Price cap on stents opens the floodgates for new realities

The government has made it clear that companies, distributors and hospitals have no choice but to comply with its order slashing prices of cardiac stents by over 75%. The decision, expected to make the life-saving devices more affordable, also signals a shift in the way stent suppliers will operate in the country.

A coronary stent is a wire mesh tube used to clear blockages in coronary arteries and prevent heart attacks.

Earlier this week, National Pharmaceutical Pricing Authority (NPPA) capped the ceiling prices of drug eluting stents (DES) and bioresorbable vascular scaffolds (BVS) at Rs 29,600 and bare metal stents (BMS) at Rs 7,260. Including VAT, these stents are expected to cost Rs 31,080 and Rs 7,623, respectively.

Artificial shortages

Some companies have reportedly withdrawn higher-priced stents from hospitals following NPPA's order, leading to a reported shortage in the devices.  Manufacturers have not withdrawn any batches of stents they have already stocked at hospitals, healthcare providers have confirmed. Yet, going forward, some are expected to withhold their higher-end variations, said an industry official who preferred to remain anonymous.

"Abbott continues to market our full range of coronary stents available in India, per the NPPA order of Feb 13, 2017. In certain cases, we had initiated the process of relabeling to comply with the revised pricing notified by the government order of Feb 13," an AbbottBSE 1.23 % India spokesperson told ET.

A cardiologist who spoke to ET on condition of anonymity said some companies, especially importers, have asked hospitals not to use stents that were priced higher than the ceiling.

"But there is no shortage of stents. Our hospital is using brands by both Indian companies and importers," the cardiologist added.

Apart from companies, some hospitals have also decided to sell only those stents priced within the ceiling fixed by NPPA. While stents are still in stock, many patients are wary of using the ones offered by these hospitals because they are considered older generation stents, said a healthcare provider who spoke to ET on condition of anonymity.

"Our team decided not to sell any stent priced above Rs 30,000. But some patients insisting on high-end stents think they're getting substandard treatment when we tell them we can't provide these third or fourth generation stents anymore," the provider said.

At the same time, several hospitals have stated they will pass the benefits of the price cap on to patients.

"We will continue to be committed to delivering world class clinical outcomes for the benefit of our patients and will see that all patients will be benefited by this order," stated a spokesperson for Apollo Hospital Groups.

"Reasonable price for stents is welcome. However, we believe that the mechanism which is used for pricing may lead to the Indian market missing out on some of the newer multinational products," said Ashutosh Raghuvanshi, CEO, Narayana Health.

New Realities for Stent Companies

Stent makers wounded by NPPA's price cap are now scrambling for ways to plug gaps and remain profitable.

While some companies said they are still figuring out how they may adapt to the decision, others are already considering cost-cutting options like discarding the middlemen who supplied their products to hospitals.

According to Indian stent company Sahajanand Medical Technologies, one of the biggest cost in this business is the cost associated with the supply chain and most of the margins made by stent makers goes into paying the distributor. The total investment made when supplying through a distributor, including procurement and storage costs, is estimated to be around Rs30-40 lakh, according to SMT CEO Ganesh Sabat.

"What we have decided to do now is to get a drug distribution license ourselves to save on the working capital cost. We already started the process of reaching out directly to hospitals, in fact we did this before the NLEM came about," he told ET, adding that reducing the supply chain cost would help companies run a sustainable business. SMT is also talking to large IT companies to use technology to improve inventory efficiency, he said.

Stent makers may also trim investment on marketing and training, said an industry executive who spoke to ET on condition of anonymity.

Costs for marketing, training, development and academic partnerships would contribute at least 10-15% of the revenue of any stent company, the executive added.

Curbing Innovation

Companies may choose to increase focus on other international markets and withhold upcoming launches, the executive said.

The prices have set the stage for multinational and domestic stent companies to halt any newer generation stent from reaching Indian patients, according to several industry officials. A stent maker who spoke to ET on condition of anonymity said the company might withhold launching a newer stent it planned on bringing into India soon.

The prices are capped too low, say domestic stent makers who expected ceiling prices between Rs40,000-50,000 for DES to account for their own costs as well as distributor and hospital margins.

The move could discourage reliable stent makers and lead to a growth in companies that produce poor quality stents, according to says Gurmeet Chugh, managing director of Indian stent company Translumina Therapeutics.

Global stent makers argue that NPPA disregarded the evolution of coronary stents over decades and didn't pay heed to several stakeholder representations seeking to differentiate stent prices based on technological differences.

"The singular focus on controlling ceiling price of stents, without attempting to address the larger picture and correct inefficiencies in the healthcare ecosystem will not achieve its stated benefit, in the long run," said a spokesperson of AdvaMed, a lobby group for global stent companies like Abbott India, Medtronic and Boston Scientific.

Ensuring compliance

Companies, distributors and hospitals found violating NPPA's order by overcharging patients for the devices would be penalized, Minister of Chemicals and Fertilisers Ananth Kumar earlier said. In some cases, they could even be blacklisted, he had said.

The government has also warned suppliers and hospitals against creating any artificial shortages of these devices.

The ministry's Department of Pharmaceuticals (DoP) on Thursday wrote to the health ministry, Indian drug regulator and NPPA to remedy any instances of stent shortages following NPPA's price caps.

"We are taking up this issue with health ministry and others. Strict action would be taken against violators," said Jai Priye Prakash, Secretary-DoP, Ministry of Chemicals and Fertilisers. According to him, the government would also use various provisions of the Essential Commodities Act to penalize those found illegally and unethically profiteering or hoarding stents. In some cases, violators could also be blacklisted, he added.

NPPA, on its part, says it has also written to all "Chief Secretaries" to ensure compliance to its ceiling prices for stents and uninterrupted availability of these devices and cardiac care services. "Government has taken all steps to ensure that stent price capping benefits are passed on to the patients and no artificial shortage created," the body said.