Recently, my niece gingerly
confided that she was going to study engineering rather than medicine. I was
certain she’d become a doctor – so deep was her love for biology and her
deference to our family tradition. But she calculated, as would anyone with
common sense, that with an engineering degree and an MBA, she’d be working for
a multinational company making a comfortable income by twenty-eight. If she
stuck with tradition and altruism, as a doctor she’d still be untrained and
preparing for examinations at twenty-eight.
Despite the truism in India that
doctors are the only professionals never at risk of starving, the rational case
for becoming a physician never was strong. Doctors always needed a dose of the
irrational, an assumption of integrity and an unbridled goodwill to keep going.
Once, doctors commanded both the mystery of science and the magic of
metaphysics. As medicine became for-profit, the metaphysics slowly disappeared.
Indians are becoming more
prosperous. They’re also less fatalistic and expect less from their gods and
more from their doctors. In the beginning they treated their doctors as gods, now
they see that doctors have feet of clay, too. Doctors, who once outsourced the
limitations of medicine to the will of Gods, summarized by the famous Bollywood
line “inko dawa ki nahin dua ki zaroorat hai” (patient needs prayers not
drugs), now must internalize medicine’s limitations. And there are many –
medicine is still an imperfect science, a stubborn art, often an optimistic breeze
fighting forlornly against nature’s implacable gale.
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.
What are the challenges of bringing advanced imaging services to India? What motivates an entrepreneur to start build an MRI service? How does the entrepreneur go about building the service? In this episode, I discuss radiology in India with Dr. Harsh Mahajan, Dr. Vidur Mahajan and Dr. Vasantha Venugopal. Dr. Harsh Mahajan is the founder of Mahajan Imaging, a leading radiology practice in New Delhi, and now a pioneer in radiology research in India.
Listen to our conversation on Radiology Firing Line Podcast here.
Saurabh Jha is an associate editor of THCB and host of Radiology Firing Line Podcast of the Journal of American College of Radiology, sponsored by Healthcare Administrative Partner.
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.
What would medical care be like in a genuine free market?
Nobel laureates in economics have opposing views. But does India have the answer? There, healthcare has a strong private sector: patients usually pay directly and the insurance industry is just emerging.
Milton Friedman believed that markets would work just fine in healthcare. Kenneth Arrow was not so optimistic. In his much cited opus, Arrow singled uncertainty as the key factor which distinguishes medical care from other goods and services. Uncertainty means that one doesn’t know when and how much healthcare one is going to need. Not quite the same as shopping for cereal in Waitrose.
George Akerlof felt that asymmetric information, i.e. when one side knows far more about the product, could be problematic for quality.
In Akerlof’s hypothetical market, “Market for Lemons,” which takes the example of used cars, there are “peaches” (good cars) and “lemons” (low quality cars). Buyers can’t distinguish between peaches and lemons, but know lemons exist and so offer a price that’s too low for peaches. Sellers who, of course, know their peaches and lemons, remove good cars and retain bad cars. Process continues, and there’s a downward spiral, with market progressively enriched with lemons.
Asymmetric information in a free market could lead to fall in quality and market failure. There’s asymmetric information in healthcare when buying insurance; people are more inclined to purchase when sick. Also, when the physician knows more about quality of product and its need than the patient.Continue reading…
Currently, India spends about $20 per person per year on healthcare and spending more once seemed like a peripheral concern, taking a back seat to basics like food and sanitation. However, in the past decade, as the Indian economy has grown and wealth followed, Indians are increasingly demanding access to “high quality” healthcare. But what does “high quality” mean for a country where a large proportion of the population still goes hungry? Where access to sanitation is so spotty that the Supreme Court recently had to decree that every school should have a toilet? What is “high quality” in a setting where so many basics have not been met?
It turns out that “high quality” may mean quite a lot, especially for the poor. A few weeks ago I spent time in Delhi, meeting with the leadership of the Indian health ministry. I talked to directors of new public medical schools and hospitals opening up around the country and I met with clinicians and healthcare administrators at both private and public hospitals. An agenda focused on quality rang true with them in a way that surprised me.
The broad consensus among global health policy experts is that countries like India should focus on improving “access” to healthcare while high income countries can afford to focus on the “quality” of that care. The argument goes that when the population doesn’t have access to basic healthcare, you don’t have the luxury to focus on quality. This distinction between access and quality never made sense to me. When I was a kid in Madhubani, a small town in in the poor state of Bihar, I remember the widespread impressions of our community hospital. It was a state-run institution that my uncle, a physician, once described as a place where “you dare not go, because no one comes out alive”.
I visited Safdarjung Hospital in New Delhi today – an institution with 1,531 beds and 145% occupancy rate. Yes, 145%. You do the math. A lot of bed sharing and asking families to bring in cots. It’s right across the street from the All India Institute of Medical Sciences (AIIMS), the premier public healthcare institution in India. While both AIIMS and Safdarjung are run by the federal government, only AIIMS is renowned for famous specialists, world class facilities, and an international reputation to boot. Safdarjung doesn’t suffer such burdens – its specialists are not well known, facilities are dilapidated, and you probably have never heard of it.
I spent several hours walking around, talking to lots of physicians, visiting ICUs and cath labs. I visited the outpatient department where 7,000 people show up every day, many lining up the night before, to get a ticket by 11 a.m., when registration closes and those who haven’t gotten a ticket are out of luck. In the ER, there was a line of between 50 and 100 people waiting to get rabies shots. This is the hospital where every poor person in Delhi unfortunate enough to get a dog bite is sent. They have the rabies serum. Most other public hospitals do not.
Safdarjung has “efficiency” baked in. In a typical year, they do 800 cardiac surgeries, 2,000 angioplasties, 3,000 echocardiograms, and 100,000 EKGs. They see tens of thousands of patients in the cardiology clinic. They have 4 (yes, four) full-time cardiologists on staff. The rest of the work is done by medical residents, who call when they get into trouble. Brigham and Women’s Hospital, which probably doesn’t have one quarter the volume of this place, has 140 cardiologists. The patients at Safdarjung pay essentially nothing. Even their medications are free. For those who are not extremely poor (and I doubt there are many non-poor patients who go to Safdarjung), you do have to pay for your own devices. Need a stent? Bare metal ones cost $200 to $1000. Drug eluting stents are $1500 to $2500. You get to decide which one you want. They have a chart with pictures and prices that looks a lot like a dinner menu. Continue reading…