Private Healthcare in India Part I: Artificially-inflated cost of medicine, consumables make non-govt hospitals inaccessible to most

Editor’s note: The deteriorating state of public healthcare in India means that an increasingly larger percentage of its citizens are being driven to the private sector for their medical needs. Mounting costs and decreasing availability of drugs is a major issue, but that’s only the surface of the crisis that confronts the country. The following is the first in a three-part series that looks at a handful of factors that have hampered access to private healthcare in India. Last August, Noida resident Nipun Talwar’s 53-year old father, Pawan, contracted swine flu and went into acute respiratory distress. The 26-year-old had admitted his father in a hospital in their hometown Meerut, where the doctors were telling them to shift to Delhi. Pawan was shifted to a corporate hospital in Delhi’s Saket on the recommendation of a doctor the family knew. He was put on extracorporeal membrane oxygenation (ECMO), a respiratory and cardiac life support system and later on ventilator support. After 14 days of admission, Pawan succumbed to the illness. [caption id=“attachment_4405073” align=“alignleft” width=“380”] Representational image. Reuters[/caption] “Everyday, we were billed approximately Rs 1.5 lakh,” said Talwar. “Who can afford that? This system is like white-collared dacoity.” He alleged that they had to deposit lump sum amounts of a few lakh for the doctors to start a thoracotomy procedure, to allow the patient to ventilate from the throat as opposed to the mouth. Talwar claims that all of the family’s savings were used to pay for this treatment, along with huge borrowings from relatives. After his father died, in December, he wrote to the National Pharmaceutical Pricing Authority (NPPA) to take action against the hospital for overcharging on medicines. Talwar’s bill was analysed along with three more bills in public interest by NPPA – but the hospitals were not named, as they requested confidentiality. In a  report that was released this February, the NPPA said that in the four bills, nearly 40.85 percent of the bill was covered by medicines and medical consumables such as gloves, syringes etc. In Talwar’s case, the medicines and consumables covered 42.18 percent of the bill. This kind of analysis of hospital bills is the first of its kind in the country done by a government body. Firstpost independently analysed six bills of patients from Delhi and Gurugram. These include two cases of dengue shock, one of swine flu, one with a complication during surgery, two cases of cardiac arrest and angioplasty. The percentage of the cost of medicines and consumables ranged from 36 percent to 58 percent. Studies conducted by the government state that most of the household health expenditures are out of pocket – that is nearly 95 percent, whether inpatient or outpatient. The Household Health Expenditures of India (2013-14) that was released last December showed that nearly 51.67 percent of out of pocket expenditures related to healthcare are spent on medicines. Why do medicines in a private hospital cost so much? To begin with, experts say, often the use of medicines and consumables is irrational or unnecessary. Independent health researcher, Dr Sylvia Karpagam was contacted by a family of an elderly patient who had a massive bleed in the brain. Karpagam said that the patient’s prognosis was poor, and there was nearly no chance of survival. Yet the family had spent nearly Rs 1.5 lakh for a day’s stay. “The procedures they did were not indicated and were irrational,” said Karpagam. “This included a box of gloves (about 25 pairs) and even a mouthwash. The premise of why we are using these instruments is doubtful.” Besides this, when a patient is admitted to a hospital, he or she is compelled to buy all medicines and consumables from the in-house pharmacy, which allows hospitals to get a huge profit margin. An institutional bulk purchase allows them to buy medicines and devices at a much cheaper rate than the written maximum retail price or MRP. The margins, the NPPA analysis showed, can be as high as 1737 percent.

Institutional bulk purchases have changed the pharmaceutical and medical devices industry drastically. The NPPA analysis said that in order to get a bulk purchase order, the industry is “forced to print higher MRPs to meet the demands of a distorted trade channel without getting any benefits from this artificial inflation.”

“About ten years ago, the hospitals used to procure medicines based on procurement price and quality,” said Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMeD). “Now, the criteria is MRP price.” This means that the manufacturer who prints the highest MRP price wins the bid, allowing the hospitals to make higher profit margins. “The fixing of MRP is completely arbitrary,” said Nath. “It is a complete breakdown of market economics.” Last December, the All India Syringes and Needles Manufacturers Association agreed to self-regulate by charging only 75 percent margin when printing the MRP. “But two foreign firms and an Indian one did not agree,” said Nath. “While renewing their contracts for this year, most of the major hospitals, our members have lost all the contracts.” Read Part II of the series about how industry is bypassing government's efforts to make healthcare affordable _Read Part III in the series about the Clinical Establishment Act and capping drug costs_