Explainer

Drug pricing authority uses special powers to make sure cardiac stents become affordable

The National Pharmaceutical Pricing Authority has fixed the ceiling price on drug-eluting stents at Rs 29,600.

In a move that comes as a huge relief to patients, the National Pharmaceutical Pricing Authority on Monday drastically slashed the price of coronary stents used to unblock arteries. The authority has fixed the price of the most commonly used drug-eluting stents at Rs 29,600. The price of such stents could earlier be as as high as Rs 2.5 lakh.

In its order the authority has stated that drug-eluting stents cannot be priced more than Rs 29,600 and bare metal stents at not more than Rs 7,260. A bare metal stent is a short wire-mesh tube that acts as a scaffold to keep a blocked artery open. A drug-eluting stent consists of a similar wire-mesh scaffolding but is coated with medicine that is released periodically to prevents further arterial blockage. The drug-eluting stent is more often used and covers nearly 80% of the market share for coronary stents.

The NPPA has been in the process of fixing a ceiling price for the coronary stents since December 2016. On December 21, the Department of Pharmaceuticals had ordered the NPPA to cap the price of stents to make them more affordable.

No formula

As per procedure laid down in the Drug (Price Control) Order that the NPPA is responsible for implementing, the authority is supposed to fix the price of a drug or medical device by taking the average of retail prices of all drugs or devices that have at least one percent market share and mark that average up by 16%.

But the NPPA has not used a formula to fix the price of cardiac stents taking into consideration that the prices of stents have, so far, been arbitrarily fixed by distributors and hospitals. In its order the authority said that “huge unethical markups are charged at each stage in the supply chain of coronary stents resulting in irrational, restrictive and exorbitant prices in a failed market system driven by information asymmetry between the patient and doctors pushing patients to financial misery.” If it had to go by the prescribed formula, the NPPA would have to take into consideration various price points fixed by either hospitals or distributors. Since the pricing is arbitrary, the NPPA decided to fix a reasonable price without using a formula.

The order states that the government is “under constitutional obligation to provide fair, reasonable and affordable price” for stents and that an immediate intervention was necessary to check “unethical profiteering and exploitative pricing”.

As per data submitted by the stent manufacturers, the trade margin for drug-eluting stents between a distributor and a patient was as high as 892%. The highest profit margins are made by hospitals at up to 654%.

The circumstances were therefore considered “extraordinary” under which the NPPA decided to exercise powers under paragraph 19 of the Drugs (Price Control) Order. Paragraph 19 gives the government the power to fix a ceiling price of any drug in such extraordinary circumstances and in case of public interest “as it deems fit”.

Earlier, the NPPA put out various formulae for the pricing of cardiac stents that could be used to come up with a reasonable price. Those were discussed in the Monday meeting, before the decision was made to fix the price under Paragraph 19 of the Drugs Prices Control Order.

“We are not bound by any formula under paragraph 19,” said Bhupendra Singh, chairman of NPPA. “Since we were not officially collecting any data on the price, the situation was tricky. We did both a data and market analysis and decided on the price that was reasonable and also keeps the interest of various stakeholders.”

This provision was used in 2014 to fix the prices of 108 drugs used to treat diabetes and cardiac ailments. A petition challenging this order was heard in the Bombay High Court, which upheld the NPPA order in September 2016. The Supreme Court in October last year dismissed an appeal against the high court order.

Welcome move

Coronary stent manufacturers can now add local taxes or value added taxes to the ceiling price but no other charge. The order will be in force for a year. Hospitals, nursing homes and clinics that store cardiac stents are now bound to mention the cost of a stent and disclose the brand name of a stent being used in their bills to patients, the order states. Patients have often complained that they have not been given break ups of hospitals costs that reveal prices of stents.

“After months of consultations, we welcome the strong and determined action of the government, particularly in the face of a concerted campaign by industry and profit-oriented hospitals to prevent any form of effective price control,” said Malini Aisola of the All India Drug Action Network, about the NPPA order.

The decision took the stent manufacturers completely by surprise. The manufacturers opposed the immediate effect of the order and said that implementing the order on old stent stocks will be difficult.

“For some days angioplasty will come to a halt,” said Probir Das, chairman of the The Medical Devices Forum of the Federation of Indian Chambers of Commerce, which largely represents companies manufacturing foreign stents. “For the first time in the country, a medical device is getting price controlled. But we get no transition time. This is very unilateral.”

Both Indian and foreign manufacturers said that the decision will harm the industry, and in turn medical tourism. Das said, “If only these stents (at low prices) are available in the market, we will not have much cardiology left. Why would people come here (from abroad for treatment)?.”

Gurmeet Chugh, managing director of Translumina Therapeutics said the move will “ultimately kill the ecosystem where Indian manufacturers shall keep manufacturing low end technologies.”

The manufacturers also opposed the immediate effect of the order and said that implementing the order on old stent stocks will be difficult.

“For some days angioplasty will come to a halt,” said Probir Das, chairman of the The Medical Devices Forum of the Federation of Indian Chambers of Commerce, which largely represents companies manufacturing foreign stents. “For the first time in the country, a medical device is getting price controlled. But we get no transition time. This is very unilateral.”

The ceiling of cardiac stent prices could also end the practice of irrational use of stents. Often, patients with even 50% blockage of arteries, who do not require stents are administered stents, experts said. To ensure rational use of stents, standard operating protocols for doctors and hospitals who administer stents should be framed, said Sulagna Chattopadhyay, a health activist who had petitioned the Rajya Sabha on this issue.

Chhatopadhyay said that patients should be counseled on the extent of their arterial blockages, whether they need cardiac stents and also told the price of treatment. This may reduce irrational practice even further.

“The pricing is only the tip of the iceberg and if we are to truly ensure universal access to healthcare for heart patients, we need to regulate and clean up every aspect of the system,” she added.

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