The cuts that complicate efforts to cap stent price
The plethora of price points for coronary stents, offering ample opportunity for cuts for those in the supply chain, could complicate the National Pharmaceutical Pricing Authority’s (NPPA’s) move to cap stent prices. This is because several options for the price fixation formula involve taking into account current market prices.
A quick look at the way the cost of a stent, estimated to be a few thousand rupees, escalates to between Rs 50,000 and Rs 1.65 lakh by the time it reaches patients reveals the exponential increase at every step (see table). One of the biggest jumps happens at the level of hospitals. Since hospitals implant the stent, they also become de facto retailers as the devices cannot be bought in the open market.
With so many price points, the NPPA is grappling with various formulae to fix the price. Other than the major foreign companies Abbott, Boston Scientific and Medtronic, there are Indian companies like Sahajanand Technologies, Translumina and several smaller ones. In the case of foreign companies, the stents are imported by their India offices and distributed through dealers. With the import being done by the same company, there is the apprehension of transfer pricing, where the company could fix whatever price suits it depending on where it wants to show its profits. In such cases, one of the NPPA’s suggested formulae -a 35% margin over the landed (import) price -would mean offering these companies an official mark-up on the one they have already built in, giving them enough to offer bribes to push up sales.
Distributors strike the deals with hospitals and doctors, especially in the case of foreign firms, leaving the companies clear of any unethical marketing. “On every stent, cardiologists get a cut of Rs 15,000 to Rs 35,000. If the cardiologists do not get their cut, the stents, even if procured by the hospitals, will remain on the shelf unused and once past their expiry date, will have to be condemned.Since no manufacturer takes back expired stents, the cost is borne by the distributor. Thus, it is imperative for dealers to keep the cardiologists happy and all dealer margins will have to include the doctor’s cut,” explained a dealer.
Stent companies typically introduce multiple brands, claiming the new ones are an improvement over existing ones. However, the companies themselves and many doctors admit that there is little difference
Abbott had even given an affidavit, while seeking marketing approval, that its three very differently priced brands -Xience Pro, Xience V and Xience Prime (see graphic) -were identical giving a detailed head-to-head comparison to demonstrate it. Yet, cardiologists, tutored by company representatives on the supposed superiority of one over the other, defend the price difference.
“The only way the government can put a stop to such price gouging by stent companies is by fixing the prices of all drug eluting (95% of stents used in India are the drug eluting variety) stents at say Rs 25,000 and also fixing the handling charges that hospitals can levy on that price. Otherwise, the hospitals will continue to charge arbitrarily. At Rs 25,000, legitimate marketing expenses can be accommodated and at the same time huge cuts to doctors will come to an end, putting an end to the incentive for unnecessary stenting,” said an industry insider.
The price of a drug eluting stent is capped at Rs 23,625 for the Central Government Health Scheme (CGHS), which almost all companies are complying with, showing that it is possible for them to make a profit even at that price.
Even as NPPA grapples with price fixation, firms and hospitals are fixing tenders for procurement, and import data for as recent as November 2016 shows that stents continue to be imported for as little as Rs 15,000 to be sold to patients for well over a lakh.