Will increased scrutiny reform or reverse the healthcare sector?

201708ehm02A foray into healthcare seems to be Kolkata-based ITC’s latest bid to transform itself from a cigarette-maker into a diversified corporate across FMCG. ITC Chairman YC Deveshwar’s announcement post the AGM that the company was looking to set up multi-speciality hospitals that will set “a new standard in healthcare by making patient care as the central focus, and not incentivise doctors to create revenue” was greeted with mixed responses. One major apprehension is given ITC’s play in the premium hospitality segment , will an ITC hospital go the same way?

The ITC Chairman sought to lay these fears to rest at a post-AGM press conference. He reiterated that a “different model” with patient wellbeing at the centre is being worked out for the hospital.   While it is too early to predict how ITC’s healthcare foray will pan out, one more player, and a big one at that, reconfirms that healthcare will continue to attract investment, inspite of the Government of India’s efforts to increase regulation.

Even as the cover story of Express Healthcare talks about how hospitals could convert their on site pharmacies into a profitable revenue stream once they deploy more efficient systems and processes (See story: Hospital Pharmacies: A boost to profit margin), the price caps on medical devices and increasing span of medicines under price control have already eaten into their margins. The recent roll-out of GST too hasn’t been kind to hospitals. Though healthcare has been exempted from GST, the input costs, in terms of several services in hospitals, has gone up to 12 per cent. Hospital infrastructure costs, like a comprehensive maintenance contract, has increased from eight per cent to 18 per cent. Estimates are that this increase could result in hospitals spending around four per cent more, a cost that most will pass on patients. (For detailed anaylsis, read: GST: A doubled-edged sword).

There is one more regulation making its way through the regulatory channels: the proposed Uniform Code for Pharmaceutical Marketing Practices (UCPMP), which will increase scrutiny on pharma companies, forcing them to reform. As we saw with the price cap on stents and other medical devices, the UCPMP’s goal is to break the alleged nexus between pharma companies and doctors as well as hospitals.

According to industry sources, the UCPMP has been sent to the Law Ministry for a vetting, which is generally the process before it is notified. The DoP was reportedly unhappy that the pharma industry wasn’t voluntarily following the Code. With Prime Minister Modi’s push to cut prices of medicines and healthcare costs, the UCPMP might be notified and become mandatory, in spite of opposition from industry.

The Alliance of Doctors for Ethical Healthcare (ADEH) Groups of doctors, has written to Minister of Chemicals and Fertilizers Anant Kumar, with copies to the PM and Minister of Health & Family Welfare, concerned that the June order of the DoP, meant to regulate the UCPMP, has many clauses which could be misused. The ADEH letter states that medical devices are not part of the order (Clause 1, Sub Clause 3), which means a large chunk of expensive items where the companies make huge profit have been exempted, leaving a big scope of corruption by the companies. Hence this must be included in the order.

But this is refuted by the Medical Technology Association of India (MTaI) which denies that its member companies make huge profits on their medical devices. In fact, according to MTaI, the duly verified and audited margins made by each of their member companies are readily available with the Registrar of Companies.

The ADEH letter also asks the DoP to omit Clause 3, Sub Clause g, (provided a pharma company may sponsor any seminar…) as it leaves scope for pharma companies to spend huge amounts in the name of holding CMEs. For the same reason, the letter from ADEH says that the clause on health awareness camps is liable to be misused and should be done away with. The letter also reasons that all drugs should be in the National List of Essential Medicines so that they are brought under the Drug Price Control Order as once any chemical is labelled as drug it automatically becomes essential as it does not remain for commercial consumption but for the use of healthcare on the advice of the doctor. One of the other points brought up in the ADEH letter is there is no mention of penalty to companies for manipulating drug prices, like hospital price and MRP. Thus the healthcare sector will have to navigate these challenges even as it seeks to capitalise on the opportunities.

Viveka Roychowdhury