Delhi Govt Likely To Put A Cap On Hospital Profits This Week

NEW DELHI, 6 MAY 2018: The Delhi government is likely to come out with a policy to cap profit margins for hospitals this week. A first for any state, the policy will cover sale of medicines, consumables and devices to patients. The state government had appointed a nine-member committee in December last year to suggest the scope and process of capping prices. 

The move followed public outrage on the death of a child due to dengue at a private hospital where the family was charged over Rs 15 lakh for treatment. The committee had members from the Delhi Medical Council, Indian Medical Associations and some top bureaucrats with the health department. “We submitted the recommendations to the government about one month ago,” one of the members told TOI.

Government sources said the committee had suggested capping the profit margin for drugs and devices at a maximum of 50% above the manufacturing price or procurement cost, whichever was lower. “Health minister Satyendar Jain will make an announcement on profit capping by next week,” said an official, who did not want to be named. The policy will also cover rates of packages for various procedures.

The panel has suggested the package rates should be transparent and take into account possible complications that may arise during treatment. A member of the committee said: “Hospitals often end up charging more than the package price they share with patients at the time of admission. The possibility of cost escalations should be explained in advance.”

TOI has reported on revelations by the National Pharmaceutical Pricing Authority (NPPA) that hospitals have been found to be charging 1,000-1,700% margin on medicines and consumables. Compared to that, a 50% profit recommendation does seem like a huge reduction. However, it is unclear what the government means by manufacturing cost of a drug, as there is no way to know the ex-factory cost of medicines or consumables.

The only printed information is the maximum retail price, which is found to be inflated in most cases to accommodate margins. The procurement price of medicines and consumables too is hard to estimate. Medicines and consumables are sold through multiple hospital pharmacies which they operate through pharmacy licences. Whatever pricing rules apply to a pharmacy outside hospitals would also apply to pharmacies running inside a hospital.

It is not clear yet whether the government's proposed cap margins will apply to all pharmacies in Delhi, or, if not, how the prices of hospital-only pharmacies will be regulated. Dr Giridhar Gyani, director general of the Association of Healthcare Providers of India (AHPI), has in the past said that the association was of the opinion that its members should not charge more than 8-15% margin on drugs and consumables and that they should do transparent pricing for procedures.

“Our members are being forced to charge such high margins because costs have risen considerably due to the rising salaries of specialist doctors, the cost of constantly upgrading technology and the 10-12% of revenue that they are forced to spend on marketing and branding to ensure high occupancy. The government ought to do a transparent and detailed costing exercise to settle the question of the real running costs once and for all,” Dr Gyani had said.ET Healthworld