The Menace Of Inflated MRPs On Medicines
There are so many problems with our ‘Healthcare’ system that I am at a loss, where to begin. From crowds at the iconic AIIMS and as well as major private hospitals, mortally sick patients being turned away either for want of money or due to shortage of beds, babies delivered outside hospital doors, fake medicines to unnecessary diagnostic tests and even surgeries, rampant kickbacks; there are all kinds of stories floating around. Meantime, people continue to suffer, many mortgage their houses to pay for treatment, others just die as they are unable to afford it.
Putting in place a ‘universal healthcare’ system for all is perhaps not feasible for the government – the resources required are humungous – and the private sector can barely take care of their own senior people. Even the reach of their CSR funds is limited to a few ‘memorial hospitals and institutes’ which manage to corner cheap prime land from the government, on the express condition of providing a certain number of ‘free beds’ to the poor, but more often, these are appropriated for extending favours.
We have an ironic situation. India has the best of doctors – our physicians and surgeons in almost all specialties are as good as, if not better than, those in advanced economies. There is a ‘culture of empathy and caring for the needy’; our new-age private sector hospitals are equipped with the latest machines and robots. Yet, we see so much suffering and misery all around! Even the so-called ‘upper middle class’ is unable to cope with medical costs when someone in the family needs to be hospitalised. Perhaps the only explanation is that the number of hospital beds and doctors is woefully inadequate for our huge population.
What can we do to mitigate the situation?
Of all the ‘villains’ in this complex situation, I think the menace of printing artificially high MRP on medicines and consumables is perhaps the worst and, also interestingly, a ‘low hanging fruit’ which can be tackled in a relatively easier manner. Investigating the criminal malpractice of big kickbacks on diagnostic tests could be another ‘not unsurmountable’ exercise. In any case we have to take small steps. Tackling the MRP scam could be the first one. Let me explain the issue with some simple examples.
A box of disposable gloves – one of the most common consumables – of a fairly popular brand, containing 450 grams of the product (as I found out personally a few years ago when a young relative was a long term ‘home care patient’ in Ghaziabad) had an MRP of Rs 600 printed on it. Their neighbourhood chemist would charge them Rs 150 for it as they bought three or four boxes every month. We can safely assume that a small hospital, using 300-400 boxes monthly would be getting the same for Rs 125 or less. A bigger hospital’s cost could be still lower around Rs 100 or just 17 per cent of the MRP. Now, what do the hospitals charge from the patients? Almost all bill the patients at MRP! Typically, in a hospital bill, medicines and consumables account for 60-65 per cent of the total; so this is where they make their profits. To the best of my knowledge, only one hospital ‘500 bed Rajiv Gandhi Cancer Institute’ in Rohini (north west Delhi) has, for many years, been giving 21 per cent discount on medicines and a higher amount on consumables. In the Ghaziabad case, other commonly used consumables also had high margins – feeding bags box (MRP Rs 500) came to my relative at Rs 150, suction catheter (MRP Rs 42 for Rs 11) urine catheter (MRP Rs 380 for Rs 130) and so on.
The situation is only a little better in the case of medicines. The average discount on the MRP, extended to a hospital, for branded drugs still under patents, varies between 30 -50 per cent and these are billed to the patients at MRP. Shockingly, pharmacy outlets in hospitals – as I found out personally during 2012-15 when my close relative was hospitalised twice – won’t even give the usual 10 per cent discount extended by them to senior citizens at the same chain’s outlets outside. Barring some drugs on the ‘National List of Essential Medicines’ (NLEM) where prices are fixed by the government, there is literally free for all!
The government did indeed, make a beginning by capping prices of stents last year, but the results were mixed. In fact, the NPPA (National Pharmaceutical Pricing Authority) had even forced device makers, perhaps for the first time ever, to put the correct MRP tags on the devices, to prevent overcharging by the hospitals. It appears that most private hospitals went on to jack up the ‘angioplasty package cost excluding price of stents’ to make up for the loss of margin on the stents. The CEO of one of the largest players in the field had actually gone on record to say that “earlier our procedures were underpriced and implants were overpriced and this is being corrected now”; so much for the government order capping stent prices. An encouraging response had, however, come from the All India Syringes and Needles Manufacturers Association to voluntarily cap trade margins at 75 per cent over their discounted net ex-factory prices including GST. This effectively meant a maximum trade margin of about 43 per cent on the MRP – a far cry from the 80-90 per cent earlier. We need many more initiatives like this.
Admittedly, the MRP scandal is not exclusive to medicines and consumables. It seems to be a generic! As an example, my research shows that, a common FMCG item like liquid hand wash – of a popular brand – carried an MRP of Rs 300 on the 750 ml pack but you could easily buy it on Amazon for about Rs 90 net, including GST of Rs 15 after availing of the myriad “cash back” schemes. Even, from the stores, the price including all taxes, didn’t exceed Rs 169 before availing one of the many discounting schemes. However, in the case of the healthcare industry, this practice becomes a truly nefarious one.
What can be done about this problem? How can the government stop hospitals from earning such obscene profits on drugs and consumables? The NPPA, along with eminent doctors and the watchdog community of senior chartered accountants and consultancy firms, could surely come up with a practical solution. A simplistic – though admittedly retrograde – approach could be to impose GST on the printed MRP or a price after reducing a margin that is considered fair by the practitioners. Such a move would certainly open up the mystery of astronomically high MRPs that lead to all kinds of malpractices in this all- important life-saving industry.
The author is member Managing Committee of the Indian Cancer Society,
Delhi and was member of the Governing Council of the Rajiv Gandhi Cancer Institute and Research Centre. He is past president of AIMA and former member, Board of Governors, IIMC
