Pricing of Cardiac Stents

Rema Nagarajan

Rema Nagarajan (reemanagarajan2016@gmail.com) is a senior journalist with the Times of India and writes on health issues.

The pricing of cardiac stents in India has been mired in controversy and allegations of profiteering at the cost of vulnerable patients. This article looks at the stances of various stakeholders around the issue leading up to the government slashing the prices of stents by a huge percentage.

The author wishes to thank the many cardiologists and persons from within the stent trade with a conscience who could not accept the looting of patients through stent pricing for sharing their views and crucial inside information. She also wants to thank Malini Aisola and K M Gopakumar of the All India Drug Action Network.

On 13 February, the National Pharmaceutical Pricing Authority (NPPA) effectively slashed the price of cardiac stents by 85% (NPPA 2017c). Though the stent manufacturing industry had been bracing itself, the extent of these cuts came as a shock. No one in the trade had expected that the government would follow through on its promise to bring down the price of cardiac stents, certainly not by such a huge percentage.

Many, especially cardiologists, have questioned why, out of the hundreds of medical devices used in healthcare, the cardiac stent was chosen for price control. It is one among the 22 medical devices notified as drugs under the Drugs and Cosmetics Act, 1940. Since India has no separate regulatory body for medical devices and since these devices were notified as drugs, they are regulated by the Central Drugs Standard Control Organization (CDSCO).

Of the listed devices, the cardiac stent is among the most expensive and one of the most commonly used because of the high prevalence of coronary artery disease in India. In 2014, it was estimated that about ₹2,500 crore was being spent every year on stents alone, equivalent to almost 10% of the central government’s annual health budget in 2013–14 (Times of India 2016). Media reports about the epidemic of unnecessary stenting in the United States (US), driven by commissions given to cardiologists on stent prices, had started surfacing regularly by 2010 (Devi 2011). Several media reports in India too highlighted how cardiologists and private hospitals were pushing patients to go in for expensive stents (Mumbai Mirror 2011).

The Genesis

In 2010, an investigation was launched by the Maharashtra Food and Drug Administration (FDA) Commissioner Seema Vyas into the distribution and pricing of several medical devices. The FDA found that these were exorbitantly priced with huge margins being charged at each point in the chain.

On 23 August 2011, days before Vyas’s tenure came to an end, she wrote to the NPPA and the Drug Controller General of India (DCGI) recommending that ceiling prices be fixed for devices categorised as drugs and suggesting that several other life-saving devices that are implanted in the body be categorised as drugs. The detailed investigation exposing the huge margins was also sent to the NPPA. With Vyas’s departure, the issue was never followed up. Neither the NPPA nor the DCGI did anything with the report that had been handed over to them. In 2013, a Mumbai-based civil society group, the Society for Awareness of Civil Rights (SACR) filed a right to information (RTI) application and got a copy of the investigation report as well as copies of Vyas’s letters. The SACR wrote to the union health ministry and the prime minister’s office (PMO) on the issue, but received no response.

In March 2014, R P Y Rao of the SACR, armed with information from a whistleblower, wrote to Mahesh Zagade, Vyas’s successor, complaining against the kickbacks and margins being given to doctors and hospitals by the distributors of Medtronic stents. Zagade asked Madhuri Pawar, assistant commissioner in the FDA’s vigilance department, to conduct an investigation. The FDA again wrote to the NPPA in September 2014, asking it to fix prices for 14 medical devices, including cardiac stents. The SACR continued to follow it up with several letters to the health ministry and the PMO, urging action on overpricing of stents. Meanwhile, in July 2014, a series of media reports on the investigation exposing the stents racket put pressure on the government to act (Times of India 2014).

December 2014 turned out to be an action-packed month for stent pricing and regulation. On 5 December, the then NPPA chairperson Injeti Srinivas wrote to device companies asking for a list of devices they manufacture or import along with their prevailing prices. The letter cited media reports about huge trade and profit margins on cardiac stents, orthopaedic implants and other devices, leading to exorbitant prices for patients. The NPPA asked such companies, including Abbott, Boston Scientific, Zimmer India, Johnson & Johnson and Medtronics to submit details of price revisions during the previous two years for each type of device. It asked for the information “within three days” as it was required “in connection with issues raised during the ongoing parliament session” (NPPA 2014). No information was provided.

On 11 December, the Department of Pharmaceuticals (DoP), citing news reports on huge mark-up in stent prices due to unreasonable margins to distributors and hospitals, asked the NPPA to study the issue. On 15 December, K M Gopakumar of the All India Drug Action Network (AIDAN), a civil society group working on access to medicines, wrote to Union Minister of Health and Family Welfare J P Nadda about the overpricing of stents. Later, they also met the NPPA’s Srinivas who was seeking action on stent pricing.

On 24 December, the Odisha Drug Controller Hrushikesh Mahapatra too sent a letter to the NPPA, recommending control of stent prices under para 19 of the Drug Price Control Order (DPCO) 2013 since stents were not included in the National List of Essential Medicines (NLEM). Normally, only drugs in the NLEM are covered by price controls. However, para 19 of the DPCO lays down that,

… the Government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any Drug for such period, as it may deem fit…

Mahapatra also suggested that all manufacturers and importers of stents be asked to submit information for monitoring year-on-year increase in the maximum retail price (MRP). The DPCO 2013 permits only a 10% annual increase in the MRP of non-scheduled drugs. The Odisha drug controller also submitted a market survey which showed the price to the distributor, MRP, price to hospital and the selling price to patients for various devices including stents. It showed huge margins being allowed to distributors and hospitals.

Despite reminders, the device companies did not submit the pricing information sought by the NPPA (NPPA 2015). On 16 February 2015, the NPPA issued a show cause notice to all manufacturers and importers giving them two weeks to file the information on their price list. The body also held a meeting with the manufacturers in the last week of February. In an effort to arrive at a reasonable benchmark price for bare metal stents (BMS) and drug eluting stents (DES), the NPPA requested the National Health Systems Resource Centre (NHSRC), a technical support institution under the health ministry, to undertake an assessment of the clinical effectiveness and cost effectiveness of these stents.

In April 2015, just nine months after he took charge as chairperson, Srinivas, who had attempted to bring widely used anti-diabetic and cardiac medicines as well as cardiac stents under price control, was shunted out to the Sports Authority of India (SAI) though he continued to hold additional charge as NPPA chairperson “till alternative arrangements are made” (Times of India 2015b).

Jitendra Sharma, head of the health technology assessment unit of NHSRC, conducted the assessment of cardiac stents, the first of its kind done by the government with the objective of cost rationalisation. The assessment, submitted in May 2016, concluded that after several clinical outcomes were considered, the DES was one-and-a-half times more effective than the BMS. It stated that the MRP in many cases was 10 times the landed cost, the bulk of the margins accounted for by distributors/hospitals and promotional costs. It added that in the case of most stent companies, the mark up over the import price ranged from about 300% to 1,200%. In PPP (purchasing power parity) terms, stents are 10 times costlier in India than in the US and the United Kingdom (UK), said the report, adding that government covered only 45% of angioplasties involving stents and private insurance covered 15%, leaving 40% of patients bearing the cost themselves. The report again recommended price fixation under para 19 of DPCO.

Based on the NHSRC report, the NPPA submitted its own report invoking para 19, well before cardiac stents were included in the NLEM. The report stated that

the ignorance of the consumer coupled with highly exploitative pricing is resulting in catastrophic medical expenditure and impoverishment of the patient and her /his family in a large number of cases, which constitutes the extraordinary circumstances for the proposed intervention.

Opposition to Inclusion in NLEM

At the same time as the Maharashtra and Odisha investigations on stents, in Delhi, a core committee constituted in May 2014 under the chairmanship of V M Katoch, former secretary, Department of Medical Research and former director general of the Indian Council of Medical Research (ICMR), was involved in reviewing and revising the NLEM. The committee was in the process of finalising its recommendations when media reports on the stents scam erupted.

Meanwhile, advocate Birender Sangwan wrote to the health ministry and filed RTI applications in October 2014 demanding to know why stents were so overpriced and why they were not being placed under price control. The health ministry replied in December 2014 that though stents were categorised as drugs, they were not under price control because they were not included in the NLEM and that the NLEM was under revision. In January 2015, the ministry also informed him that on 29 April 2014, the ministry had revised the ceiling price for reimbursement of DES for beneficiaries of the central government health scheme having fixed it at ₹23,625, inclusive of all taxes. Thus, while the central government had capped the price that it would pay for stents, the general population was left to face whatever prices they were charged and howsoever exorbitant.

Following the replies from the health ministry, Sangwan filed a public interest litigation (PIL) on 16 February 2015 in the Delhi High Court seeking directions for coronary stents to be included in the NLEM. The high court disposed of the petition on 25 February the same year, asking the health ministry to treat the petition as a representation for inclusion of stents in the NLEM and to pass an appropriate order and inform the petitioner. As the health ministry did nothing, Sangwan filed a contempt petition in September. The high court pulled up the health ministry (Birender Sangwan v Union of India 2015).

In October 2015, the health ministry constituted a subcommittee of the NLEM core committee, chaired by Y K Gupta, head of the Department of Pharmacology, All India Institute of Medical Sciences (AIIMS), to deliberate upon whether stents should to be included in the NLEM. The subcommittee included 19 cardiologists from top government institutions along with various other experts and officials. It held deliberations with different stakeholders, including stent manufacturers, patient groups and other civil society groups (GoI 2015).

According to the subcommittee report, around 25% of deaths in India are attributed to cardiovascular disease (CVD). Coronary artery disease (CAD) accounts for 90%–95% of all CVD cases and deaths. The committee noted that in India, only about three out of every 1,000 coronary heart disease patients are treated with angioplasty compared to 32 in the US. It concluded that there was an obvious, enormous and unmet need for procedures requiring stent implantation. Hence, it said, coronary stents were an essential medical device and recommended their inclusion in the NLEM. The committee report was submitted on 24 May 2016 and by 19 July, the health ministry notified the inclusion of coronary stents in the NLEM.

Apart from stent manufacturers, hospitals and doctors too opposed the move to include stents in the NLEM. The reason for such opposition was that medicines and devices listed in the NLEM are then notified as Schedule-I drugs, which makes them eligible for price control by the NPPA. Not a single multinational company makes stents in India, and yet they claimed the move would dent India’s industry-friendly image and affect its “Make in India” initiative. Hospitals and doctors claimed this move would limit patients’ choice and would stifle innovation in stents (Financial Express 2016; Business Standard 2016). There was no reference to the reality that doctors and hospitals chose the stent, not the patient. Patients, even educated ones, have no clue about the various kinds of stents in the market. Interestingly, all the arguments against inclusion of stents in the NLEM came from the private healthcare sector. No government sector doctor would speak openly against it, though many of them also promoted and used expensive “foreign” stents (Times of India 2015a).

Fight for Differential Pricing 

Though stents were included in the NLEM on 19 July, they were not notified as a Schedule-I drug by the DoP for five months. As soon as stents were included in the NLEM, the AIDAN swung into action, reaching out to Sangwan and other groups working on public health such as the Jan Swasthya Abhiyan to form a combined front. By now, the Rajya Sabha Committee on Petitions too was hearing a plea seeking a mechanism to check the exorbitant prices of cardiac stents and other medical devices. Starting in January 2016, the committee held several meetings. The AIDAN too made submissions before it pressing for price control of stents (Rajya Sabha petition 2016). As the stent companies and hospital groups intensified their lobbying, the combined front of civil society groups too campaigned vigorously for price control. Sangwan filed a fresh public interest petition in the Delhi High Court in December 2016 pointing out that stent prices had not been fixed. The media also reported on the backdoor lobbying in the DoP by stent companies to block price controls. The DoP finally notified coronary stents as a Schedule-I drug on 21 December 2016. The next day, the Delhi High Court directed the government to fix the ceiling price for stents by 1 March.

This led to the next round of lobbying by companies, hospitals and cardiologists from the private sector to seek differential pricing for stents on the basis of changes in design, delivery system and other “innovations.” This bid for differential pricing had started even when the government had only just started toying with the idea of fixing a ceiling price for stents. The civil society groups strongly opposed differential pricing making several representations to the NPPA chairperson Bhupendra Singh and the DoP on the issue. They argued that no published study showed any of the stents to be superior to the existing ones (Business Standard 2016b; Down to Earth 2017).

Moreover, media reports had shown how cardiologists readily abandoned the stents that they had been promoting as the best ones as soon as the more expensive ones came into the market. Cardiologists and hospitals were known to push for more expensive stents, ostensibly because they were superior, but in reality because they brought them a higher margin. Moreover, in the documents that Abbot filed for approval before the DCGI, the company made detailed comparison between the stents it manufactured and affirmed that they were “identical” and that the different stent brands were merely a case of “rebranding or relabeling.” They had made similar statements before the the US FDA, where they said their latest generation DES was identical to the earlier ones and only differed in the delivery system (Times of India 2015c; 2016).

Yet, most private sector cardiologists came out in defence of the stent companies saying they were justified in asking for different price slabs for various “generations” of DES. Trade bodies like the Federation of Indian Chambers of Commerce & Industry (FICCI) and Confederation of Indian Industry (CII), which you might assume would protect Indian interests, echoed the multinational stent manufacturers in arguing that innovative’ stents should be kept out of price control. However, the Association of Indian Medical Device Industry (AiMeD), which represented Indian stent manufacturers, made it clear that they did not support differential pricing of stents. Unlike AdvaMed (Advanced Medical Technology Association) and MTaI (Medical Technology Association of India), which championed the multinationals’ cause, AiMeD had for long been demanding price regulation (Outlook 2016).

The committee that had examined the essentiality of stents and included 19 cardiologists from the public sector health services studied the question of differential pricing as industry representatives made this demand during its stakeholder consultations. It was categorical in its ruling that there was no need for differential pricing of the different DES or between DES and the bioresorbable vascular scaffold (BVS) or bioabsorbable stents, the latest “innovation” wherein the stent gets absorbed into the body within a few years leaving the vessel free of caging so it can regain its normal function.

After taking into account arguments regarding incremental improvements in stents in terms of thinner struts, deliverability, polymer coating, etc, and the assertion that newer stents were better than older ones, the committee observed that the older DES that were proven to be inferior were neither available nor being used. The committee agreed that DES was definitely superior to bare metal stents, but said there were no good grounds for subcategorisation of currently-available DES as there was no published data establishing their superiority in clinical outcome (outcome for patients) of mortality and myocardial infarction (heart attack). The committee added that if acceptable evidence is produced of safety and benefits, incremental innovations in technology of coronary stents could be considered for subcategorisation. As for the BVS, the committee noted that they were only shown to be “non-inferior” to DES, and there was no data showing superiority. If anything, studies showed an increased rate of sub-acute stent thrombosis or blockage, it noted, adding that a more extended follow-up with a larger number of patients was required.

The committee thus allowed only two categories—bare metal stents, and a second category, including DES and BVS. Thus when the DoP notified stents under Schedule-I, there were only these two categories. Over 95% of the stents used in India are DES. Bare metal stents are only used in a small category of patients who have conditions that might preclude the use of DES while estimates suggest roughly 2% of stents used are BVS. Lobbying efforts for differential pricing continued in the NPPA and DoP right until prices were capped. The Cardiological Society of India members, in particular the president M S Hiremath, drew up differentiation methodologies for categorising stents and other well-known cardiologists like Naresh Trehan and Ashok Seth argued strongly for differential pricing for “next-gen stents.” None of these doctors declared any conflict of interest when they wrote articles in newspapers and appeared on television arguing in favour of what the stent companies sought—differential pricing. None of them talked about the crores of rupees of sponsorship their societies and foundations got from these multinational stent companies, nor about the crores their hospitals made from the margin on these so-called “next-gen” stents. None of them referred to the published peer-reviewed articles in international journals that had concluded there was no proven superiority of one stent over another in terms of outcomes for patients.

Calculation of Ceiling Price

Once it became obvious that the NPPA was going ahead with the process of price capping, the scramble was to persuade the authority to use the formula that would give companies the maximum ceiling price possible.

By the middle of January 2017, Bhupendra Singh made public the possible ceiling prices depending on which formula was used to calculate it. The stent industry wanted the price of a stent to the hospital to be the basis for price fixing. Understandably, the NPPA’s calculation of the average price of DES to hospitals using industry-submitted data gave the highest ceiling price of over ₹67,000, which included the 16% margin to the “retailer,” in this case, the hospital. The lowest ceiling price would be the CGHS price of ₹23,625 including taxes (NPPA 2017a).

The hospitals resisted being categorised as retailers. Moreover, while a hospital might have a bill showing it paid ₹80,000 for a stent, in reality it would have paid only ₹50,000. This is done through a system of credit notes where the dealer gives the hospital a credit note of ₹30,000 after billing the hospital for ₹80,000. Thus, the real price to hospitals was much lower than what they were showing as the billed purchase price. The AIDAN resisted the hospital price-based calculation and Malini Aisola explained,

We should not forget that affordability is the touchstone in the exercise of price fixing. The government must not fix a price based on a methodology that is faulty and legitimises the exorbitant prices charged to patients. It should work towards protecting the right to health and putting an end to the exploitative practices in which the industry, hospitals and doctors are complicit. (Nagarajan 2017)

Indian stent manufacturers resisted the use of import price of stents as the basis of calculation. They pointed out that multinationals imported stents from their parent companies, which would have included their profit in the import price, and that the profit to the Indian arm was over and above that.

Hefty Margins

The price of a stent to the patient included hefty cuts at every level of the trade. According to dealers and distributors of stents, most cardiologists got a “cut” on every stent they implanted. The cut ranged from ₹15,000 to ₹35,000. Thus a dealer’s margin, when he sold to a hospital, included the cardiologist’s cut. “Hospitals like to pretend that they do not know about the cut their cardiologist was taking,” said a dealer. Companies, especially multinationals, use dealers to bribe doctors and hospital managements to get the contracts because many of these multinationals supposedly adhere to a code of ethics that prevents them from bribing directly. “We are aware cardiologists take a cut and wish we could put an end to it. We would get the stent cheaper if the price did not include that cut,” said a senior management executive of a corporate hospital chain.

If there were any doubts regarding the size of these margins, the data put out by the NPPA on 16 January put them to rest. It showed that the margin on stents ranged from 270% to 1,000%. The data showed that hospitals extracted the highest margin—11% to 654%. The reason for the spirited opposition of hospitals and cardiologists to price capping for stents became clear. While they all claimed they were glad prices were being brought down as it would benefit patients, they lobbied hard to thwart price control and to get differential pricing, ostensibly to ensure that the latest innovations were available to patients and because they worried about the quality of stents (NPPA 2017b).

Many lobbied especially hard for bioabsorbable stents to be kept out of price control as it was a “revolutionary” technology. Singh held hearings with all the stakeholders. However, a meta-analysis on the two-year outcome of BVS compared to DES published in the British Medical Journal towards the end of January 2017 showed that the BVS may be associated with worse long-term outcomes compared to DES. The fact that the BVS was being used in India since 2012, long before the stent got clearance by the US FDA, gave the lie to the claims of cardiologists that they preferred foreign manufactured stents only because they were approved by the US FDA and had more clinical data to back their safety and efficacy claims than Indian made stents (US FDA 2016; Angioplasty.org 2017).

The BVS which was imported for ₹42,000 and sold to patients for almost ₹2 lakh, got US FDA approval only on 5 July 2016. Yet, the senior-most cardiologists appear to have had no problem using the BVS, which had neither FDA approval nor enough clinical data to back claims of superiority, four years before this happened. Since then, more studies have been published showing the elevated risk of the BVS that has made regulators of several countries issue safety alerts regarding their use. Many have also restricted the use of this stent (CDSCO 2017).

Once the data on margins were publicised, doctors and hospitals talked of the economics of running a catheterisation lab and the hospital as justification for extracting a huge margin on stents. In reality, hospitals do not stock all the various brands or sizes of stents, as that would take up too much space. The hospitals also do not bear the cost of expired stents as they never buy any stent and stock it. They only keep a very limited inventory of the most commonly used stents and pay only for those they use. The rest is taken back by the dealer at his cost.

Even the payment is usually made either over a month later or sometimes even after six months, when the hospital gets the money from the insurer as borne out by the Maharashtra FDA report of 2011. It is the distributors or dealers who stock the stents, bear the cost of expiry, ensure the stent of the required brand and size is delivered to the hospital when needed and wait for payment from the hospital. Thus, the margin charged by hospitals seems completely out of proportion with what it costs them. Moreover, there are separate cath lab charges or these charges are included in the angioplasty packages offered by the hospitals usually separate from what they bill for the stent. Yet, hospital associations threatened that they would have to hike up charges of other components of an angioplasty to offset the loss on margins they are used to making on stents.

Making a Case for Regulation

It was against this backdrop that the ceiling price was fixed by the NPPA. According to the NPPA notification on 14 February, the price of the DES and BVS was fixed at ₹29,600 and that of bare metal stents at ₹7,260, a steep cut from what was being charged in most hospitals. With the Prime Minister Narendra Modi throwing his weight behind the exercise of fixing the ceiling price, all talk about the companies resisting the price capping or going to court against the move died a quick death. The NPPA followed it up with several notifications seeking greater transparency on how stents were billed to patients and several other measures to crack the whip on hospitals for overcharging, or on companies that tried to withdraw stocks.

There is already a pushback against the price capping as stent companies, who also manufacture other devices, fear that the NPPA might follow through on its declared intention to regulate the prices of other devices categorised as drugs. Three of the largest stent multinationals have threatened to withdraw their most expensive stents from the market citing “commercial unviability.” It is a test of the government’s resolve regarding price control in public interest.

There has been criticism from several quarters about the government capping the price of just one item, stents. People have questioned how the government could possibly regulate the price of everything used in healthcare delivery. As several news reports have shown, companies collude with hospitals to charge huge margins on everything from medicines and diagnostics to all consumables, including bandages, disposable syringes, catheters and implants.

While all of this is true, the NPPA’s efforts to regulate stent prices have registered two significant gains. One, they have laid bare the nexus between doctors, hospitals and companies and exposed the profiteering in the private health sector that delivers health to roughly 70% of the population. Even more importantly, it has shown what is possible if various arms of the government like the health ministry, FDA, NPPA and DCGI actually functioned as they were meant to. Stents are merely indicative of the complete lack of regulation and the consequent exploitation that patients are subjected to. If anything, the stent pricing issue strengthens the case for greater regulation.

– See more at: http://www.epw.in/journal/2017/23/insight/pricing-cardiac-stents.html#sthash.cSOByjCc.dpuf

Advertisements

Share your thoughts

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Create a free website or blog at WordPress.com.

Up ↑

%d bloggers like this: