On April 8, the Supreme Court of India directed the Central government to make testing for the novel coronavirus disease free of cost at approved private laboratories. Whether the government should reimburse the labs for the cost incurred was a question that the court said it would consider later.
Days later, on April 13, the court amended its order: free tests in private labs only for people covered by the government’s flagship healthcare programme Ayushman Bharat, and any other category of economically weaker sections of the society as notified by the government, it ruled.
Private labs, the court clarified, could continue to charge for Covid-19 tests from individuals who could afford them. The price, however, could not exceed the upper limit set by the Indian Council for Medical Research: Rs 4,500.
Almost everything related to testing in India, starting from whom to test to orders placed by the ICMR to procure test kits, have been subjects of heated debate. The mechanics of involving the private sector to test people for Covid-19 has been no exception.
As India has ramped up coronavirus testing, the ICMR has approved a wide range of labs across the country – 315 government labs and 111 private labs, as of May 4. Most of the private labs are still restricted to urban pockets. In some states, they are testing almost as much as the government labs, if not more. In Delhi, for instance, there are more private labs than government facilities engaged in Covid-19 testing. In Maharashtra, the number of samples tested by private and government-run labs are neck-and-neck.
Critics have a two-pronged objection with this arrangement: First, they say that testing should be free for everyone who needs it during a pandemic (as it is in several countries). Additionally, the cap of Rs 4,500 is inflated, they allege, particularly because people often have to undergo the test several times.
For instance, there have been several accounts over the past couple of weeks of patients requiring critical care in hospitals being forced to undergo Covid-19 testing, without symptoms or travel history. “Such people account for a large chunk of private testing,” said Malini Aisola of the advocacy group All India Drug Action Network. “Some labs are even offering package deals. That is just unethical.”
Besides, Aisola pointed out that many of the approved private labs were housed in tertiary care hospitals. “Hospitals are forcing patients to undergo repeated tests before discharging them,” she said. Every round cost Rs 4,500. Three tests come to Rs 13,500.
Multiple tests or not, the price was simply too high, Aisola insisted. “The test is just not as expensive as it is being made out to be,” she said. “Why can’t the ICMR just put out a break-up of how it arrived at that price, how much each kit manufacturer is selling for, etc.”
Scroll.in attempted to do precisely that – by speaking to kit manufacturers, government labs, private labs, scientists, economists and officials. The pricing question turned out to be complex. Even government labs were buying kits for Rs 1,200. One question surfaced: would the costs have come down had the government allowed labs to assemble their own kits instead of mandating that they buy readymade ones?
What the test costs in a research lab
In an affidavit to the Supreme Court, the ICMR said the price of the test was “based upon the price of specialised kits which are required for conducting the tests”. Taking the basic cost for all the components that went into making a kit, it amounted to Rs 1,500 per screening test, according to the council. An extra Rs 3,000, it added, was factored in for the confirmatory test.
This calculation seemed to be (somewhat inexplicably) based on the kits that the ICMR provides to government labs. These kits require two levels of tests: the screening test looks for the coronavirus family of viruses in the swab of a patient, while the second confirmatory test establishes the presence of the novel or newly discovered strain of the coronavirus that emerged in China and caused the current coronavirus disease or Covid-19 pandemic. The confirmatory test is required only if the screening test turns out to be positive.
However, unlike the ICMR-supplied kits, the test kits used by most private labs combine the two tests into one. That is, a sample can directly be tested for Covid-19.
While labs claim a single test reduces overall costs – since all samples have to be tested only once – critics point out that people who did not need a confirmatory test are having to pay for it. “When you combine two tests, the cost [of the kit] will obviously go up,” said Indranil Mukhopadhyay, a health economist who teaches at the OP Jindal Global University. “But in reality, only a fraction of people actually require that confirmatory test. That’s where the game is.”
Others believe that Rs 4,500 is too much, combined testing or not. N Raghuram, a biotechnologist at a government institute, took a particularly dim view of the price. “We do the RT-PCR test in our lab for our research purposes and that comes to much less than Rs 500 per test,” said Raghuram, former vice-president of the Society for Scientific Values, a scientists’ collective that promotes ethical research. While Raghuram studies rice and plants, not human viruses, he said it did not make a difference at all, given the mechanics of RT-PCR or reverse-transcriptase polymerase chain reaction test.
Most countries including India are using the real-time RT-PCR test to diagnose the novel coronavirus in nasal and throat swab samples of a suspected patient.
It begins with the extraction of genetic code in the form of the single-stranded RNA from the sample. Then, an enzyme converts the separated RNA into double-stranded DNA – the “reverse-transcriptase” part of the process. The DNA is introduced into a tube along with the “primer”, a synthetic stretch of nucleotide which binds the human DNA to the DNA of the target novel coronavirus. In that sense, the primer could be visualised as a key to a specific lock (the novel coronavirus in this case).
As multiple cycles of cooling and heating – a chain reaction – amplify the DNA in the sample, a fluorescent detector in the medium, called the “probe” makes the DNA glow, helping pathologists identify the virus.
“So effectively the only thing that separates different types of RT-PRCs is the primer,” said Raghuram. “I study plants, but the difference is only the primer I use.”
And primers for the novel coronavirus, Raghuram said, were rather easy to synthesise. “The first thing China did was make the sequence of the virus’s DNA public,” he pointed out. “There are several companies which can manufacture primers for say Rs 1,000 that can be used for 10,000 tests.”
In other words, according to Raghuram, private firms manufacturing the kits were selling kits to Indian labs, private as well as government, at highly inflated rates, thereby leading to expensive testing. Here, it is important to note that barring the network of Virus Research and Diagnostic Laboratories, even government labs are dependent on kits manufactured by private companies. States have also augmented their labs with private kits to keep up with demand.
A test kit, including the RNA extractor, should not exceed Rs 200, Raghuram contended.
Another biotechnologist who teaches at a leading government institute said at the “lab scale”, an RT-PCR test kit ought to cost less than Rs 300, with the test itself costing Rs 450-500. “But for commercial purposes, there are marketing costs, distribution costs, etc. Things which are beyond my area of expertise,” said the scientist who requested anonymity. Even accounting for commercial costs, however, the scientist said, Rs 4,500 appeared to be a “bit too much”.
What the test costs in a diagnostic lab
As of May 3, the ICMR had approved RT-PCR kits manufactured by 21 companies, 10 of them Indian. This in addition to kits with international approvals, which can be used directly.
To get a sense of the market dynamics, Scroll.in spoke to several manufacturers, private labs and state governments.
Pune-based MyLab, one of the most popular kits in use, including by several autonomous government labs doing Covid-19 testing, charged around Rs 1,20,000 for a kit of 100 tests, said a company spokesperson. This comes to Rs 1,200 per test. Several buyers including two private labs, two state government officials, one in Central India and the other in South India, and a scientist at a government facility, confirmed the price.
However, the company spokesperson said the rate often varied depending on the scale of the order and the buyer. “Sometimes, the price per test could even be three-digit,” said the spokesperson.
The German company Altona Diagnostics, also with a large customer base, said its kits came to around Rs 850-Rs 890 per test. However, two of its customers – the private laboratory chain Thyrocare and a government lab in North India – said the kits came to around Rs 1,200 with the RNA extractor kit, almost identical in price to MyLab’s kits.
“As of now, kit cost is Rs 1,200 but that is never constant as bulk buying gives you better rates,” said Arokiaswamy Velumani, chairman and managing director of Thyrocare. A 100% increase in testing volume reduced kit price by 5%, said Velumani.
Some manufacturers, though, cited lower costs. A representative of Helini Biomolecules, a Chennai-based company, said they would price their product at “Rs 750 per test approximately”. While the company has been greenlighted by the ICMR, it is yet to receive a license from the Drug Controller General of India – which means it is yet to start commercial manufacturing.
These prices are considerably higher than what Raghuram and the other government biotechnologist quoted earlier in the story put forward as fair – even the cheapest Indian kit is more than 200% more expensive. What gives?
“Everything depends on the reagents you have purchased,” said a senior government scientist at a designated Covid-19 testing centre. Reagents are chemicals used to make the primer and other kit components. “Normally, it is not going to be that expensive, but we are importing all of that now and there is a global shortage, so unless you factor that in, it is very difficult to put a figure.”
Besides, it was only natural that for-profit importers would sell it at a mark-up, said the scientist. “Anyone who is going to sell has done some R&D, they have to pay salaries, etc. so you can’t just simply add up the costs of different components and arrive at a price,” the scientist said.
My Lab, for instance, imports enzymes that go into its kits from the United States.
However, even Indian companies who claim to have a completely indigenous manufacturing capacity seem to have priced their products in the same range as importers and manufacturers who are dependent on foreign supplies. Take the Hyderabad-based Huwel Lifesciences. The company is supplying kits comprising 100 tests at Rs 90,000 to the Telangana government – Rs 900 per kit. “Even if I produce at the lowest rate, it doesn’t mean I have to sell it at Rs 100,” said Shishir Kumar, the company’s director. “It is based on competitor price, volume, etc.”
In any case, the final price of a test is contingent on several other factors in addition to the kits, say private labs and some scientists at government labs. “I would not be too fussed about the price of the kit,” said a clinical scientist at a government lab doing Covid-19 testing. “The kits are only a component of the total price, not its main driver.”
Private labs offered a somewhat similar assessment. Velumani of Thyrocare pegged it at 25% of total costs. “When you buy a flight ticket, the fuel price is only a part of the total amount,” he said.
A representative of the Indore-based privately-run laboratory called Central Lab also estimated the cost of the kit to be a quarter of the total costs.
Both Central Labs and Thyrocare source their kits from Altona Diagnostics.
Pune’s Sahyadri Speciality Labs, however, said kit price formed a larger share: more than one-third of the total cost. A representative of the lab did not reveal which brand of the kits they were using.
In Amritsar, the family-run Tuli Diagnostic Centre said it was having to pay a fortune for the kits: Rs 1.25 lakh for a 48-packer kit from the Haryana-based Medsource Ozone Biomedicals. That adds up to more than Rs 2,500 per kit.
Robin Tuli, part of the family which owns the lab, blamed the high rates on logistics and small order quantities. “It takes quite some doing to get a truck to come to Amritsar,” he said.
The Tulis, however, are saving on other parameters. They are processing samples collected by the government, which means they do not incur collection costs, and their staff is largely family members. “My parents and my wife,” said Robin Tuli.
Irrespective of the cost break-up, private labs militantly defend the Rs 4,500 cap. “This price is what you would get if you bought soap straight from the gates of the factory,” said OP Manchanda, chief executive officer at Lal Path Labs. “We have had to bear so many unforeseen expenses such as employee insurance.”
Ask Thyrocare’s Velumani, and he rattles off a list of expenses in addition to kits: “Protective equipment used in collection, floor costs, upkeep of premises, HR costs, logistics of sample reaching my floor.”
What explains the price gap?
An RT-PCR test at a government research lab in regular times costs less than Rs 500.
But diagnostic laboratories are charging upto Rs 4,500. Even taking into account the price of test kits and other costs, wasn’t the gap too wide?
Comparing testing in clinical labs to research labs was akin to comparing apples and oranges, said a government clinical scientist . “First, clinical standards are much higher,” said the scientist. “There are all kinds of external quality control assessments you have to sign up for – all that is very expensive.”
Besides, “you cannot compare the heterogeneity of human samples to laboratory samples,” said the scientist.
“To bake a cake, you need sugar and flour,” the scientist explained, “but whether you bake a fancy cake with it or a regular cake depends on other things. That is the difference between testing for research purposes and clinical purposes.”
Another scientist at a government lab in Western India seemed to agree. The lab is using MyLab kits – its overall cost, the scientist said, added up to around Rs 1.5 lakh every 100 tests, or Rs 1,500 per test. “For private labs, there is a cost of set-up, salaries, insurance, audits. So, for a fair assessment you have to take all of that into account.”
Both these scientists who requested anonymity citing service rules, however, conceded that testing prices could be bought down – if labs assembled their own kits instead of buying readymade ones from private companies. “Most big labs have the capacity to, but we are leaking money because of the ICMR’s insistence on using readymade kits,” said the first scientist.
However, others said there was another important factor that could have dictated IMCR’s decision: time. “You can purchase reagents and synthesise the probe,” said Arvind Sahu of the National Centre For Cell Science, an autonomous organisation under the Department of Biotechnology in Pune. “But the success of the test is dependent on the specificity and sensitivity of the probe. So when you have readymade probes available, you save time by directly buying them [in the form of a pre-assembled kit], because time is the essence now.”
Yet, at least one private lab said its overall costs added up to considerably less than Rs 4,500 even with readymade purchased kits: the Pune-based Sahyadri Speciality Lab. A spokesperson of the lab told Scroll.in that it was incurring around Rs 3,100 per test. It was purchasing kits at Rs 1,200-1,500, added the spokesperson.
The lab, however, has been charging its customers Rs 4,500. “I don’t think there is any margin because we are testing many people and our employees for free,” said the spokesperson.
The way forward
Health economist Indranil Mukhopadhyay said while the testing rate would be dynamic in an evolving situation as in India and would depend on the testing rate and volume, Rs 4,500 was too high for the government to reimburse. “You obviously can’t expect private labs to test for free because they are running a business, but Rs 4,500 per test will cost the exchequer too much,” said Mukhopadhyay. “So, you have to employ them [private labs] only in situations when they are absolutely necessary.”
Another way to bring costs down was for the government to play a more proactive role, said former union health secretary K Sujatha Rao. “You can do a mix of cash and kind,” said Rao. “Let the government procure kits centrally and distribute them – that would bring the overall costs down and it will also make it cheaper for the government to reimburse.”
Mukhopadhyay also advocated more “centralised action” vis-à-vis production of kits. “You increase the scale and volume of production, get the PSUs [public sector units] involved,” he said. “I am not saying that indigenisation of kits will by itself lead to lower rates, but given that our labour is also cheaper, costs will definitely come down if you take a comprehensive approach.”
Perhaps in one of the biggest breakthroughs in terms of indigenous manufacturing capacity of test kits so far, the ICMR on April 23 finally approved the RT-PCR kit developed by the Indian Institute of Technology in Delhi. “Except for some basic reagents, it is completely indigenous,” said Vivekanandan Perumal, the lead scientist of the team that designed the kit. Among other innovations, the kit does away with the need of probes, said Perumal.
The institute will now pass on the technology to companies interested in licensing the product and commercially manufacturing it. Perumal was loath to put forth a number to what he thinks would be the market value of the product, but said it would be cheaper than anything available currently.
But these kits may not find favour with too many private labs just yet – despite being cost-effective. “We have a relationship with Altona. To be comfortable with a new product will take some time even if it is cheap,” said Sachin Salve of Thyrocare. “We can’t go for it unless we are sure. Just imagine if there is a false negative or positive. We have a brand reputation to maintain.”
“You will,” he added, throwing in a car analogy, “always prefer a Maruti to some new brand after all.”