The Narendra Modi government faces the risk of appearing indifferent to excessive profiteering by sections of the healthcare industry in spite of its multiple pledges of making healthcare affordable. The National Pharmaceutical Pricing Authority, the Centre's agency tasked with keeping checks on the prices of medicines, has released documents that illustrate how hospitals may extract profits of up to 1,200 per cent on drugs and devices. A disposable syringe available to a hospital from the manufacturers' distribution chain for Rs 15.29 may be billed at its maximum retail price of Rs 200. India's existing drug pricing regulations allow manufacturers to inflate the MRPs to allow everyone along the supply chain - distributors, retailers, hospitals - to claim slices of the profit pie. Medicines make up a significant proportion of healthcare expenses for households. But patients remain largely oblivious or hamstrung to do anything about such pricing practices.
Sections of patients' rights advocates and concerned doctors have argued for the reintroduction of cost-based pricing which the Centre had abandoned in 2013. In cost-based pricing, manufacturers fix MRPs by adding all margins to be paid along the supply chain to the factory price of the product. This is not a novel idea. The drug price control order of 1995 had fixed the 'Maximum Allowable Post-Manufacturing Expenses' at 100 per cent to calculate MRPs to cover packing, shipping and all margins. Cost-based pricing does not imply no profits at all. Profit is good: it drives enterprise and business and may also spur innovation. Private enterprise, sensing a burgeoning public demand, has, over the years, invested in hospital infrastructure and is delivering healthcare services - arguably, services meeting world-class standards in some institutions that are unavailable in many public hospitals. Profits are important, but they need to be monitored and regulated. However, neither the Centre nor the NPPA has made any move to return to cost-based pricing. The healthcare industry may well argue that in 2018, the MAPME should be more than 100 per cent. That is an issue of negotiation. The Centre has repeatedly declared its intention of making healthcare and medicines affordable. A decision to return to cost-based pricing would be a critical step towards that goal.