Government regulator National Pharmaceutical Pricing Authority (NPPA) has capped the price of drug eluting stents used in heart surgeries. A stent is a tiny expandable metal scaffold used in opening narrowed or weakened arteries to ensure blood flow preventing heart attacks. The authority based its decision on a recommendation urging it to include stents in the National List of Essential Medicines (NLEM). Medicines and devices listed in the NLEM must be sold at the price fixed by NPPA. The move was seemingly made to keep a check on unethical profiteering and exploitive pricing, and to ensure fair, reasonable and affordable price for stents. Following the price cap, the rate of drug eluting stents (DES) has come down to ₹ 27,890 from ₹ 29,600.
A supply shock following the price-cap is expected. Just like all other companies, companies that manufacture stents are making them to earn profit. If their incentive is taken away by a government ruling, they are likely to stop making them or reduce the quality to make up for the losses. Healthcare issues are critical for the people and that is why policies regarding such matters should be planned very carefully. If a pharmaceutical company finds it unprofitable to make stents, it will simply move to supplying some other non-protected market or manufacture some other product where they can make profits.
This is exactly what happened last year when Abbott industries, a large stents manufacturer, sought to leave the market citing unviability as the prime reason. However, the government denied its request and forced the firm to provide stents for at least six more months. While such use of force may work for a few months, eventually stent manufacturers will stop producing them. This also sends a wrong signal to all companies that India is not a business-friendly country.
The government has just assumed that the high price of stents is due to the greed and profiteering by pharmaceutical companies. And now we all must suffer from scarcity of a critical good. So the supposedly noble intention of government to make stents affordable, will lead to a situation where stents become unavailable, at any price.
After seven decades of failure of similar policies, we should know by now that price-caps never work. If they did, we could just set the price of stents at ₹ 10 and everyone would be happy.