India’s healthcare system aims to ensure affordable, accessible, equitable, and quality healthcare for all. Unjustified pricing of medicines, medical products, and healthcare services may warrant regulatory intervention to protect patients and reduce financial hardship. The debate around healthcare pricing has gained fresh momentum in India.
The harder question is what that intervention should look like.
Price control is a regulatory instrument. It should not become the starting point for defining the problem.
This is particularly important in healthcare because there is no single healthcare market or value chain. A generic medicine, an innovative therapy, a medical device and a specialised product requiring complex storage or distribution do not have identical economics. The costs involved in making these products available to patients can differ significantly. A blanket trade margin formula may appear straightforward, but healthcare is simply too diverse for a one-size-fits-all approach.
The first task, therefore, should be to understand how prices are built across the value chain. If an unreasonable margin exists, where is it being added? Is it widespread or concentrated within a particular category or channel? Most importantly, will regulating it actually lead to a meaningful reduction in what the patient ultimately pays?
Different problems may require different regulatory responses. Where excessive trade margins are clearly established, margin rationalisation may be appropriate. Where the underlying issue is limited competition, lack of transparency or another market distortion, other interventions may work better. The response must follow the problem rather than applying the same remedy everywhere.
This also requires a distinction between legitimate costs and practices that warrant intervention. Distribution, logistics, inventory and specialised handling can all contribute to the final price of a healthcare product. Where margins are disproportionate and cannot reasonably be explained, they should face scrutiny. But every difference between the initial sale price and what the patient finally pays cannot automatically be treated as profiteering.
The goal must be to protect patients from unjustifiable pricing without creating a framework that makes quality care harder to deliver or future investment more difficult. That requires regulation which is informed by evidence, sensitive to differences across healthcare categories and regularly reviewed as costs, technologies and market conditions change.
That last point is particularly important. Healthcare pricing cannot be an exercise conducted once and then left unchanged for years.
Costs move. Inflation affects operating expenses. Technologies change. Supply chains evolve, and new therapies and medical technologies enter the market. A margin or price considered reasonable today may not remain appropriate several years from now.
Any new trade margin framework should therefore build periodic review into its design from the outset. The review should consider changes in costs, inflation, technology and wider market conditions rather than allowing a regulatory threshold to remain static for an extended period.
And the review must work both ways. If market evidence shows that margins have become unreasonable, the regulator should be able to tighten its intervention. Equally, where costs or market conditions have materially changed, there should be a mechanism to reassess what remains reasonable.
Trade margin rationalisation should be a continuous regulatory exercise, not a one-time decision.
This acquires greater significance when seen alongside India’s future healthcare requirements. The country’s disease burden and demand for quality care will require continued expansion of healthcare capacity. Hospitals and diagnostic infrastructure will need to grow, newer medicines and medical technologies will have to reach more patients, and manufacturing, research, supply chains and clinical capabilities will all require capital.
That raises an important question within the affordability debate: where will the investment required to build the next generation of India’s healthcare capacity come from?
Government expenditure will remain essential, but private investment will also be important in meeting the scale of India’s healthcare needs. Pricing policy therefore has to balance two legitimate objectives. It must protect patients from unjustified costs, but it must also allow the healthcare system to sustain quality, adopt innovation, expand access and continue attracting investment.
Stakeholder consultation is important for precisely this reason. Government, healthcare providers, pharmaceutical and medical technology companies, distributors and patient representatives see different parts of the value chain. Consultation does not weaken regulation or give any stakeholder a veto. It helps policymakers understand how an intervention is likely to work in practice before it is implemented.
The current debate offers India an opportunity to build a more mature approach to healthcare pricing. The choice is not between price control and no price control. Where pricing is demonstrably unjustifiable, regulation should act firmly.
But a blanket formula fixed today and allowed to remain unchanged for years will not adequately address the complexity of healthcare. India needs a dynamic pricing framework: one that starts with evidence, distinguishes between different parts of healthcare, intervenes where there is a demonstrable problem and is periodically recalibrated as economic and market conditions change.
That is how pricing regulation can protect patients without compromising access, quality, innovation or the long-term ability of India’s healthcare system to meet growing demand.
This article is writteb by Dr Sujeet Ranjan, CEO, United Way, Delhi.
(DISCLAIMER: The views expressed are solely of the author and ETHealthworld.com does not necessarily subscribe to it. ETHealthworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly)
