The government has capped prices of knee implants, but what about overall surgery costs?

The National Pharmaceutical Pricing Authority announced price caps on orthopaedic implants used in knee replacement surgeries last week, bringing the price of the basic model of implants down by 65%. While making the announcement, Minister for Chemicals and Fertilisers Ananth Kumar said that the move would save patients in India Rs 1,500 crore every year. However, experts within the medical industry are unconvinced that costs for patients seeking knee replacement surgeries will fall since hospitals might make up for the lower implant prices by raising other prices associated with the procedure.

Hospitals in India conducted between 1,00,000 to 1,50,000 knee replacement surgeries every year. A management consultant report estimates that the orthopedic devices market in India is worth Rs 2,400 crores and to grow at around 20% every year for the next decade to reach Rs 16,000 crores by 2030. A standard cobalt chromium knee implant used to cost close to Rs 1.5 lakh till last Wednesday, when the NPPA said that the maximum price charged for the device could be only Rs 54,720. The NPPA’s analysis of knee implants prices showed that some models were sold at 400% trade margins.

But the cost of the implant is only a part of the expense of a knee replacement surgery.

At some hospitals in Mumbai, for instance, patients may spend between Rs 1 lakh and Rs 3 lakh apart from the price of the implant for hospital facilities and a particular surgeon’s expertise.

Hospitals that have bought knee implants before the price cap was fixed will now have to sell the implants at less than half the price they bought the implants at. Health activists fear that hospitals will increase peripheral costs to recover their losses.

“The impact of capping the prices will be nullified if hospitals further hike their procedure costs,” said Malini Aisola, a member of the All India Drug Action Network.

A senior executive working with a multinational company supplying knee implants to major corporate hospitals in India did not deny the possibility of hospitals escalating arthroplasty prices. “Ideally, hospitals should reduce their prices,” said the executive, who did not wish to be identified. “But, most likely, hospitals will end up raising their operation charges, bed charges and doctor’s fees.”

The NPPA has tackled the problem of the industry compensating for regulated prices of medical devices before. When the authority capped the prices of cardiac stents in February, it also passed orders to ensure that hospitals did not raise the prices of angioplasties, which are procedures to open blocked arteries.

According to minutes of meetings leading up to the decision to cap knee implant prices, the authority has made the decision to appeal to all orthopaedic healthcare providers “to pass on the price reduction benefits to patients and bring down the prices of their arthroplasty packages correspondingly and not to inflate it in future as is being noticed in case of coronary stents.” However, unlike in the case of cardiac stent price regulation, the authority has not yet passed orders to directing hospitals not to raise prices of arthroplasties. Arthroplasty is the surgical reconstruction or replacement of a joint.

The minutes also record the authority’s opinion that the “involvement of hospitals and doctors was found to be the biggest reason for price distortion and the root cause of unethical practices in the system of orthopaedic health care.”

Hype marketing

The NPPA has also criticised the practice among hospitals of promoting certain types of knee implants, sometimes even in the absence of clinical data to prove their superior quality in comparison to less expensive devices already in use. “The high flexion knee implants are now being used in the country with lots of ‘hype’ by companies and hospitals. These implants are being imported at much higher prices based on its publicised benefits without disclosing the limitations,” the authority recorded in minutes of its meeting, citing several studies to show that the high flexion implants do not have benefits for which they are being promoted.

While admitting that some hospitals and doctors might indulge in such unethical practices Dr PM Bhujang, president of the Association of Hospitals in Mumbai, many others will not.

Dr Prince Surana from Surana Group of Hospitals in Mumbai said that market forces will also keep hospitals in check since those that try to recover the cost by escalating their hospital and surgical fees will not be able to compete with hospitals that do not. “This way, the market dynamic will help bring the packages of knee replacement surgeries down and patients will chose hospitals which are affordable and provide quality healthcare.”

Aisola, however, pointed out that even with the knee implant price cap, knee replacement surgeries are still expensive procedures. “The cost of implants has reduced, it does not necessarily mean that everyone would be able to afford the surgery,” she said. “Even existing hospital costs are prohibitive. The government has to ensure that hospitals offer affordable surgeries and there is an urgent need to improve public sector hospitals and equip them to offer these surgeries so they actually become affordable.”

While capping the prices of various kinds of knee implants, the NPPA has allowed for profit margins of 40% on standard cobalt chromium implants. However, it has fixed prices for titanium, oxidised zirconium and high flexion implants allowing for only 30% profit margins. According to the authority, even though titanium, oxidised zirconium and high flexion implants have been in use for more than a decade, “globally these technologies have failed to establish their superiority over standard cobalt chromium implants”.

The NPPA has reasoned that allowing lower profit margins on these products will discourage doctors and hospitals from promoting them.

While the price cap on knee implants is supposed to bring benefits to patients, some doctors contend that the move will limit research and innovation in the field of orthopaedic implants. “People will not be encouraged to innovate in the field of orthopaedic implants owing to price restrictions,” said Dr Shailendra Patil, orthopaedic surgeon at Wockhardt Hospital in Navi Mumbai. “Also, patients will not get access to the most advanced technology as companies may not introduce their newest technology in the country.”

On this, NPPA has noted that most of the margins are being passed off in the trade and hence reducing margins will not affect research and innovation as claimed by several doctors. NPPA report stated that the “import prices already include research and development cost along with sufficient margins.”

The NPPA’s report noted that “there are patients who can pay extra cost in the name of getting these ‘latest’ and do not mind the cost. Such patients should be clearly briefed about the benefits as well as limitations of this technology in comparison to existing well accepted technology.”

Despite their reservations about knee implant price regulation, most doctors and hospitals say they welcome any move that helps patients. “We are going to support anything that benefits patients,” said Bhujang.

However, the Medical Technology Association of India, a body of medical device manufacturers, has expressed disappointment. “We feel we could have been heard better, and we expected the regulator to have waited for our preliminary proposal that was committed in our meeting last week before this decision,” said the association in a statement.

An industry expert who has monitored the procedure followed for capping the price of coronary stents said that the government was overzealous about capping the price of orthopaedic implants. “Unlike the stent industry, the margins here in the orthopaedic industry were not very high,” he said, even though the NPPA found 400% trade margins on certain implants. “Also, it is an elective procedure, most commonly performed for patients from the upper classes of the society.”