TWN Info Service on Health Issues (Mar17/02)
On 13 February India's National Pharmaceutical Pricing Authority (NPPA) issued an order to fix the ceiling prices for the two main categories of cardiac stents. The order stated that “huge unethical markups at each stage in the supply chain” resulted in “irrational, restrictive and exorbitant prices in a failed market system driven by information asymmetry between the patient and doctors and doctors pushing patients to financial misery”.
While there is worldwide attention on the exorbitant prices of medicines, less is known about the high pricing of medical devices. Price control is an important tool to ensure the affordability of life-saving medicines and medical devices such as cardiac stents.
Below is an article in Frontline magazine published in India on the move to control the prices of cardiac stents in the country that came after 2 years of advocacy by health professionals and civil society groups, including the All India Drug Action Network, the Jana Swasthya Abhiyaan, the Alliance of Doctors for Ethical Healthcare and the Third World Network, as well as a High Court decision in support of price control.
The fixing of ceiling prices for stents is much delayed and is at best a piecemeal intervention in a health-care industry that continues to remain unconscionably unregulated
By T.K. RAJALAKSHMI
While the move has been welcomed by those in public health, the timing is not entirely above suspicion. It took more than two years for the prices to be brought down to affordable levels and that, too, after a Delhi High Court order as far back as on February 25, 2015, directing the government to include coronary stents in the National List of Essential Medicines (NLEM).
A cardiac stent is made typically of a metal mesh in the form of a small expandable tube to treat weak and narrowed arteries. The process of implanting a stent involves no major incisions in the procedure of angioplasty. Stents are drugs under the Drugs and Cosmetics Act, 1940.
The NLEM 2015 was notified on December 2015, but only in July 2016 were coronary stents included in the NLEM. The government set up a subcommittee to consider the essentiality of placing coronary stents in the NLEM, which submitted its report in April 2016.
But it was only on December 21, 2016, a full five months after the inclusion of coronary stents in the NLEM, that the Department of Pharmaceuticals notified coronary stents as part of Schedule I of the Drug Price Control Order, 2013, paving the way for the NPPA to fix the ceiling price of stents. Within one and a half months, the exercise was done. Bare metal stents (BMSs) were to cost not more than Rs.7,260 a unit, and the maximum price of a drug-eluting stent (DES) was to be Rs.29,600. Of the 52 stent manufacturers who submitted their prices, the rates of only nine were found to be above the ceiling price for the DES, it was reliably learnt.
The NPPA in its February 13 order observed that “huge unethical markups at each stage in the supply chain” resulted in “irrational, restrictive and exorbitant prices in a failed market system driven by information asymmetry between the patient and doctors and doctors pushing patients to financial misery”. All retailers and dealers were required to display their price lists given by the manufacturer or the importer in a conspicuous area on their premises; hospitals, nursing homes and clinics were also required to mention the cost of a stent along with its brand name, names of the manufacturer/importer in their billing to the patients. However, at the retail end, hospitals charged astronomical amounts as the costs incurred in making medical devices were distributed across the supply chain of manufacturer, distributor and retailer.
“The NPPA basically exposed the difference between the prices at which stents were given to hospitals and the rates charged from the patients. The hospitals have been showing extra expenses by putting the MRP [maximum retail price] in their books,” said G.S. Grewal, former president of the Punjab Medical Council.
Stent manufacturers were reluctant to include stents in the price control list, arguing that drugs and medical devices could not be put in the same category and that the costs of procedures had to be considered. Their main argument was that price controls would be inimical to inter-generational advancement in stents and manufacturers would be compelled to produce stents with reduced advantage. The argument was that cardiovascular diseases (CVDs) were on the rise and a leading cause of morbidity and mortality in India. Some 25 per cent of overall mortality in India was attributed to CVDs, with coronary artery disease (CAD) the most common CVD, accounting for 90 to 95 per cent of the deaths. In India, the prevalence was higher in the under-70 age group compared with the West. A report of the National Commission on Macroeconomics and Health estimated the number of CAD patients at 61.5 million in 2015; of them, 23 million were estimated to be under 40.
According to the National Interventional Council (NIC) registry, 2015, a total of 3,53,346 procedures were performed and 4,73,000 stents were implanted. Some 95 per cent were DESs; 2 per cent were BMSs; and 3 per cent were biovascular scaffolds. The data also showed a progressive increase from 2010 to 2015 in the number of centres performing the procedures and in the number of coronary interventions made. But the rates charged for stent procedures ranged from Rs.23,000 at Central Government Health Scheme (CGHS) hospitals to over Rs.2 lakh in private hospitals, which put them out of the reach of the common people. In 2015, the out-of-pocket expenditure for Percutaneous Coronary Intervention procedures was reported to be 41.38 per cent of the total expenditure, of which government support and private insurance companies accounted for 42.87 per cent and 17.75 per cent respectively.
As for variable pricing for differing categories in the DES, the subcommittee accepted the superiority of DES types over BMS types, but it was categorical that there was no definite superiority among currently available metallic DES types in terms of their clinical outcomes of mortality and myocardial infarction (heart attack).
High Court intervention
It took a High Court order to get the government moving. Birender Sangwan, an advocate, petitioned the Delhi High Court in 2014 after his relative had to pay an exorbitant amount for a stent in a private hospital. Sangwan’s plea was that the exorbitant stent prices were discriminatory and prejudicial to a large number of people. While coronary stents became a part of the NLEM in 2016, their prices were not fixed. The NPPA, an organisation set up in 1997 under the Department of Pharmaceuticals and committed to ensuring affordable drug pricing, was seized of the matter as the issue had been raised at a State Drugs Controllers’ meeting a few years ago. The State Drugs Controller of Odisha had in a 2014 letter recommended control over the prices of stents under the Drug Price Control Order (DPCO) of 2013. On the basis of a market survey, it was submitted that the price to the distributor, MRP, price to hospital and selling price to patient of various medical devices, including stents, showed huge margins to distributors and hospitals. The Commissioner, Food and Drug Administration, Maharashtra, had also, in September 2014, requested the NPPA to fix the MRP for 14 medical devices including cardiac stents. While the scheduled drugs for price control were listed in the NLEM and incorporated in the first schedule to the DPCO 2013, the non-scheduled drugs were also monitored by the NPPA from time to time to ensure that the 10 per cent ceiling (on prices) mandated by the DPCO 2013 on a year-to-year increase in the MRP was not violated.
Matter of life and death
The issue of drug pricing makes the difference between life and death for the majority in this country. Unlike in China, where stents are indigenously produced, three-fourths of the stents in India are imported and manufactured by multinationals. In 40 per cent of the cases, the expenses involved are met out of pocket.
According to an NPPA report on stents, the number of cardiac interventions had grown manifold in the past decade, from 40,000 in 2006 to 2,62,349 in 2013. The report also noted that coronary atherosclerotic heart disease (CAHD) was the most common form of CVD in the country and afflicted around 32 million people with a mortality rate of 1.6 million in a year. “Angioplasty procedure is very common these days but the high cost of cardiac stents is a major cause of concern, as it seriously affects the ability of the common man to access it,” stated the report.
The NPPA requested the National Health Systems Resource Centre (NHSRC) to assess the cost effectiveness of the BMS and the DES types. The NHSRC survey concluded that the cost-effective price for the BMS could be Rs.19,000 and that of the DES, Rs.28,000, and found the MRPs to be exorbitant. The bulk of the stents were imported, but the MRPs were found to be 10 times that of the landed cost (L.C.). Three market leaders, Abbott Vascular, Medtronic and Boston Scientific, accounted for nearly 60 per cent of the market share of stents in the country. The survey showed that in the case of Abbott alone, the difference between the L.C. and the price to distributor (PTD) ranged between 68 per cent and 140 per cent across different brands, while the difference between the PTD and MRP ranged between 72 and 400 per cent. The gap between the L.C. and the MRP ranged between 294 per cent and 740 per cent. The same company made the supply to the CGHS at a margin of just 100 per cent to 200 per cent. In the case of Medtronics, the survey found that the margin between the L.C. and the MRP ranged from 498 per cent to 854 per cent. In the case of Boston Scientific, the margins between the L.C. and the MRP ranged from 464 per cent to 1200 per cent, according to the NHSRC survey.
A quotation for the Boston Scientific Range of Products submitted by a distributor to a hospital in Amritsar (a copy is available withFrontline) showed that the price for the DES in various categories to the hospital ranged between Rs.32,000 and Rs.75,000, whereas the MRP for the same ranged from Rs.1,50,000 to Rs.1,65,000. Another quotation submitted by a distributor for Abbott Vascular (also available withFrontline) to the same hospital for the Abbott product, Xience Xpedition Everolimus Eluting Coronary Stent, pegged the distributor rate at Rs.82,000 while the MRP was Rs.1,40,000. Two other stent brands were also listed, with distributor-to-hospital rates at Rs.50,000 and Rs.32,000 respectively and MRPs at Rs.1,15,000 and Rs.40,000 respectively.
The NPPA report mentioned earlier noted that there was an “unreasonable markup in the final cost to the patient”. It noted that there was a common perception, not clinically validated, that imported stents were superior to those made in India. But many hospitals, it said, including government hospitals, were creating categories on the basis of country-specific regulator approvals such as a United States Food and Drug Administration-approved DES or a European-marked DES or even a Drug Controller General of India (DCGI)-approved stent in their tenders. This encouraged the perception that products approved by a particular regulator were superior, going by the price band. “This is typical of the pharma sector where higher price is confused with higher quality,” observed the NPPA report
More than 50 coronary stent manufacturers, including some of the leading names in the industry, nine industry associations and four public health organisations were asked to submit their representations on stent pricing. The NPPA worked out the probable minimum and maximum prices that could be charged at every stage in the chain of distribution, factoring in margins as well. The minimum rates clearly indicated that there was a possibility of fixing prices at those rates. These were stiff enough for the consumer, but the maximum ceiling prices that were fixed were found to be exorbitantly high. For instance, the minimum MRP that could be charged for the two categories of stents was Rs.25,000 and Rs.40,000 respectively, while the maximum was Rs.75,000 and Rs.1,98,000 respectively. The maximum trade margins that were worked out from the hospital to the patient ranged from 436 per cent to 654 per cent for the BMS and the DES respectively. The maximum trade margin from the distributor to the patient was more than 1,026 per cent for the BMS and about 892 per cent for the DES. Interestingly, the NPPA calculated on the basis of industry data that the maximum cost of production for the BMS and the DES was less than Rs.10,000 for domestic manufacturers, while the landed cost for the imported DES was not more than Rs.40,820 and Rs.16,749 for the BMS.
For imported stents, the maximum MRP charged for the BMS was Rs.50,000 and Rs.1, 98,000 for the DES. “Imagine a situation where a young man brings his 50-year-old father to a hospital with a heart condition and is recommended an angioplasty. The hospital advises him to go for quality and suggests a range of stent prices. The patient and his family in such circumstances would rather not argue with the hospital and leave it to the hospital to take the best option. In that process, the patient ends up spending astronomical amounts. Remember the man is only 50 years of age. These are the kind of psychological pressures that are put on people,” said P.N. Subramaniam, secretary of the Federation of Medical and Sales Representatives Associations of India (FMRAI).
The rates of stents differed on the basis of their size, but medical representatives that Frontline spoke to said the variation was minimal. They also said that hospitals bought them at prices far lower than the MRP. The average cost to the distributor was Rs.20,000, while the hospital paid Rs.25,000. The hospital and doctors then decided the selling price. Some hospitals sold them for around Rs.60,000 and some for Rs.1.5 lakh. The profit and commission to the hospital and the doctor came from this amount. “The product is kept in the Cath lab, and the doctor takes it and uses it. Patients and their families never come in contact with the product. This open pricing is an issue in all devices,” said Subramaniam. He quoted other instances as well. The Foley’s catheter, an instrument used to drain urine from the bladder, has an MRP of Rs.100 to Rs.270 though hospitals buy it for Rs.30. Urine poly bags are also bought by hospitals at Rs.40 while the MRP ranges between Rs.120 and Rs.180. He cited another example of a life-saving injectible antibiotic called Meropenem: while the selling rate to institutions ranges from Rs.300 to Rs.700 , the MRP ranges from Rs.600 to Rs.2,496. He lamented that there was no pricing policy that worked on the basis of the cost of production.
Demands for affordable pricing
The All India Drug Action Network (AIDAN), the Jana Swasthya Abhiyaan, the Alliance of Doctors for Ethical Healthcare and the Third World Network have demanded that the ceiling prices fixed by the NPPA should meet the objective of ensuring true affordability and should be fixed “on the basis of CGHS reimbursement rates”. The CGHS rate was around Rs.23,625. They said that the NPPA data revealed that by the time the patient got the stent, the increase in the original cost (of production) was often in the range of 1,000-2,000 per cent.
They exhorted the government not to succumb to pressures from the industry or the medical establishment. They also urged the Medical Council of India to investigate the professional misconduct of doctors and called for a legally binding code for the marketing of health products including devices, a demand that the FMRAI has also raised.
Drug pricing is at the heart of health-care access. It is significant that the NPPA is a part of the Department of Pharmaceuticals and not the Ministry of Health, which it ideally should be under. Regulation of the prices of essential medicines was itself in danger of getting wound up following deliberations in the NITI Aayog. The apprehensions were somewhat set to rest following an assurance from the Union Minister of Chemicals and Fertilizers Ananth Kumar, reports of which appeared in sections of the media. The Medical Technology Association of India has expressed its disappointment with the capping of stent prices and demanded the involvement of the Medical Technology Assessment Board in the exercise.
It has been the consistent plea of public health activists and experts that determining the prices of essential drugs cannot be left to the market but should be based on the cost of the production. The NLEM confines itself only to the treatment cost of medicine and not other attendant costs that are added on to the overall treatment. These expenses charged by hospitals are still largely out of control.
At present, only 18 per cent of the domestic market is under price control, leaving several life-saving drugs, including patented ones, out of the control mechanism. Even the price-controlled drugs are often very expensive, with manufacturers enjoying high margins. The practice of fixing ceiling prices had a marginal impact on reducing the prices of the medicines.
From 1979 onwards, a cost-based system of pricing came into effect which factored in the cost of raw material and the cost of conversion, including a margin. This system was replaced by a market-based system by the Drug Price Control Order, 2013, a gift of the United Progressive Alliance government. According to a representation made by AIDAN to the Supreme Court in an ongoing case on drug pricing, the market-based pricing formula calculated the ceiling price as a simple average of prices of all brands that have equal to or more than 1 per cent of the market share after adjusting for the retailers’ commission. There were more brands selling at higher prices than at lower prices, so the simple average also turned out to be high, it said.
The delay in fixing the price of stents has been inexplicable. But a piecemeal approach would have a piecemeal outcome. Probir Das, the CEO of Terumo, a multinational medical device manufacturing company, toldFrontline that the new pricing mechanism would hurt the industry. Reduced prices did not mean that patients would no longer be made to go for unnecessary stenting, a trend that has been of concern internationally. “Companies will stand to lose between 40-50 per cent of revenue. People who can afford to buy the latest generation stents will not be able to buy them. It would have been better to go after hospitals that were making huge markups,” he said.
Sulagna Chattopadhyay, Editor-in-Chief of Geography and You, who petitioned the Rajya Sabha committee on petitions for the regulation of stent prices and other medical devices, said the cost of importing stents was one-third of what was charged from the patients. She told Frontline that there should be a cap on the procedure charges and that an audit of stents sold could bring out the nexus between the hospital-industry and doctor.
A regulatory framework is required for every stage of treatment in order to ensure affordable and equitable health care. The overall expenditure on health as a proportion of the gross domestic product is still very low and much of health care continues to be in the largely unregulated private sector. The stent price regulation, therefore, is a piecemeal intervention at best.