Fortis Hospital in Gurgaon.(Sanjeev Verma/HT File Photo)
Fortis Hospital in Gurgaon.(Sanjeev Verma/HT File Photo)

Delhi pvt hospitals maybe asked to cut profit margins, give drugs from govt list

The committee was formed after reports of medical negligence at Max Hospital and overcharging at Fortis Memorial Research Institute (FMRI) put the spotlight on over-billing at private hospitals.
Hindustan Times, New Delhi | By Anonna Dutt
UPDATED ON JAN 16, 2018 10:10 AM IST

Private hospitals should only prescribe from the list of 376 drugs on the National List of Essential Medicines (NLEM), and not charge a premium of more than 15% over market rates on diagnostic tests they conduct, according to the nine-member committee set up by the Delhi government to formulate norms for the profit margins of private hospitals.

The committee, headed by Delhi’s director general of health services, was formed in December after reports of medical negligence at Max Hospital, Shalimar Bagh and overcharging at Fortis Memorial Research Institute (FMRI), Gurgaon, put the spotlight on over-billing at private hospitals.

For drugs and consumables not on the National List of Essential Medicines, the committee recommended that private hospitals be allowed to charge a profit of not more than 50% on the procurement price. Hospitals procure drugs and consumables at a fraction of the maximum retail price (MRP), often as little as 20-30% of the printed price.

“This will make a huge difference. The drug price control orders fix the rates of NLEM drugs by calculating a market average of the selling price of drugs in a particular category, ensuring some profit for manufacturers but not too much,” said Professor Vijay Bhalla, director, SGT College of Pharmacy, Gurgaon.

“Many pharmaceutical companies create irrational drug combinations just to get out of the NLEM list; this removes the cap on pricing and allows them to fix high MRPs,” he added.

An investigation by India’s drug pricing watchdog, the National Pharmaceutical Pricing Authority (NPPA) revealed in December that Fortis Memorial Gurgaon made a profit of more than 1,700% on drugs and consumables used for the treatment of a 7-year-old Adya, who died of dengue in September last year.

The hospital has maintained that its pricing was “in-line with what other private hospitals in India charge.” It denied it had charged above the marked MRP or violated the drug price control order, both of which do not require that the profit made on non-NLEM drugs be less than 50%.

The committee has asked Delhi government to ensure that the NLEM drugs are also available at pharmacies. “As profit margins on NLEM drugs are lower, pharmaceutical companies often do not push these medicines in the market,” said Dr Arun Gupta, president of the Delhi Medical Council, and one of the members of the committee.

“The committee found that drugs and investigations constitute 50-60% of a bill at the hospital, so these were the areas on which we focussed,” he added.

Among the recommendations is that the charges for diagnostic tests done within hospitals must not exceed their costs at stand alone labs by more than 10-15%.

“People visiting hospital out-patient departments have the option of getting investigations done from other labs, but patients who have been admitted have to get tested in the hospital. We have recommended that the cost of the tests should be comparable,” said Dr Gupta.

Apart from the drugs and investigations, the committee also examined fixed “packages” offered by hospitals for various surgeries and procedures. “Often, the bill exceeds the prices mentioned in the packages by a huge margin, so we have suggested that the prices should vary not more than 10%,” said Dr Gupta.

To keep the price within a fixed range, the committee suggested that hospitals offer “special” packages that costs slightly more than normal packages to cover the cost of potential complications. “It will work like insurance, not all the people who opt for the special package will have complications, so the ones who do can be treated with this fund,” he explained.

A corpus for patients coming to the emergency department so that they do not have to pay for anything more than the actuals of drugs and consumables used and colour-coding NLEM drugs to make it easier for customers to identify them are among the other recommendations of the panel.

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