Karnataka Seeks Fairer Medicine Pricing Rules for Hospitals
The Karnataka government has sought the intervention of the National Pharmaceutical Pricing Authority (NPPA) over the pricing of medicines, medical devices and other medical supplies sold to patients in private hospitals.
The state has raised concerns about a practice in which hospitals purchase medicines and medical products at discounted institutional or landing prices but may bill patients at the printed Maximum Retail Price (MRP) or close to it. According to the Karnataka Food Safety and Drug Administration (FSDA), the difference between the hospital’s procurement cost and the MRP can be extremely high in some cases.
Karnataka FSDA Commissioner K Srinivas has written to the NPPA and the Department of Pharmaceuticals seeking regulatory intervention. The proposal covers several categories, including critical-care medicines, oncology drugs, high-value injectables, implants, surgical supplies, diagnostic-related consumables and disposable medical devices.
The state has reportedly provided several examples to the central authorities showing large differences between the landing cost of products and their printed MRP. In some cases, the difference has been reported to be as high as 52.6 times the hospital’s landing cost.
The Karnataka government has suggested that the existing pricing framework under the Drugs (Prices Control) Order, 2013 (DPCO) should be examined to determine whether patients can be protected from excessive price differences. The proposal seeks a system that could link patient billing more closely to the actual procurement cost of medicines and medical supplies.
Under the suggested approach, hospitals could potentially charge the procurement or landing price along with a reasonable service component and applicable taxes, rather than automatically passing on the full MRP when the product was obtained at a substantially lower institutional price.
The issue is particularly important for patients receiving prolonged or expensive treatment. Critical-care medicines, cancer medicines, injectables and medical devices can form a significant part of hospital bills, meaning large differences between procurement costs and patient charges can increase the overall financial burden on families.
The NPPA is the central authority responsible for regulating and monitoring drug prices. Under the DPCO framework, prices of medicines covered by price control are regulated through ceiling prices, while the authority also has powers to take action in certain extraordinary circumstances in the public interest.
The Karnataka proposal comes amid a wider national discussion about pricing practices in private hospitals. The Centre has also recently reviewed concerns about high markups on hospital consumables and medical devices and has been consulting stakeholders about possible trade-margin regulation.
The proposed changes would need to take into account the costs incurred by hospitals, manufacturers, distributors and other participants in the medical supply chain. Any new framework would therefore need to balance patient affordability with the actual costs involved in procuring, storing and supplying medicines and medical products.
The matter will now require consideration by the central authorities. If the NPPA and Department of Pharmaceuticals accept the proposal for further examination, it could lead to discussions on how private hospitals disclose procurement costs, calculate medicine charges and bill patients.
The Karnataka government’s move has brought renewed attention to transparency in hospital billing and the need to ensure that patients understand how medicine and medical-device charges are calculated.