Government's price caps pinches pharma, private hospitals in 2017

New Delhi: Indian pharmaceutical and healthcare sectors will step into the new year with lingering bitter after-effects of proactive measures of the government, which pulled out all the stops in 2017 for affordable Medicare in the country.

While the government's directive to doctors to prescribe only generic names unsettled pharma companies, the NPPA's (National Pharmaceutical Pricing Authority) move to cap prices of medical devices such as stents and knee implants created discomfort for the manufacturers.

Fortis Hospital in Gurgaon and Max Hospital at Shalimar Bagh in the capital were in the news -- for wrong reasons -- on alleged overpricing and medical negligence, respectively. To be sure, the two incidents brought practices of private hospitals under sharper scrutiny. The industry, however, hoped that these are only "aberrations".

Summing up 2017, Indian Pharmaceutical Alliance (IPA) Secretary General D G Shah told PTI that the industry was never up against so many challenges in one single year before.

For one, he said, generic drug prescriptions by doctors and drug substitution by chemists posed a big challenge. Friction between the NPPA and the Department of Pharmaceuticals with implications for pharma companies was another.

Shah also flagged "unstable" policy environment, growing concerns for the export business and "hurried drug regulatory reforms" as key sticking points in 2017.

"These are flowing into 2018 as well. The proposals to bring a new pharmaceutical policy without proper stakeholder consultations and amend Drugs (Prices Control) Order, 2013, without an impact assessment study will add more problems for the domestic industry in a difficult environment," he pointed out.

Amid all the noise, the government stood firm, keen to make healthcare affordable to the common man. This was attested by the capping of ceiling price of costly devices such as coronary stents and knee implant systems.

The twin steps, according to the government, led to estimated savings of Rs 5,950 crore for the general public -- Rs 4,450 crore on the stent front and Rs 1,500 crore from the knee implant move.

The ceiling price of coronary stents was revised effective April 1. The result: All types of stents now come in a price range of Rs 7,400-30,180.

Likewise, knee implant ceiling prices were fixed with effect from August 16, which made all kinds of implants now available at Rs 54,720-1,13,950.

On another front, the NPPA stuck to its pursuit of setting ceiling prices, with a total of 255 formulations fixed during January to November. This meant the number of total formulations under price control has hit 849 under the National List of Essential Medicines (NLEM), 2015.

The government's assessment is the move to cap drug prices led to an estimated savings of Rs 2,643.37 crore for consumers. Additionally, Rs 179.45 crore were recovered from drug firms for overcharging.

The government also issued 226 demand notices for overcharging -- amounting to Rs 728.99 crore -- during January-November.

Despite all the challenges, the pharma industry stayed on a growth trajectory.

According to industry body Assocham's estimate, the pharmaceutical sector is poised to grow to USD 55 billion by 2020, from the USD 28 billion currently.

The industry is expected to grow at a clip of 16 percent in 2018, said an Assocham-UL India joint study.

Drug export is also seen to expand by 30 percent in 2018 and may touch the USD 20 billion marks by 2020, from the current level of around USD 16.5 billion, the joint study stated.

As for healthcare, Apollo Hospitals Joint Managing Director Sangita Reddy said the hospital segment faced tough times this year, with the spotlight on alleged malpractices and instances of neglect.

The NPPA found Fortis hospital at Gurgaon charging as high as 1,700 percent margin on consumables and medicines used for the treatment of a dengue patient who subsequently died.

On the other hand, licence of Max Hospital at Shalimar Bagh was cancelled by the Delhi government for alleged medical negligence during the premature birth of twins and declaring one of them dead despite being alive.

Although the licence cancellation was later stayed by an appellate body, the two issues dented the perception of private hospitals in the public eye.

"Let us appreciate that these are aberrations and that millions of people get cured and treated successfully each day across private hospitals in the country," Reddy said.

Admitting that the private players have a task at hand to rebuild trust with the public, she suggested, "We must take steps to help rebuild the trust deficit between patients and doctors. This will be our common endeavour in times ahead."