Private hospitals' diagnostics & drugs margins as high as 1,737%

New Delhi: If you think that private hospitals make huge money from patients by prescribing costly medicines and diagnosis, you are absolutely right. The shocking revelation has come to the notice of National Pharmaceutical Pricing Authority (NPPA) after analysis of bills from four major private hospitals in Delhi and NCR by the apex drug price controller.

According to a NPPA report, private hospitals are making profits of up to 1,737 per cent on drugs, consumables and diagnostics and that these three accounts for about 46 per cent of a patient's bill.

The analysis report, which was released on Tuesday, clearly pointed out that hospitals are making major profits through inflated maximum retail prices (MRP), while drugs and devices' manufacturers are getting their actual cost only.

Sources in the NPPA said that stern action would be taken against all such private hospitals. "It's a gross violation of the drug price control order, so the action would be initiated soon," the sources said, adding that the NPPA is also mulling to analyse the bills of IVF clinics as NPPA has received several complaints about IVF centres making a huge profit through 'unethical' practices.

"The total cost on scheduled medicines used in the treatment is only 4.10 per cent as compared to 25.67 per cent on non-scheduled formulations, which is clear that for claiming higher margins, doctors-hospitals preferred prescribing and dispensing non-scheduled branded medicines instead of scheduled medicines," the NPPA report said.

The report further highlighted that in most of the cases of scheduled and non-scheduled drugs under the formal monitoring of NPPA, the hospital purchase prices are invariably often lower than the 'prices to stockists' (PTS) offered by the manufacturers in the retail chain. The NPPA, in its analysis, reported that three-way stopcock manufactured by Romsons was sold to patients at Rs 106 against the purchase price of Rs 5.77, which is 1,737 per cent more than the actual cost, while hospitals sold Adrenor 2 ml injection at Rs 189.9 after procuring it at Rs 14.70, which is 1,293 per cent more than the purchase price.

The NPPA also noted that most drugs, devices and disposables were used and sold by the hospitals from their in-house pharmacies and patients didn't have the choice of buying them from outside where prices could be lower.

"Institutional bulk purchase by private hospitals, in most cases by their own pharmacy, makes it easier for them to indulge in 'profiteering on drugs and devices even without the need to violate the MRPs' since these are already inflated," the NPPA said in its report.

The NPPA in its report has stated that hospitals were effectively pushing the industry to print higher MRPs to get bulk supply orders from them. "This is a clear case of market distortion where manufacturers after accounting for their profits print inflated MRPs to meet the demands of a distorted trade channel without getting any benefits from this 'artificial inflation' and patients have to incur huge out-of-pocket expenditure in hospitalization cases," stated the NPPA.

The profit margins for the hospitals were highest on consumables, ranging from almost 350 per cent to over 1,700 per cent, while margins on drugs that are not under price control, the margins ranged from about 160 per cent to 1200 per cent and profit margins on drugs under price control were between 115 per cent and 360 per cent. Under the national list of essential medicines, 2015, NPPA has capped the prices of 871 essential drugs along with approval of retail prices of 642 dugs as 'new drugs' during the same period due to statutory provisions.