Rema Nagarajan| TNN |
An investigation by the deputy director general of the Competition Commission of India has concluded that Max Super Speciality Hospital, Patparganj, has been making 275% to 525% profit on sale of disposable syringes by abusing its dominant position to force inpatients to buy such products from its own pharmacy.
The report also detailed how the extracting of such “huge profits margins” from inpatients was prevalent across all 14 hospitals of the Max group. The report, in fact, indicates that the practice of corporate hospitals making huge margins from inpatients is widely prevalent.
CCI was looking into a complaint filed by a patient’s attendant, Vijay Sharma. Sharma said he had bought a disposable syringe made by Becton Dickson India Ltd (BD) at a maximum retail price (MRP) of Rs 19.50 when it was available for Rs 11.50 in the open market. In January 2016, CCI found the hospital and BD Ltd prima facie guilty of colluding to sell syringes from the hospital’s pharmacy at double the open market price and asked its deputy director general to investigate the issue within 60 days.
Almost two years later, the investigation report prepared by CCI deputy director general Rakesh Vashishth lays bare the standard practice of manufacturers selling devices to hospitals at a fraction of the printed MRP at which hospitals sell to the patients, raking in “super-normal profits”. BD Ltd’s submissions during the investigation admitted that this was “standard industry practice followed by all manufacturing companies in India”. The hospital too stated that “the sale of syringes at MRP is consistent with market practice followed by other hospitals generally”.
With both stating that they merely followed standard business practices, what emerges is that inpatients at private hospitals in India are being forced to pay up to five times the actual cost of medical devices or disposables like syringes, pushing up their bills enormously. In the private healthcare market, consumables and medicines constitute typically 40-50% of an inpatient’s bill.
A senior Max group executive explained in the course of the investigation that medicines and devices were sold at MRP and that no discounts were given to patients by its pharmacy. The report noted that instead of charging “a reasonable margin” on the actual price at which the hospital procured the syringes, Max group was charging at MRP. The hospital was acting as a trader, whereby it purchased blister pack syringes from the market and sold it to inpatients at “unfair and excessive profits”, noted the report.
BD submitted that the difference between the two syringes bought by Sharma was in the packing — the one bought from the hospital was in blister packing, which costs more, while that bought from the open market was in flow wrap. It further submitted that it sold syringes at different discounts to hospitals depending on their size, volume purchased and as a strategy to bag a contract. Max Hospital being a chain could buy larger volumes and a range of other products and hence got a cheaper price than many others, explained BD.
According to the report, similar or identical products were available in the open market at discounted rates, but since the hospital insisted on inpatients procuring from its own pharmacy, “it was a clear instance of abuse of the dominant position” and spatial monopoly enjoyed by the hospital in earning “supernormal profits”. The investigation also fixed individual responsibility within Max Hospital