By ANISH KOKA MD
It is commonly believed that deliberate, careful price regulation by enlightened technocrats trumps the haphazard and chaotic regulation of prices imposed by the free market—especially when the market is subject to greed and corruption.
A most interesting case study challenging that belief comes courtesy of the largest Democracy in the world: India.
In 2017, an arm of the Indian Government, the National Pharmaceutical Pricing Authority (NPPA) took action to control the price of coronary stents in India by capping their retail price. The problem that stimulated this action was their exorbitant price that made them unaffordable to many Indians.
The retail prices of US made drug-eluting stents ranged from Rs 80,000 – 150,000 (~$1000 – ~$2000), while the price of Indian made drug-eluting stents ranged from Rs 45,000 – 90,000 (~$600 – ~$1200). Considering that a good job for 90% of the Indian labor force pays about Rs 180,000 per year, these prices put most coronary stents out of the reach of a vast swath of the populace.
What regulators knew, however, was that the price point at which coronary stents were being imported into India was a fraction of the price being charged to Indians. The up-charge had everything to do with what happened after the stent was brought onto Indian soil: The Indian subsidiary of the US stent manufacturer would sell its product to a domestic distributor that would then employ all means necessary to ensure their stent was chosen by cardiologists to be implanted.
By SOMALARAM VENKATESH MD
With a stated intent of bringing social justice and financial relief to hundreds of thousands of patients undergoing coronary angioplasty in the country every year, the Government of India capped the sale price of coronary stents in Feb 2017. Stent prices fell by as much as 80% with this populist move, seen as anti-trade within the industry circles. It is tempting for a practising interventional cardiologist to look at two years of this government control on medical device prices in a market economy.
Before price-capping, angioplasty patients were indeed getting a raw deal. There was no uniformity in price among stents of similar class/generation made by different manufacturers. The cost of the only bioabsorbable stent then available in India, to the patient, was 200,000 Indian Rupees (a little under USD 3000), whereas the US or European-manufactured (“Imported”) drug eluting stents (DES) would cost anywhere between INR 85,000 to 160,000. Stents manufactured within India (“Indigenous”) were cheaper. The real cost of manufacture or import was hidden from public view. It was left to the eventual vendor, with alleged involvement of the user hospitals, to determine the Maximum Retail Price (MRP). It was speculated that a huge margin was worked into it, and the profit was split between manufacturers, distributors, and hospitals. Allegedly, some unscrupulous physicians received kickbacks for implanting these devices. Even in government-run hospitals, foul play was suspected.
By a single stroke of the pen, Prime Minister Narendra Modi government slashed stent prices substantially. The bioabsorbable stent cost, to the patient, was capped at INR 60,000 (< USD 1000). Bare metal stents (BMS) and Drug-eluting stents (DES) were capped at INR 7500 and 30,000, respectively. The government seemed to have done its homework: these figures were arrived at from industry-supplied figures on manufacturing or import costs. The cosy network of coronary stent food chain was set on fire with this move: with sudden diminution of profit margins, it was feared that multinational companies would cut Indian workforce; stent distributors & vendors (especially small vendors) were expected to be wiped out or cut in size; doctors worried that with low profitability, multinational stent manufacturers would exit the country or at least, stop importing newer technologies; and hospitals feared revenue loss.
Following this, Industry and Hospital-chain representatives are said to have had series of discussions with the government. Rumours were that the Central Government was arm-twisting traders and that it would relent and raise price limits after these ‘talks.’ The National Pharmaceutical Pricing Authority (NPPA) promised a price revision, one year after the price cap. Meanwhile, some multinationals informed the government that they would withdraw some of their ‘top-end products’ from the Indian market, citing financial nonviability, obviously to put pressure on the government. The Bioresorbable Scaffold from Abbott actually disappeared from Cath lab shelves.