Private hospitals are making a killing by buying medicines and devices in bulk at huge discounts and selling them to patients at the marked maximum retail price accounting for 15-35% of their profits. Patients, as a captive market, have little choice but to bear the inflated costs. Take an example of Shalini Pahwa , diagnosed with multiple myeloma, a kind of cancer. She was given an injection, Novartis's Zometa, that costs Rs 15,200 per shot, every three to four weeks for over two years in a top private hospital in Gurgaon. On a work trip to Bangalore, she got the injection at a hospital there for just Rs 4,000. When she confronted the Gurgaon hospital about this huge cost difference, it readily offered her a cheaper option — Cipla's Zoldria for Rs 2,800.
"Why didn't they tell me earlier of the cheaper option? Why do I have to bargain like in a mandi? Now I go to a different hospital and get the same injection, Zoldonat, manufactured by Natco, for just Rs 800 and I feel just fine," says Pahwa. A haematologist, who didn't wish to be named, explains the more expensive choices thus: "Some doctors feel safer giving the medicine of the originator company as they feel there will be better quality control. And some people feel if it's cheap it can't be good enough. But generics, especially by good companies, are as good as originator drugs. It's better to give patients a choice."
But quality issues may not be the only reason why a hospital chooses to push the more expensive option. Zometa is sold to stockists for just Rs 13,000, according to an industry insider. At that rate, the hospital would make a profit of Rs 2,200. Clearly, the Rs 2,800 injection could not yield that huge a margin.
Take the case of a broad-spectrum antibiotic, meropenem, used particularly in ICUs for patients with serious infections. Cipla's brand Merocrit is sold for Rs 2,965 per gram by a top hospital. The adult dose is about 1-2g every eight hours for about 10 days. That's about Rs 90,000 to Rs 1.8 lakh on just one antibiotic. Merocrit is sold to hospitals for anything between Rs 700-900 per gram. So the hospital makes anything between Rs 70,000 and Rs 1.4 lakh on just one patient by pocketing the discount..
Interestingly, other brands of meropenem are much cheaper in many not-so-high-end hospitals. "The MRP per gram of meropenem manufactured by Zuventus is Rs 698 and by Lupin, Rs 988. The hospital buying price for the Lupin brand Merotrol is Rs 600. When the patient is charged the MRP, the hospital makes Rs 400 per gram or Rs 12,000 to Rs 24,000 per patient over 10 days on one antibiotic even in a not-so-expensive hospital," explains a veteran doctor who wishes to remain anonymous. It's not just medicines, hospitals charge MRP on every consumable — from syringes and catheters to bandages and diapers — though they buy them at huge discounts. To protect this revenue stream, patients are not allowed to buy anything from outside the hospital, ostensibly to ensure quality.
"We give hugely discounted rates. It is not our fault that hospitals choose not to pass on the discount to patients," argues a company's sales official who didn't wish to be named. However, that leaves one question unanswered — why hospital MRPs are so much higher than actual selling prices? Doctors point out that the huge MRP enables companies to attract hospitals with the prospect of high margins. "Pharmaceuticals or devices and diagnostics are two major revenue earners for any private hospital. Besides, as a private venture, we also have to ensure healthy profits for the investors or owners," points out a hospital administrator.
Public hospitals, in contrast, can not only get drugs and devices at even steeper discounts — the government buys in bulk — they have no compulsion either to earn ever higher profit margins. Yet, the failure of governments to boost public health infrastructure in keeping with rising demand has pushed patients to the private sector. And for many, this means impoverishment.