Why the Tata Memorial incident should be a wake-up call for other hospitals, pharma companies and regulators

Why the Tata Memorial incident should be a wake-up call for other hospitals, pharma companies and regulators

A stitch in time saves nine' is a befitting phrase in the case of India's most reputed cancer speciality healthcare service provider, the Tata Memorial Hospital (TMH) at Parel in Mumbai. Despite having knowledge about downward price revision – they knew about reduction in prices since January 2014 – of one of the oncology medicines, the hospital administration did not take timely action. As a result of this laid-back attitude, patients ended up paying a hefty price for buying the drug from TMH pharmacies when the same was available with chemists in the hospital's vicinity at less than half the cost.

What is the issue?

The oncology drug in question is one of the Novartis-branded Octreotide variants called Sandostatin LAR 20 mg vial (injection) carrying a maximum retail price (MRP) of Rs 65,499. While the TMH pharmacies have been selling the injection at Rs 48,296 i.e. at a discount of 26%, a survey with chemists outside revealed that the same vial was available at Rs 32,000 – that's less than over 50% and 34% of the printed MRP and TMH pharmacy price respectively.

dna first reported this issue about discrepancy in drug pricing at Tata Memorial Hospital on October 5, 2014, after TMH administration refrained from offering any clarification despite being informed about the issue in mid-September this year. Once the issue was out in public, the hospital administration no choice but to take note and investigate internally as well as with the Swiss drug maker Novartis and their stockist supplying the medicines to TMH.

In the over two months of pursuing this matter, dna sent two sets of questionnaire to the Tata Memorial Hospital administration as well as Novartis India officials. After persistent follow-ups and reminders for over two weeks, on November 21, 2014, TMH finally responded (though very selectively) to questions sent on October 6, and November 6, 2014.

What did Tata Memorial say?

Admitting the disparity in pricing at its pharmacies, Narayan HKV, medical superintendent, Tata Memorial Hospital, said in an email that there has been a 'collective failure' resulting in the sale of the drug at the erstwhile price. “There has been an omission in the supply chain management on the part of the company (Novartis India) and their stockist in not recalling existing stocks proactively resulting in the existing stocks being sold at a higher rate. On our part also we had not raised a rejection note to achieve the same objective,” he said.

The confession sounds a bit strange given that global multinational companies like Novartis boast of stringent processes be it product quality or supply chain management. The same goes with the healthcare service provider Tata Memorial that takes pride in being an ethical entity providing service to people.

So if both entities knew about it well in advance, what stopped them from taking corrective measures?

And while Novartis in its earlier repsonse had shrugged-off the responsibility saying credit notes are issued in such cases of downward price revision, Tata Memorial claimed it never received any such credit note. Reason, after receiving the price revision communication, TMH executives should have checked for unsold stocks in their inventory and informed Novartis about the same, which, we understand, never happened.

In fact, the TMH administration never bothered about this pricing disparity even when it was brought to their notice in the form of a written complaint followed by an email to the hospital's public relations officer. After being made to run around from one office to another and being told 'we will get back to you on this' without a deadline for the information or action to be taken, the only option left was to make this matter public in the hope that it will finally grab attention from the TMH administration.

So how many patients were overcharged?

While Narayan stated that pharmacies at TMH have sold seven vials of Sandostatin 20 mg variant to four patients subsequent to the price revision, no details (number of units sold and to how many patients) on other variants i.e. Sandostatin LAR 10 mg and 30mg were shared.

Hence, it is unclear how many patients in all may have been overcharged for these vials. Besides, it is also not clear if the statistics shared included sales from pharmacies at other TMH centres viz. Kharghar, Kolkata. Another hospital at Visakhapatnam (Andhra Pradesh) is yet to become fully operational so it is unlikely any sale would have happened there.

In fact, patients could have saved much more if the hospital had prescribed an Octreotide generic of the same strength instead of the Novartis branded Sandostatin LAR 20mg. For instance, Octride Depot 20mg by Sun Pharmaceuticals carries a MRP of Rs 17,800 and is sold at Tata Memorial pharmacies for Rs 12,157.

This means, four vials of generic could be bought for the price of one Novartis branded Sandostatin. And since there is no time limit – in terms of how many injections are to be taken every four weeks and for how long – opting for the generic Octreotide would have resulted into significant savings in the long run.

What happens next?

In its attempt to close the matter Tata Memorial Hospital has chosen the reimbursement approach. “We have decided to reimburse the difference in price to our patients and the same will be recovered from the company as a credit note. M/s Novartis has also agreed to compensate us to the extent of revision,” said Narayan in his email response.

To be sure, dna also sought details about patients who were overcharged for the Novartis branded Sandostatin vials as well as how much will the reimbursement be. However, no such details were shared by TMH administration.

However, as per our analysis, based on TMH's assessment of the situation, the four patients / family members between them are likely to receive Rs 1,33,000 for the seven injections they were overcharged for. The figure arrived at is based on the fact that new stock of Sandostatin LAR 20mg (post rejection of the old stock) will be sold by pharmacies at Tata Memorial Hospital for around Rs 29,000-odd. That's a price difference of a little over Rs 19,000 in comparison to the earlier discounted price of Rs 48,296 for the same medicine.

Was the issue specific to a particular medicine only?

While the issue being discussed here primarily revolves around discrepancy in pricing of Novartis branded Sandostatin variants, it certainly isn't an isolated incident but something that could have grave repercussions in the overall scheme of things. The reason being that a Drug Price Control Order (DPCO) back in 2013 had set price caps on 348 drugs (including life-saving and other therapies) in the National List of Essential Medicines (NLEM) by the National Pharmaceutical Pricing Authority (NPPA). As a result of this order pharmaceutical companies had to revise prices and re-introduce the drugs in the market at lower rates.

In his email, Narayan claimed that, as per (TMH) records there is no other oncology drug which has seen a downward revision of rates. However, Novartis India in its earlier response to dna questions had clearly stated that prices of Sandostatin LAR 10 mg were revised from Rs 48,277 to Rs 24,000, Sandostatin LAR 20 mg from Rs 65,499 to Rs 32,000 and Sandostatin LAR 30 mg from Rs 72,081 to Rs 35,000. The prices of Sandostatin SC 50 mcg and 100 mcg remained unchanged at Rs 380 and Rs 715 respectively, Novartis India had said.

Is this a logical conclusion? Because other hospitals could be overcharging as well?

Given TMH's confession indicating a collective failure on the hospital and Novartis India's part, it is likely many more such incidents (involving this and a host of other medicines) may have happened / are currently happening across government and privately run hospitals in the country. Take for instance, Novartis India's earlier response to dna saying in case of price revisions, the drug maker issues credit note to the stockist / hospital. But that did not happen in the case of medicines supplied to Tata Memorial Hospital for reasons as explained by Narayan in his earlier statement.

In fact, in the second set of questions to Novartis India, dna specifically asked for details of other hospitals across India that buy Novartis branded oncology medicines and how many patients (across all distribution channels in India) may have ended up paying a high MRP post the price cut. The Novartis India spokesperson however did not respond to any query saying, “We have nothing to add to our previous response.”

What do healthcare professionals, consumers, activists have to say?

According to former IPS officer and lawyer, YP Singh, “While the case in point here is a non-NLEM drug, in the overall scenario, I think there is a need to make DPCO more stringent especially in case of significantly expensive medicines that have undergone downward price revision. Proper mechanism needs to be put in place to ensure hospitals sell medicines at revised rates,” said.

Commenting on the practice by hospitals when it comes to their pharmacy operations, a senior healthcare professional, said, “Most private hospitals insist (directly / indirectly) that medicine for the patient be procured from the hospital medical store. Patients are told that they will be billed for the medicines, at hospital charges, even if they (patients / family members) insist that the medicines be purchased from outside. It is a clear case of restrictive trade practice and also against fair medicare practices.”

Singh asserted saying, “It is a wrong practice (by hospital pharmacies) and the issue needs to be taken up.” He added that despite high margins on medicines hospital pharmacies don't offer any discounts, but a lot of standalone chemist give discounts ranging between 5% and 10%. “There is also a need to independently regulate pharmacies operated by hospitals,” he said.

In fact, given the pricing issues connected with medicines, family members of patients undergoing treatment at private and government hospitals tend to source medicines from Dawa Bazaar (the wholesale market for medicines at Princess Street in Mumbai). “The difference in prices can be as little as 20% and as high as 50%,” said a Mumbai resident who faced issues with purchasing medicines at a private hospital.

Conclusion

It is a known fact that falling ill can be one of the most traumatic experiences for any middle class family in India. And if it's a serious illness like cancer or related health condition, the high cost of medicare can financially cripple, if not make the patient's family bankrupt.

“Government supported hospitals like Tata Memorial over-charging for medicines is very shocking. If that's the case, one can only imagine how rapacious could private hospitals get! This is something, government authorities in-charge of health services should investigate and control,” said the healthcare professional quoted earlier.