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Private Hospitals, Including Fortis, Making Profits up to 1737%: Drug Price Regulator’s New Study

Private Hospitals, Including Fortis, Making Profits up to 1737%: Drug Price Regulator’s New Study

New Delhi: A study of the bills of four major private hospitals, conducted by the National Pharmaceutical Pricing Agency (NPPA) following several cases of overpricing of medical bills, concluded that the hospitals have been making profits up to 1737% on drugs, consumables, medical devices and diagnostics. One of the hospitals they studied is Fortis hospital.

“In recent months Delhi/NCR witnessed some unfortunate deaths because of dengue and other ailments in four reputed private hospitals. In each case, NPPA got complaints of overpricing and inflated bills from the relatives of deceased patients,” says the study, posted on NPPA’s website.

NPPA says they asked for the details of bills from these hospitals, a duty they can legally carry out. They have then analysed these bills for this detailed study.

One of the hospitals they studied is Fortis Hospital that was embroiled in a controversy in December 2017 over the high prices they charged the family of a seven-year-old girl who was suffering from dengue. Fortis says they billed the family nearly Rs 16 lakh. The child finally died.

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Their analysis of bills from just these four hospitals was of a total value of Rs 69,34,764.

What NPPA can regulate

Out of this amount, the bulk component of the bill was in fact “non-scheduled formulations” which comprised 25% of the cost in these bills. The next highest component was diagnostic services which took about 16% of the bill. Consultation and medical supervision, cost of procedures and room rents were all about 12% each.

Surgery costs were less than 1% of the bills. And “scheduled formulations” took up about 4% of the bills.

The fact that scheduled formations comprise one of the lowest components of the bill is indicative of the benefits of price control for the patient- scheduled formulations are those that are in the National List of Essential Medicines, 2015 (found in Schedule 1 of the DPCO, 2013). Only the items on this list are under price control, regulated by the NPPA.

Till date, NPPA has capped the prices of 871 essential drugs on this list, leaving the bulk of the market free of control.

Besides the shortlist of items which the NPPA can monitor and regulate, the rest of the market is “non scheduled”. Thousands of drugs, devices, consumables and diagnostics, remain unregulated and hospitals bill patients discretionarily and arbitrarily, leaving patients with what the NPPA calls an “information asymmetry.”

On this, the study says, “It is amply clear that for claiming higher margins, doctors-hospitals preferred prescribing and dispensing non-scheduled brand medicines instead of scheduled medicines where scheduled medicines under NLEM are supposed to cover all essential medicines.”

NPPA says that the Clinical Establishment Act, 2010, is one of the only policy interventions which can help, but states have been reticent so far to enact this legislation.

Fortis hospital, Gurgao. Credit: File photo

Other strategies of profiteering by private hospitals

The study also says that the beneficiaries of profits have been hospitals and not manufacturers of drugs or devices.

Hospitals have also been insisting that patients buy drugs, devices and disposables from their own in-house pharmacies, and patients were given “no choice” to buy these items from places which may be cheaper.

Another tactic used by private hospitals has been to not advertise the expenses on drugs, devices and diagnostics. These together account for about 46% of the total costs. This is why “patients have complained that the initial estimate of expenditure is inflated by 3-4 times.”

The price regulator has called out the hospitals for “unethical profiteering in failed market system.”

How hospitals have been charging patients

The NPPA’s study is valuable for the various types of items’ prices it has studied. It has tabulated the prices for scheduled formations, non-scheduled formations, consumables and medical devices.

It has also studied the price to stockist, the purchase prices by the hospitals, the prices printed on the items and the ultimate billing to the patients.

Consumables see the highest margins. These include surgical masks, hand gloves and so on, all of which are billed to patients. For example, a three-way stopcock bi-valve sees a margin on procurement price of 1737%. Bed bath wet wipes see a margin of Rs 959%.

For scheduled items, whose prices the NPPA regulates, the study shows that in some cases there has been a margin of 357% for the private hospitals. For example, a propofol injection costs Rs 80.96 to stockists. Hospitals purchase it for half that price, at Rs 40.95. The MRP printed on the injection however, is nearly five times what the hospital bought it for. And the margin that hospitals take away for just this injection is 357%.

For non scheduled items, where NPPA does not regulate the price, there have been upward margins up to 1192%. Take the case of Adrenor injection of two ml. It is priced to stockists at Rs 13.64, purchased by hospitals for Rs 14.70, and 28 of these were billed to patients for a total of Rs 5318. This is a margin of 1192% on what the hospital procured it for.

Medical devices, where the NPPA made a big splash last year by regulating the prices of cardiac stents and knee implants, sees margins of upto 1271%. This margin on the price to distributors, is seen for intravenous infusion sets which are non-vented. Here, the price to distributors is Rs 5.20 and the billing to patients is at Rs 2070. Disposable syringes see a margin of 1596%.

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