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Price cap on stents, how hospitals and manufacturers may beat the cap

Hospitals and manufacturers are now faced with a reduction in profits margin of up to 85 percent following the price capping of cardiac stents. The price cap has had some unintended consequences. Amongst these are the myriad of ways both hospitals and manufacturers have tried to avoid the losses imposed on them by the cuts.

Copyright: tribalium123 / 123RF Stock PhotoSome stent manufacturers have taken to package deals reports the Times of India, reportedly selling stents in a buy 10, get 3 free manner. This may be an attempt to flood the market with domestic products, amidst fears of a takeover of the market by cheaper Chinese imports. It may simply be a means to drive up sales by pushing products to hospitals in batches to make up for lost profits.

The need for the cap was first put in place by hospitals marking up the price of stents — compared to the manufacturer’s price — by up to 1000 percent. This colossal mark up price is currently being combatted by an eight percent trade margin, massively reducing the potential mark up price at the hospital level.

Regulators have however been faced with many complaints regarding companies and hospitals simply not abiding by these rules. The National Pharmaceutical Pricing Authority (NPPA) has issued warnings regarding this breach of the law. They state that the eight percent trade margin applies to every level of purchase from the manufacturer to the patient.

This statement however covers only the purchase of the stent itself. This leaves a loophole at the hospital level which allows for a hospital to recover their significant loss in profit through simply charging more for the angioplasty surgery. This would mean that the package as a whole (the stent and procedure) may realistically not change in price at all for the patients.

Doctors may also simply increase the hospital charges, or increase the length of stay for the patient. As there is no current government intervention to prevent this, it is a highly likely outcome as it presents a means of maintaining profits without creating any issues with the NPPA.

While the intention of the price cap on stents was to allow better access to coronary bypass surgeries to the poor, the full situation may be far more complex. Theoretically, through cheaper prices many more people will be able to afford this surgery than would have previously.

It seems apparent though, that both hospitals and manufacturers are adamant on finding ways to avoid this and continue to make the same level of profits. This will be done at the expense of the patient. Former Union Health Minister Dr Anbumani Ramadoss believes the price cap has backfired, and may have negative implications for both Indian patients and medical tourists in the coming years.

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