Delhi's proposal to cap drug costs worries hospitals industry

People segregate expired medicines outside a chemist store in New Delhi, India February 2, 2018. REUTERS/Saumya Khandelwal/Files

Suhail Hassan Bhat, Aditya Kalra-JUNE 1, 2018

NEW DELHI (Reuters) - Indian authorities have proposed capping medical costs at private hospitals in the capital to help millions of people, but the plan would deal a blow to the multi-billion-dollar healthcare sector already grappling with price control policies.

The move by Delhi’s health department comes at a time when Prime Minister Narendra Modi’s federal government has capped prices of medical devices such as knee implants, taking a tough line against what it calls “illegal profiteering” by companies.

Modi’s government had also cited a need to rationalise hospital treatment costs after it found they were raising other charges to compensate for losses faced due to government-set medical device prices.

The Delhi state government this week directed private hospitals not to charge patients more than a 50 percent “mark-up” on drugs and disposables, such as injections or gloves, according to a copy of the “advisory” seen by Reuters on Friday.

 

It also proposed restricting overall costs in some cases, saying hospitals must waive off 50 percent of the bill if a patient dies within six hours of admission.

The local government said the advisory was issued after reviewing complaints of hospitals overcharging patients. The proposals would become mandatory after a public consultation process of 30 days, state health minister Satyendra Jain said.

Health activists have lauded the move, saying it will be a boon to patients and boost affordability.

But the rules, if enforced, would come as a setback for big hospital operators such as Apollo Hospitals Enterprise Ltd and Fortis Healthcare Ltd, which have a presence around India, including in New Delhi.

Apollo and Fortis did not respond to a request seeking comment. But a source working at a leading private hospital chain said the directive would hit profit margins and force hospitals to disclose their procurement prices.

“It’s unworkable,” the source said, adding the industry was concerned other states would follow suit.

Pharmaceutical tablets and capsules in foil strips are arranged on a table in this picture illustration taken in Ljubljana September 18, 2013. REUTERS/Srdjan Zivulovic/Files

Nearly 70 percent of healthcare in India is in the hands of private players. Many people turn to private hospitals for treatment as public hospitals remain overburdened and dilapidated.

Rana Mehta, leader of healthcare at consultants PwC India, said the advisory would benefit patients, but affect businesses.

“The regulations should not derail the viability of the sector, which will in the long term have an adverse impact on the quality of care delivered,” said Mehta.