NPPA Lim­its Stent Mar­gins for Hos­pi­tals, Dis­trib­u­tors

Reg­u­la­tor caps mar­gin at 8%; hos­pi­tals can’t levy ad­di­tional charges over ceil­ing price

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

New Delhi: In­dia’s drug pric­ing reg­u­la­tor has re­stricted the mar­gin on car­diac stents for hos­pi­tals and dis­trib­u­tors to 8% in a move ex­pected to curb prof­i­teer­ing at the ex­pense of heart pa­tients.

The de­ci­sion elicited a pos­i­tive re­sponse from some do­mes­tic stent mak­ers, which had feared they would be forced to beat down prices of stents to sat­isfy dis­trib­u­tors and hos­pi­tals seek­ing to main­tain high mar­gins af­ter price con­trols were im­posed.

The Na­tional Phar­ma­ceu­ti­cal Pric­ing Author­ity (NPPA) capped prices of drug elut­ing stents (DES) and biore­sorbable vas­cu­lar scaf­folds (BVS) last week at .₹ 29,600 and bare me­tal stents (BMS) at .₹ 7,260. Af­ter in­clud­ing VAT, th­ese stents are ex­pected to cost .₹ 31,080 and .₹ 7,623, re­spec­tively. The NPPA clar­i­fied on Mon­day that hos­pi­tals and dis­trib­u­tors to­gether have to share a to­tal mar­gin of 8% from the ceil­ing price of car­diac stents — a steep drop from the mar­gins on the de­vices be­fore they came un­der price con­trol.

Dis­trib­u­tors used to charge as much as a 196% mar­gin when sup­ply­ing DES, used in a ma­jor­ity of stent­ing pro­ce­dures, to hos­pi­tals, ac­cord­ing to NPPA. Hos­pi­tals then charged over 650% when billing the de­vices to pa­tients, while dis­trib­u­tors sup­ply­ing di­rectly to pa­tients would en­joy as much as 892% in mar­gins.

Now, pa­tients pur­chas­ing stents at their max­i­mum price won’t pay hos­pi­tals mar­gins of more than .₹ 2,400 on DES and BVS and about .₹ 581 on BMS.

The mar­gin has been built into the cal­cu­la­tion of the ceil­ing price and, ex­cept for lo­cal sales taxes or VAT, hos­pi­tals can’t levy ad­di­tional charges over and above the ceil­ing price, spec­i­fied NPPA. The mar­gin also ad­e­quately cov­ers any hospi­tal han­dling charges, added the reg­u­la­tor.

“Con­sid­er­ing the high-end value mar­ket of coro­nary stents, this 8% trade mar­gin would cover mar­gins across the trade chan­nels work­ing from the level of man­u­fac­turer/im­porter to the end user i.e. con­sumers/pa­tient,” stated NPPA. “Le­gally as well as eth­i­cally, hos­pi­tals can­not and should not charge mar­gins,” NPPA chair­man Bhu­pen­dra Singh ear­lier told ET.

While global stent mak­ers are yet to con­vey their views on NPPA’s lat­est mes­sage, some In­dian stent com­pa­nies have lauded the cap on mar­gins. “Man­u­fac­tur­ers would have been hurt the most when the gov­ern­ment re­duced the prices of stents, but by cap­ping the mar­gin, the chan­nel mar­gin has re­duced, thereby en­sur­ing ad­vanced in­no­va­tive prod­ucts to the end con­sumer,” Ganesh Sa­bat, CEO of In­dian stent maker Sha­janand Med­i­cal Tech­nolo­gies, told ET.

Ac­cord­ing to him, dis­trib­u­tors and hos­pi­tals used to en­joy 80% of the to­tal mar­gins made in the sup­ply chain, even though man­u­fac­tur­ers were the ones in­vested in in­no­va­tion.

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