Q: This move will surely cut down on profit margins for manufacturers and distributors.

Considering
that the distributors are mostly the suppliers of top MNC-manufactured stents in the country, how will
the price cap impact distributor sentiments?

Harsh: This move will surely have a more crucial and negative effect on distributors and the
manufacturers that operate through local distributors. As per one of the leading stent distributors,
Indian stent distributors have to incur high interest rates on a large amount of capital invested, along
with losses of some stents in their inventories due to expiry dates, as well as transport and storage
costs that tally to around 25% of an additional cost burden for distributors. Although distributors were
profiting from high marginsup to 600%on stents, which was not fair, the new mandate of 8%
marginsharing between distributors and hospitals will definitely be a turnoff for the stent
distributors in the market.

Megha: Definitely. The industry is extremely disappointed with this price ceiling, especially when
none of the manufacturers and distributors got any breathing time since the order was enforced,
effective immediately starting on February 14th, 2017.

Swarnadip: This is a pivotal point, especially because we have an almost negligible number of local
manufacturers when it comes to technologically advanced devices like stents. India imports the
stents manufactured by top MNCs, which raises the price because of high import duties. And
considering that there are no manufacturing facilities established by the foreign companies like
Abbott, Boston Scientific, or Medtronic, the distribution channel becomes even more important. In
that kind of a scenario, if distributors get very low margins, that would only discourage them from
doing business in India.

But on the contrary, major distributors say they are happy with the NPPA guidelines, though there is
a need for minor tweaking as no hospitals pay on a per-purchase basis but instead pay on interest
which means that distributors have to bill them when the stents are implanted/used, not before that
and this becomes quite challenging for distributors as the stock, based on the demand, stays with
them. This in turn increases their inventory costs, and they do not get money from the dispatched
stock as well. So to balance this, they will need margins similar to the past in order to run their
operations.
Mumbai: After a sharp cut in prices of coronary stents in February, the governments National
Pharmaceutical Pricing Authority (NPPA) is monitoring prices of other medical devices but is
not planning to cap prices of other devices as of now, NPPA chairman Bhupendra Singh said on
Thursday.

As of now there is no proposal to cap prices of other devices but all the 23 devices which are
there in the drugs and cosmetics rules, they are to be treated as non-scheduled drugs and under
DPCO (drug price control order), prices of non-scheduled drugs cannot be raised by more than
10% in a year. We are seeking and collecting information based on a common format, which is
there for not only devices but for all the drugs, Singh said at a press conference.

ALSO READ: Abbott, Medtronic may move NPPA again to withdraw stents

He added that the NPPA is taking suggestions from the industry to finalise a format for collecting
price data of medical devices, which include heart valves, intraocular lenses, and orthopaedic
implants.

In February, the NPPA had slashed prices of coronary stents by up to 85%, capping the ceiling
price of bare metal stents at Rs7,260 and that of drug eluting stents at Rs29,600. In April, the
regulator said prices of stents can be increased by around 2% after taking into account the
wholesale price index.

The governments focus has been to make healthcare affordable for the public, which has raised
concerns that more drugs and devices may come under price control. On 17 April, Prime
Minister Narendra Modi said in Surat that many drug firms were unhappy with the decision of
cheaper stents and medicines and the government has put in mechanisms to bring down prices of
medicines.

He added that his commitment is to provide affordable healthcare for the poor and middle
classes.
On February 13, the Union government capped prices of stents a tiny
metal tube inserted into the narrowed coronary arteries by nearly 85%,
drastically reducing the cost of angioplasty.

The price cap is just one example of how a life-saving medical device can be
made affordable when the government intervenes to regulate prices. Prior to
the price capping, a stent contributed heavily to the cost of an angioplasty. A
patient had to shell out anywhere between Rs50,000 and Rs1.5 lakh for a
stent, depending on its brand and range. But, now, no stent, however
advanced, can cost more than Rs30,000.

The fall in stent price has brought relief to patients with heart ailments, but
other medical devices that are equally life-saving or essential to improving
health are still unaffordable because prices are not regulated by the
government.

For example, in cardiac care, a conventional pacemaker costs in the range of

Rs40,000 to Rs2.3 lakh. It is a small device that is placed in the chest or
abdomen to help control abnormal heart beats. According to industry sources,
this cost is almost 40% more than its import price and follows a market
methodology a term referring to an arbitrary pricing decided by hospitals.
Pacemakers are as life-saving as stents. But the cost is definitely a financial
burden on patients. They have to take up loans or pay for the device on EMI
basis, said a senior cardiologist at a hospital in Vile Parle.

Similarly, orthopedic implants and intraocular lenses are other medical

devices which burn big holes in a patients pocket.

Hindustan Times has learnt that the MRP of an imported knee implant is
anywhere between Rs 90,000 and Rs2 lakh, which is more than 300% of
its import cost, according to a dealer.

Dr Pradeep Bhosale, head of hip and joint replacement surgery at

Nanavati Hospital, said the number of knee and hip replacement
surgeries has increased by 600 times in the past five years, but implants
continue to be expensive for patients.

We often choose imported implants owing to their better longevity.

There are many Indian companies that now manufacture these implants,
and they are nearly 40% cheaper compared to the imported ones, he
said.

Bhosale added that doctors have their reservations about using Indian
implants as there have not been any no long-term clinical trials to prove that
they are at par with products approved by the Food and Drugs Administration
.

Another essential medical device where there is a wide gap in the import cost
and the final price paid by patients is intraocular lens. The heavily-priced
intraocular lenses contribute to a major portion of the cost of cataract
surgeries.
On the price regulation by the government, doctors argued that medical
devices such as intraocular lenses, and knee and hip implants, are
neither essential nor life saving, but a means to improve quality of life.
These devices are essential for good quality of life, said an
ophthalmologist from a hospital in south Mumbai.

Dr Abhay Shukla, from Jan Swasthiya Abhiyan, questioned why these

devices, which have catastrophic economic implications on a patient, are not
included under the National List of essential medicines (NLEM), by the
ministry of health and family welfare. Once a device is included under
NLEM, the National Pharmaceutical Pricing Authority (NPPA) can regulate
its prices.

Giving an example of a injection syringe, Dr Shukla said, It is manufactured

at Rs2, but its MRP is between Rs15 and Rs20. No doubt, a patient ends up
paying ten times more than its manufacturing cost, but its economic
implication is very little on the patient, he said.
But, when you look at medical devices and implants whose cost runs in
lakhs, then the patient feels a big financial pinch. These are the products
prices of which the government must regulate, he added.

Two doctors have pointed out that as a device moves from a manufacturer to
a patient, hospital earns the maximum commission. Hospitals and doctors
earn the highest margin. They sometimes buy devices from distributors, said
Dr Arun Gadre, a city gynaecologist.
While the NPPA is already looking at regulating the prices of orthopedic
implants and intraocular lenses, an industry insider from Hyderabad,
said the capping of prices of pacemakers will be tough.

There are many local manufacturers for orthopedic implants and lenses who
can step in if multi-national players withdraw. However, with pacemakers,
there are just one or two Indian manufacturers, he said

Medical Device Companies Cope With

India's Stent Price Caps
By Jof Enriquez
Follow me on Twitter @jofenriq

Medical device companies Abbott, Boston Scientific, Johnson & Johnson, and
Medtronic are trying to come to grips with Indian regulators decision to set a price cap
on cardiac stents by refiling applications to withdraw certain products, as well as
lobbying against such regulation, which they contend increases the risk of introducing
new products into the country and places such products out of patients reach.
Citing the need to uphold public interest against unconscionable prices,
India's National Pharmaceutical Pricing Authority (NPPA) in
February slashed prices of coronary stents by nearly 400 percent in some
cases, capping them at Rs 7,260 for bare metal stents, and at Rs 29,600 for
drug-eluting stents and bioresorbable vascular scaffold
(BVS)/biodegradable stents. NPPA is considering setting similar price
controls on nearly two dozen other medical device types, as well.

In response to NPPAs ceiling price order, Abbott and Medtronic applied to withdraw
their respective stents off the Indian domestic market, but NPPA last week rejected their
bids because no such requests are permitted under current law, which also requires
stent makers to maintain supply for up to six months to prevent a shortage.

Now, representatives from coronary stent manufacturers Abbott,

Medtronic and Boston Scientific, along with Johnson & Johnson, a maker
of knee, hip and joint implants, are reportedly planning "to approach
India's health and trade ministries in May to convey that "price control is
not the way forward," according to an Indian executive at a multinational
medtech company aware of the executives plans, reported Business
Standard.

The industry source reportedly said the companies will make known to Indian officials
their view that the government's price control measures will jeopardize future
investments and make them "less likely to introduce new products" into India.

Abbott and Medtronic are likely to refile their applications to withdraw certain high-end
coronary stents from the Indian market, according to Live Mint. In the meantime, an
Abbott spokesperson says the company is committed to maintaining supplies of its
Alpine drug-eluting stent and Absorb dissolving stent. Medtronic, on the other hand,
says it will re-file the incomplete paperwork that caused the earlier denial by NPPA, but
that it "will continue to supply the Resolute Onyx stent in India."

Boston Scientific requested that NPPA let it sell some stents in India at special prices
higher than the mandated price caps, reported Live Mint.

NPPA says its order has a provision whereby companies can apply to revise stent prices
if they can prove that their products are superior to other stents. The government body
had ruled that newer drug-eluting stents showed little difference from older models, and
essentially lumped them together under the ordered price ceiling for products deemed
essential to public health.

MUMBAI: Soon, there may be ceiling prices, fixed by the government, on

orthopaedic implants. Alarmed with the sharp spike in prices of orthopaedic
implants, drug pricing regulator National Pharmaceutical Pricing
Authority (NPPA) has directed manufacturers such as Johnson &
Johnson (J&J), Zimmer and Stryker to submit details of production and
pricing of their products, including those for knee and hip. At present there are
no price caps on these medical devices. The companies will also need to
submit the increase in prices effected by them over the last three years, the
NPPA communication on June 17 said.

Sources said that the government has initiated the process of setting ceiling
prices for exorbitantly-priced medical devices like cardiac stents and implants.
It also wants to ensure that the price increase in devices is less than 10%
annually, as these are regulated as 'drugs' under the Drugs and Cosmetic Act.
(All non-scheduled drugs prices of which are not controlled are allowed
an annual increase of 10% under the Drug Price Control Order, 2013).

Hip and knee implants cost around Rs 50,000 to Rs 90,000 on an average,

depending on the type of implant used.

This is the second time that the NPPA has asked medical device
manufacturers to submit data like the maximum retail price (MRP) and landed
cost (cost at which imported). In an earlier communication sent out in May this
year, it had sought details acting on "media reports highlighting the exorbitant
prices and huge margins".

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Since most of these devices are imported into the country, their prices are
already high, and they go up further with the duties levied on them. The cost
to patient is high as these are sold at a huge margin. Worse, the pricing
structure is opaque with companies not submitting the pricing details to the
regulator, and there is no method of determining the margin charged by the
distributor or hospital.

When contacted, a J&J executive said they would be submitting the pricing
data again, though they had sent it earlier too. Last year, a Maharashtra Food
and Drug Administration report to the government said that drug-eluting stents
were sold with huge mark-ups, sometimes nearly double the landed cost. The
government seems to be serious in monitoring the prices of these vital
devices as it had issued show-cause notices to companies for not having
revealed prices earlier this year.

Top Comment
Knee replacement costs much more than 50,000. Doctors ask patients for the type of
implant they want,but God knows what are they really putting.There should be some
type of check on this also. Thanks !Mrs Mathur

In another development, the NPPA has asked 19 drug companies to register

for an online database, which is a pre-requisite for price fixation in respect of
scheduled drugs and new drugs, and for monitoring production and availability
of scheduled formulations. The companies include Wockhardt, IPCA Labs,
British Biological, Danone, Dabur India, Indoco Remedies and Alkem
Laboratories.

Last September, the NPPA had asked all pharma companies to register online
with the Integrated Pharmaceutical Database Management System (IPDMS).
With the transition from DPCO 1995, which followed cost-based mechanism
for price fixation, to the DPCO 2013, which follows market-based mechanism
for price fixation, reference data and source of market-based data has
assumed critical importance, an analyst said.