considering that the products stalled were among the costliest in India (before price control) and that some of these were new introductions in India, it is unlikely that these products had cornered a dominant market-share. The price-cuts would have inflated the share of these latest and high-end products over the past few months, but this is an unreal situation, as the industry has repeatedly demonstrated its opposition to the unsustainable, low prices. Therefore, shortage caused by withdrawing these stents may not be a shortage in the real sense. And basing on another decision by the pricing regulator, this shortage could be made good by any other stent.
Everyone’s equal. Some more so?
The NPPA, based on a technical report, ruled that all stents were to be capped at the same price as there was no ‘differentiation’. This new price has brought in low-cost price warriors—Chinese companies. Indian device-makers and the MNCs operating in India are also flexing their range; everyone wants a piece of the Indian pie. The Indian patient should be happy that the market now has more choices. But the NPPA seems to be wary, as it doesn’t want some companies to exit, tacitly acknowledging the high-end stents are the ‘first among equals’, even when it isn’t allowing a higher price for these products.
Getting the formula right, for the patient
While NPPA’s intent of making healthcare affordable is beyond question, the tactics, over the past eight months, are not helping. The industry’s confidence is shaken, hospitals are spending more time looking at the line items on bills rather than patients, and doctors are uncertain about which products to use. The patient doesn’t know if he’s saved money today, or if he will be taken for another ride tomorrow. The NPPA must bring everyone concerned to the table, and be a conscience-keeper, friend and partner the industry, rather than be at odds. The industry must also realise that it is the primary cause for the mess—failure to self-regulate, abdication of responsibility on channel margins and lack of transparency has done it in. The saga is unending, so the need is to get real, be responsible, and focus on what all this means to a patient.
Author is Economist and director of research, Aequitas