India Today · 16 Sept, 20:50

Economy, business and finance

2,800% markup? Tukaram Mundhe says consumers can’t be taken for a ride on medical pricing

Maharashtra FDA Commissioner Tukaram Mundhe has questioned steep mark-ups on hospital consumables after a pricing survey. He said the findings have been sent to the NPPA as concerns grow over transparency and patient billing.

Maharashtra FDA Commissioner Tukaram Mundhe flagged mark-ups of up to 2,800% on hospital consumables, questioning how products bought for Rs 11 could carry MRPs of around Rs 325. He said pricing must be rational, transparent and fair, with the interests of manufacturers, hospitals and consumers considered, while ensuring consumers are not taken for a ride.

“If they can procure an IV set for Rs 11, then why can't its MRP be around that price?” Maharashtra FDA Commissioner Tukaram Mundhe questioned in an exclusive interview with India Today, highlighting the wide gap between the price at which some hospital consumables are sold to hospitals and their declared MRP.

Mundhe said the discrepancy was “really inexplicable” and “very, very revealing”, questioning why a product sold to a particular hospital at around Rs 11 could have an MRP of about Rs 325.

His remarks came after a survey conducted across the Mumbai Metropolitan Region and other hospitals, based on inputs and complaints about discrepancies between MRP, the price at which hospitals procure products and the amount charged in bills.

Mundhe said the survey found differences ranging from 150% to 2,800% between the MRP and the trade price at which hospitals procured products.

The products included consumables used daily in inpatient departments, such as IV sets, nebulisers and other hospital supplies.

According to Mundhe, the benefit of the difference between the procurement price and MRP was not being passed on to consumers. He said it could instead remain with the hospital, pharmacy industry, manufacturer or dealer, depending on the case.

“That is not fair trade practice in a real sense. It is not transparency,” he said.

Mundhe said his department had taken up the matter with the National Pharmaceutical Pricing Authority (NPPA), the appropriate authority in the sector. A letter of proposal was sent to the NPPA detailing the discrepancies, gaps, mark-ups, MRPs and actual practices found during the survey.

Mundhe said the issue needed to be looked at in a “360-degree context”, rather than as a contest between the consumer, pharmaceutical industry, hospital or regulator.

He noted that manufacturers had intellectual property rights and that trade margins had to be reasonable. Referring to the prevailing regulatory framework, he said the Essential Commodities Act and the Drug Price Control Order (DPCO) governed the pricing of essential medicines, with the current DPCO dating to 2013.

But he questioned the rationale behind a product being sold to a hospital for Rs 11 while carrying an MRP of around Rs 325.

“Why it takes to be two thousand eight hundred percent odd up, uh, to cap that MRP?” he asked, adding that a margin of perhaps 10%, 20% or 25% could be considered as an example.

Mundhe said this was the issue his department had raised after its findings and why it had approached the appropriate authority.

Asked whether he was proposing a cap or fixed price, Mundhe said he was not proposing any cap “per se”. He said the MRP would have to be decided on a product-to-product basis.

However, he said the margin while fixing an MRP had to be “rational”, “open” and “transparent”, adding that there could not be such a large gap.

Mundhe said his department had suggested several measures, including bringing certain products under the DPCO, deciding trade margins, improving inter-agency coordination and strengthening the pricing monitoring mechanism.

He stressed that the final decision would rest with the competent authority, which would consult stakeholders including the pharmaceutical industry, hospitals, regulators and consumers.

Responding to the argument that hospitals incur costs for maintaining facilities, round-the-clock nursing and other exigencies, Mundhe said any intervention would be discussed with hospitals and the pharmaceutical industry.

“It is not going to be a unilateral decision. It's not going to be arbitrary,” he said, adding that the decision did not lie with him and was a policy-level matter.

But he maintained that hospitals needed to explain the large gap between procurement prices and MRPs.

“If a particular product is MRP three hundred and twenty odd rupees [and] is being sold to hospital eleven rupees, the same product which is outside will get at the same price. Now where is this margin going? That is the valid question to be asked by either the consumer or a regulator for that matter,” Mundhe said.

He said his department had studied and surveyed the issue after it was brought to his attention and found that it needed to be addressed.

CONSUMER WILL NOT BE TAKEN FOR A RIDE: MUNDHE

Mundhe said the interests of manufacturers, hospitals and consumers all had to be considered while arriving at a decision.

“Pharmacy industry or manufacturer will not work in void. Hospitals will not work in void. At the same time, consumer will also not be work in void. They will not also be taken for a ride,” he said.

He said transparency and ethical practices were needed from manufacturers, hospitals and consumers, along with compliance with the law.

Asked what he considered a fair percentage markup, Mundhe declined to put a figure on it, saying that deciding the margin was the role of the NPPA and the industry.

“I’m no way authorised, nor I’m expertise in that,” he said, adding that his role as a regulator was to take up issues that came to his attention.