Delhi Private Hospitals Inflated Branded Drug, Medical Device Prices Up To 2,100%, NPPA Says

Private hospitals forced drugmakers to inflate the MRP by placing bulk orders, NPPA said.

Drugs move down the production line at a research and development plant in Dalian, China (Photographer: Bernardo De Niz/Bloomberg News)
Drugs move down the production line at a research and development plant in Dalian, China (Photographer: Bernardo De Niz/Bloomberg News)

India’s drug price regulator found that four private hospitals in Delhi-National Capital Region were selling a higher proportion of medicines not under price control, inflating prices through in-house pharmacies, and overpricing diagnostic tests.

The National Pharmaceutical Pricing Authority, in its 20-page report, said it had received complaints from relatives of deceased patients alleging overcharging.

The NPPA described the pricing of syringes, cannulae, and catheters by hospitals as “exorbitant”. The trade margins on some consumables were as high as 2,100 percent, or 22 times their purchase price.

For consumables like disposable syringes and intravenous medications, the margins in some cases were over 1,700 percent. The purchase price of a device like a three-way stop cock for the hospital was Rs 5.77 and it was being billed to patients at a maximum retail price of Rs 106, according to the report. The regulator reviewed the procurement price of hospitals, price to stockists as per market-based data and MRP/billing rate by hospital for drugs outside the price ceilings.

Source: NPPA Report
Source: NPPA Report

The report comes two months after the regulator warned the Fortis Hospital, Gurugram for charging an up to 1,700 percent mark-up on medical equipment from parents of a seven-year-old girl who died of dengue in September last year. The hospital also faces a lawsuit.

Without naming the hospitals, the report said: “Subsequent to disclosure of data of one hospital which had not requested confidentiality, the other hospitals submitted data with a request that name of the hospital should not be put in public domain.”

Key takeaways from the NPPA report:

- Scheduled drugs, a class of prescription medicines under price control, comprise 4 percent of the hospital medicine bills. Non-scheduled drugs, not under price control, contribute 25.7 percent of the costs, which defeats the purpose of capping prices of essential medicines, the report said.

- Also, manufacturers launch and sell drug variants of scheduled drugs to avoid price controls. As a result the growth rate in sales of drugs outside price control is twice that of drugs under price control.

- Institutional bulk purchases by private hospitals, many of which have in-house pharmacies, enables high profit margins and profiteering.

- Consumables constitute 10 percent of a patient’s bill and more than two times the expenditure on essential drugs. These are not under government price control.

- Diagnostic services constitute 15 percent of a patient’s bill and the nPPA found that these hospitals charged more than private diagnostic centres.

- The profit margin in devices, specifically syringes, cannula and catheters, are “exorbitant” and clearly a case of unethical profiteering in a failed market system” according to the NPPA.

Source: NPPA Report
Source: NPPA Report

- Patients are not adequately informed about the expenditure on drugs, devices and diagnostics, which amount to approximately 46 percent of the hospital cost in comparison with the costs of procedure and room rent which total roughly 23 percent.

In all the cases, NPPA said hospitals were the biggest beneficiaries and not the drug manufacturers. Taking action against hospitals was beyond the scope of NPPA, it said.