Close on the heels of the drug patent row, multinational companies are now facing pricing pressure on the medical devices front. Prominent medical device manufacturers such as Abbott, Medtronic and Boston Scientific are likely to take a hit, as the government has slashed the reimbursement for drug-eluting stents under the central government health scheme by Rs 40,000.
Earlier, the government had a differentiated pricing strategy for drug-eluting stents, depending on the standard of approval; now, it has more-than-halved the price and capped the reimbursement at Rs 25,000, irrespective of the standard of the stent used. For bare metal coronary stents, the government would pay up to Rs 12,000.
According to the earlier policy, the health ministry paid Rs 65,000 for all drug-eluting stents approved by Drug Controller General of India (DCGI) and the US Food and Drug Administration. For those approved by CE (Europe), the government reimbursed Rs 50,000, while for indigenously manufactured drug-eluting stents, the reimbursement was Rs 40,000.
While the government's move is expected to hurt almost all companies, it is likely multinational firms importing drug-eluting stents would be hit the most, as their products are more expensive and a cut in the scheme's payout would lead to many patients shifting to low-priced products. "For many years, the government of India focused on various pricing measures to reduce the cost of pharmaceuticals, with the anticipated result of greater public access to medicines. Over the last year and a half, we are starting to see this trend seep into the medical devices industry," said an Abbott official.
The industry is also upset at the fact that the government took the step without consulting manufacturers and other stakeholders such as patients, who would ultimately have to pay for quality devices, a source said. "As industry, we want to work with the Indian government to make medical technologies more affordable and accessible. We are concerned that these ad hoc price decisions, made without due consultations with relevant stakeholders, would only serve to stifle the environment for investment and innovation," the official said.
Under the central health scheme, entitled government employees can avail of cashless diagnostics and treatment at hospitals, which send the patients' bills directly to the government.
For this, the government and the hospitals concerned have contractual agreements for a certain period. The government is responsible for deciding the prices of medical products procured by state-run healthcare facilities.
This is the second time in less than two years that the government significantly reduced the reimbursement for stents. The last time it had cut the payout for stents was October 2011.
The government feels the move would help reduce prices of stents in the market and benefit the domestic industry. Health ministry officials say the cut is aimed at making stents affordable and accessible for all. The government has also formed a review committee to assess the results of the new pricing structure. The Centre's annual budget for its health scheme is about Rs 1,600 crore, of which Rs 1,000 crore is for hospital reimbursements, including those for medicines.
Many argue the government's move may force beneficiaries of the health scheme to pay from their pockets, as no one would want to compromise with the quality of the product for such critical treatment. The market rate for high-end drug-eluting stents ranges between Rs 1,00,000 and Rs 2,00,000. However, most companies negotiate and sell stents through hospitals.
According to World Bank estimates, in 2010, 562 private hospitals had tie-ups with the central government. A 2010 estimate estimates the number of beneficiaries of the scheme at three million.
"Decisions such as this would impact the quality and reach of healthcare to the people of India. Patients would not be able to get the latest technologies and medical products available in the market. The Centre can adopt a consultative process supported by -based reimbursement policies for driving better health outcomes,' said Manoj Gopalakrishna, chairman of the medical devices committee, American Chamber of Commerce in India.
CHOKING SUBSIDY VEIN
A drug-eluting stent (DES) is a peripheral or coronary stent (a scaffold) placed into narrowed, diseased peripheral or coronary arteries that slowly releases a drug to block cell proliferation. This prevents fibrosis that, together with clots (thrombus), could otherwise block the stented artery, a process called restenosis
- Rs 40,000 Amount of subsidy cut by government for drug-eluting stents under the centrally-sponsored health scheme
- Rs 25,000 Cap on reimbursement for drug-eluting stents
- Rs 12,000 Govt subsidy for bare metal coronary stents
- Rs 65,000 Subsidy paid by govt
