Will price cap on medical devices hit innovation?

The stage seems set for the government to take a crack at controlling sticker prices of not just medical drugs but also devices.

Published: 18th August 2017 04:00 AM  |   Last Updated: 18th August 2017 12:28 AM   |  A+A-

The stage seems set for the government to take a crack at controlling sticker prices of not just medical drugs but also devices. Wednesday’s move capping prices of knee implants, six months after the National Pharmaceutical Pricing Authority (NPPA) had a go at it controlling stent prices, reflects the authority’s determination to reduce costs.

Expenses towards knee replacement surgeries will likely reduce by 78 per cent. Currently, the landed cost for ortho implants is about Rs 65,700, while the price to patient works out to roughly Rs 4 lakh. This  difference makes the average trade margin a mind-blowing 313 per cent, which NPPA intends to kill. Other products could come under the axe in due course of time.

The NPPA’s focus may appear like an attempt to bend the market to its will, but it’s no denying that unlike developed nations, where devices undergo rigorous assessments, Indian market is largely unregulated and a majority of the equipment is imported. Price control is a blunt instrument and opponents argue it does more harm than good. For one, it denies innovators the right to price goods and undercuts market dynamics causing foreign suppliers to withdraw.

It isn’t considered a substitute for genuine healthcare reforms, as service providers, instead of reducing expenses, are seen offsetting margin losses elsewhere (charging more for services). NITI Aaayog too observed that the current drug price control framework has worked against innovation and production of quality medicines.

It’s a tightrope walk for regulators to control prices and nurture innovation. Though Indian drug prices are among the lowest in the world, healthcare costs continue to be high. But quality, not so. The government’s recent survey revealed that 946 drugs by 66 firms including MNCs like Pfizer are not of standard quality or in other words substandard. Efficacy, safety and affordability are the cornerstones of medicines, and unless authorities discover this unique mix, healthcare reforms will remain a work-in-progress.

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