Why do stents cost so much?

For those of us comforting ourselves that maybe the prices of stents are high because of their innovative nature, the recent government formula to cap prices has laid bare an unpalatable truth.

Margins. A bulk of the price you pay for a stent goes into margins paid to the various hands it passes through before it reaches the patient. A problem similar to food, where the farmer’s price gets bulked up before it reaches the consumer because of the layers of middlemen along the way.

A draining system The prevailing trade margins range from 11 per cent to over 1000 per cent at different levels, according to data from the National Pharmaceutical Pricing Authority (NPPA). If that is eye-popping, consider the fact that the margin system is unlikely to go away. In its capping formula, the NPPA suggests three independent approaches, including landed cost plus 35 per cent margin; or average price to distributor (PTD) plus 16 per cent margin; and average price to the hospital (PTH) plus a 16 per cent margin. This and other costs such as transportation push the stent price from ₹20,000-plus to over ₹60,000 for drug-coated stents.

That is about half the price patient-families may have paid in the past. The privately-employed who do not have access to government-run CGHS facilities have paid prices hovering around ₹1 lakh and more, depending on the stent.

More probing on margins is met with intriguing explanations. In the landed cost plus 35 per cent slab, the margin goes to the company which then handles payments to distributors, hospitals, etc. But the other model pegs a margin for distributor and hospital, to be taken separately. Curious, because in practice it will be taken together, as companies presently do not sell directly to hospitals and do so through distributors. So does that mean a cascading 32 per cent in margins?

Cardiac stents are wire-like meshes inserted into blood vessels to remove blockages to prevent heart attacks or strokes. There are old generation bare metal stents, more evolved drug-eluting stents and newer absorbable stents.

Patient-families may have grudgingly accepted the different prices if the Government supported it with data that showed better outcomes for the patient. (Indian Council of Medical Research, please do that comparative efficacy and price study on Indian and foreign stents and make the findings public!) That apart, medical experts uncompromised by an obvious bias say that a case can be made for all types of stents.

Each has its benefits when used in the right heart condition. Every heart condition may not need a stent; patients who do should be able to afford the “right” one. The decision about who may need a stent or who may not should be driven by a set of “rational use guidelines” that outline where a bare metal stent is good enough to do the job and where a drug-eluting one may be needed.

Reason it out Unfortunately, scientific reasoning is barely visible. Similar to pharmaceuticals, trade and distributor margins are accepted, even enshrined in the law, and neither industry not government are questioning its need.

Industry representatives explain the need for distributors and margins “in a country like ours”. Much of the distributor’s working capital is locked up because of a practice whereby they have to manage an inventory of stents in a hospital. For every one stent used, they need to keep a massive inventory, explains industry.

And while this inventory may get used up faster in Delhi or Mumbai, it’s not so in Guwahati or Siliguri. But it still needs to be maintained so as not to deny stents in smaller centres, a representative adds.

Besides, distributors give credit facilities to hospitals, and their payments come three to 12 months late in some cases, the Government allegedly being a late pay master. Also, there’s wastage when a stent is taken out of its sterile pack and then discarded because it does not fit the artery size.

All this explains the need for margins but it certainly does not make it right as the patient ends up paying for inefficiencies in the system of procurement, payment and use. The NPPA and the health ministry need to streamline processes, so that the patient pays for a quality and effective product.