Band-aid solution

Price control on stents may have only a limited impact

The National Pharmaceutical Pricing Authority (NPPA) on Monday announced a price ceiling for stents, a mesh tube which is placed in arteries to improve the blood flow to the heart. This was done after the government included stents in the National List of Essential Medicines. The ruling has, on paper, sharply cut down stent prices. According to the NPPA order, the price of a bare metal stent will be capped at Rs 7,260 while the drug-eluting ones and the biodegradable stents will be priced at Rs 29,600 apiece, exclusive of taxes. Before the order, stent prices ranged between Rs 25,000 and Rs 2 lakh apiece, with the drug-eluting ones being used in 90 per cent of the cases. The decision follows a health ministry notification on July 19 last year, after the Delhi High Court sought action on a public interest petition seeking price control on stents. While stent manufacturers and doctors have criticised the move, there are many who see some merit in the NPPA action as it is the mark-ups that are added at every point in the supply chain - from companies to distributors and then to hospitals - that significantly inflate the final cost to the patient. 

However, the moot point is whether an arbitrary price control is likely to yield any sustainable benefits to the consumers. For one, there are question marks over how implementable the order is. While the NPPA order makes it mandatory for hospitals to bill stents separately from surgical procedures or package costs, it is more likely that private hospitals will simply designate lower prices and make up the loss by hiking prices elsewhere so as to keep the overall cost of the procedure at the same level. Will the government go about capping the prices of other services and equipment used as well? 

Secondly, the order could lead to either the hospitals restricting the supply to only the lower quality stents in order to earn a big enough margin, or create a thriving grey market, which, in turn, would provide stents at an even higher price and added inconvenience. Neither outcome would benefit the consumer. This is not to forget that it is anyone's guess whether the government has the wherewithal to enforce such a price control, either by means of raids or reacting quickly to complaints. 

So what can the government do to allay such a situation where private hospitals and medical equipment manufacturers collude to fleece consumers and earn super-normal profits? A short-term solution is for the government to enter the market and procure stents at cheaper prices, as it does for central government employees, and provide an alternative to consumers. The more sustainable solution, of course, is to invest in boosting the public provisioning of health care. Doing so would not only address the massive supply-demand mismatch - for most Indians, private clinics are the only option - but also provide an anchor to prices that prevail in the market. Arbitrary price controls might provide the illusion of relief but they are akin to applying a band-aid on a gushing wound. They are a lazy and inefficient tool to address market failure. Unless the government invests in public health care, it will have to resort to more price controls in the future.