Context: High mark-ups on medicines and medical consumables can substantially increase hospital bills and contribute to medical impoverishment.
- Recent examples from Maharashtra indicate a large gap between the procurement price paid by hospitals and the price charged to patients.
- The issue raises concerns regarding price regulation, transparency, patient rights and consumer protection.
Extent of Hospital Mark-ups
- Maharashtra Food and Drug Administration (FDA) Commissioner Tukaram Mundhe highlighted instances such as a drip set purchased for ₹11 but carrying a printed price of ₹325, and a syringe bought for under ₹7 but marked at ₹57.
- An audit of critical-care bills from private hospitals in Maharashtra found that none of the 46 medicine brands examined were charged within the pandemic-era limit of a 10% mark-up over purchase price.
- Nearly half of the medicines examined were reportedly charged at more than 150% above the hospital’s purchase price.
- Examples included a paracetamol drip purchased for about ₹33 and billed at ₹408, and an antibiotic injection purchased for around ₹180 and billed at ₹950.
- Medicine mark-ups commonly ranged between 200% and 400%, while consumables could carry even higher margins.
- A drip set costing around ₹12 could be billed at ₹160 or even ₹270, while an oxygen mask costing about ₹55 could be charged up to ₹570.
Why the Issue Matters
- Patients requiring hospitalisation, particularly critical-care patients, often have limited ability to compare prices or purchase medical products elsewhere.
- Large mark-ups can significantly increase out-of-pocket expenditure, potentially pushing vulnerable households into medical impoverishment.
- Information asymmetry between hospitals and patients makes it difficult for patients to determine whether the prices charged are reasonable.
- Mandatory disclosure of procurement and billing prices can therefore improve price transparency and consumer choice.
Existing Regulatory Gap
- A 2016 Department of Pharmaceuticals committee chaired by Sudhansh Pant identified high Maximum Retail Prices (MRPs) as a mechanism that could disadvantage consumers.
- The committee recommended capping trade margins on medicines and implants, whether price-controlled or not, within a range of 35%–50% depending on price.
- However, the recommendations have not been comprehensively implemented.
- According to the article, only around 18% of medicines are currently subject to statutory price control, leaving a large proportion outside direct regulation.
Price Control of Medicines
- India's pharmaceutical price regulation operates primarily through the Drug Price Control Order (DPCO).
- The National Pharmaceutical Pricing Authority (NPPA) implements and monitors pharmaceutical price regulation under the Department of Pharmaceuticals.
- Price regulation generally focuses on specified medicines considered important from a public-health perspective, rather than covering every medicine and medical consumable.
- Expanding regulation would require balancing patient affordability, availability of medicines, manufacturing incentives and sustainability of the pharmaceutical market.
Three Measures Proposed
1. Mandatory Disclosure of Hospital Procurement Prices
- State FDAs could require private hospitals to disclose, during billing, both the price paid by the hospital and the price charged to the patient for medicines and consumables above a specified value.
- Displaying a procurement price of ₹12 alongside a charge of ₹160 would allow patients to understand the extent of the mark-up.
- Greater transparency could encourage hospitals to reduce excessive margins and allow patients to explore alternative sources where permitted.
2. Expand Statutory Price Regulation
- The Central Government could expand statutory price regulation to cover essential medicines and medical consumables.
- This would require appropriate amendments to the Drug Price Control Order, with the Department of Pharmaceuticals and NPPA playing important roles.
- The objective would be to prevent excessive pricing while ensuring continued availability of essential medical products.
3. Strengthen Patients’ Right to Purchase Medicines Elsewhere
- Maharashtra FDA orders issued in 2016 and 2022 state that hospitals cannot compel admitted patients to purchase medicines exclusively from the hospital pharmacy.
- The National Consumer Commission has regarded such compulsory purchasing as an unfair trade practice.
- The right is also recognised in the National Patients’ Rights Charter.
- Hospitals should prominently display this right and regulatory authorities should ensure its effective enforcement.
Challenges in Regulation
- Excessive price regulation could potentially affect availability, supply chains and incentives for manufacturers and healthcare providers.
- Effective regulation therefore requires reliable information on procurement prices, mark-ups and billing practices.
- Enforcement is particularly important because formal patient rights have limited value if patients are unaware of them or hospitals do not comply.
Way Forward
- Establish standardised and transparent hospital billing that enables patients to distinguish procurement costs from hospital charges.
- Strengthen monitoring of medicine and consumable prices through the NPPA and State FDAs.
- Review the coverage of statutory price regulation based on essentiality and public-health importance.
- Ensure that patients are clearly informed about their right to obtain medicines from permitted external pharmacies.
- Strengthen accessible complaint, audit and enforcement mechanisms against unfair billing practices.
- Regulation should combine price transparency, reasonable margins and patient choice rather than relying on a single intervention.
Conclusion: Affordable healthcare requires not only access to treatment but also fair and transparent pricing. Strengthening price regulation, hospital billing transparency and patients’ purchasing rights can help reduce avoidable expenditure and protect households from medical impoverishment.
