Medical device industry figures released by the government's price regulator suggest that distributors and hospitals in India can make tens of thousands to lakhs of rupees in profits on each knee-joint replacement implant sold.
Two sets of figures released by the National Pharmaceutical Pricing Authority (NPPA) today and on August 4 show the trade margins shared by distributors and hospitals for knee-joint implants range from about Rs 35,000 for one product to Rs 3 lakh for another product.
The NPPA, which has put up sheets displaying the trade margins on its website, said it is doing so "to bring in transparency". The move comes against the backdrop of independent evidence that drug manufacturers and device makers in India are setting maximum retail prices (MRPs) that allow distributors and hospitals profits.
The numbers released today, for instance, show that a joint component of the knee system brought into India at a landed cost of about Rs 1.98 lakh is sold to distributors at Rs 3 lakh but carries a maximum retail price (MRP) of Rs 6 lakh. This effectively allows the distributors and hospitals to share a profit of Rs 3 lakh between themselves.
Another implant has a landed cost of a little over Rs 65,000. It is made available to distributors for about Rs 1.67 lakh but carries an MRP of Rs 4.13 lakh. This would imply a margin of Rs 1.02 lakh for the device maker before the company passes it to distributors and a margin of Rs 2.46 lakh that distributors and hospitals can share on each implant.
But members of an association of medical device makers claimed today that manufacturing companies make only "thin" margins on knee-joint implants, in effect aligning themselves with the suggestions from the NPPA figures that the trade margins for distributors and hospitals are higher.
The industry is worried that the NPPA will impose price caps on knee implants in the same way as it had capped earlier this year the prices of coronary stents, devices used to treat survivors of heart attacks. The NPPA had fixed caps of about Rs 30,000 on all stents, even those that were earlier selling at over Rs 1.5 lakh.
"Device-makers selling knee implants make thin margins. If the government imposes a price control on knee implants the way it did on cardiac stents, it will jeopardise the industry," said Sushobhan Dasgupta, director of the Medical Technology Association of India (MTAI).
The NPPA figures show that relatively low-cost implants also allow profit opportunities to distributors and hospitals. The least-priced "total knee system" listed by the NPPA has a landed cost of Rs 23,408, is sold to distributors for Rs 23,513, but carries an MRP of about Rs 59,000. So the device maker makes only Rs 105 on this implant, but allows distributors and hospitals to share about Rs 35,000.
Senior MTAI officials who met with NPPA officials today said they plan to draw up a proposal that would help improve patients' access to knee implants. The industry estimates that about around 1.2 lakh have knee replacement surgeries every year in India, although the number of patients who need the surgery is much higher.
"Let's just say, we're now in a non-ideal situation," a senior MTAI official said. "We're working on a proposal that we hope to present to the government within two weeks."
The officials declined to discuss details of the proposal but indicated that it might include suggestions on trade margins and on the need to differentiate implants - price each implant on the basis of its inherent features - instead of imposing a uniform price cap on all.
The MTAI in a statement today also said given the specialised instrumentation systems, orthopaedic companies mostly provide support in the operation theatre through dedicated human resources. "The cost of manpower and surgery support, running into thousands of rupees per surgery, is completely borne by the channel (hospital)."
But MTAI officials asserted that they cannot speak for hospitals. Doctors campaigning for ethics in the healthcare industry had earlier this year released documents showing drug companies offering hospitals opportunities to make profits on a range of drugs used to treat cancers, heart disease and infections. – The Telegraph