Price Controls and Make in India needs convergence

By Dr. Karan Thakur

Published on: 13 September, 2017

The Government of India has embarked on price controls on drugs, stents and now orthopedic implants as its mainstay to ensure cost containment in health services. The latest move to add knee implants has laid the way for other medical devices like ocular lenses and hip implants to fall under the new regime.

Two years ago when the Government began the process of price controls through the Drugs Price Control Order, it raised heckles amongst the pharmaceutical industry. The fears that no new drugs and molecules would make its way to India as a result, were largely unfounded. The step was met with praise and appreciation from citizens who saw profiteering on behalf of pharmaceutical companies as unpardonable. While the jury is still out on how new drug development and the introduction of patents in India will pan out, the move marked the beginning of a concerted effort to reign in costs associated with healthcare.

India has amongst the highest out of pocket expenditure for healthcare the world over. The reasons for this are varied. While a large portion of the blame is apportioned to the fact that most health services are delivered by the private sector, an equal contributor has been the inability of the public sector to provide treatment and medicines.

The inefficiencies in the public system have pushed many patients to private providers, of all hues, thereby pushing up costs of care. Equally, the lack of adequate and comprehensive health insurance coverage for many has led to co-payments and additional expenses on uncovered procedures and treatments. Therefore, the components of expenses incurred on account of seeking health services are varied and multi-factoral.

That the Government has begun to address this burden of costs is welcome. Affordable, equitable, advanced and quality healthcare should be norm for all citizens, if not a right. However, price control is a blunt instrument, which will effect change through dictate, but not fully resolve a vexing issue. In the case of cardiac stent price controls, there have been reports of reduction in cardiac procedures, but some reports also suggest no change on account of price hikes on other components of the package.

This portends important lessons for the price control regime as a whole. Controlling prices of a component may not adequately address the issue fully. Similarly, the results of price controls of knee implants remain to be seen.

The Government should have embarked on more forward-looking reform to achieve the goal it set out for itself through price controls. Mandates to purchase only Indian manufactured stents and implants from a period in the future, say 2020, would have ensured that the Government effectively killed two stones with one. On the one hand, the mandate would ensure that foreign multinational companies would have been ‘forced’ to setup manufacturing units for these devices in India. This would boost technology transfer, hasten local innovation, generate employment and possibly boost exports.

The Government is the largest purchaser of medical devices and equipment, and such a step would have led to an automatic reduction in prices across the board. Additionally, till that date of the mandate, the Government could have purchased vast quantities of devices at subsidized or CGHS rates (which was already in vogue for the past three years) and made these available at Jan Aushadhi centers, Government hospitals etc. for purchase by patients themselves. Such a step would have helped boost the Government’s ambitious manufacturing play through the Make in India scheme and at the same time helped in meaningful and lasting reduction in costs.

Price and costs of care will continue to remain an area of concern for patients and policy makers alike. Politically astute and popular steps like price controls are welcome, but they do not represent a holistic policy approach towards meaningful reduction in the costs of care. In order to reduce prices - competitiveness, policy ingenuity and mandates (where necessary) would all need to come together.

Lets hope that the beginning made through price controls will help usher in more systemic and holistic reforms that help reduce the burden of cost of care from our citizens.

(Dr. Karan Thakur works for Apollo Hospitals. Views expressed by the author are personal.)