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Price Cap on Hip Implants Expected in India

By Rob Meyer

A price cap on hip implants is likely upcoming in India, according to a recent report in Indian newspaper The Hindu

After implementing price caps on knee implants (following previous caps on cardiac stents) in 3Q17, “the cap on hip implants is also likely in the process,” said orthopaedic surgeon Dr. Ram Prabhoo, president of the Indian Orthopaedic Association. “The price control on all implants has been widely discussed.”

Knee implant prices in India were slashed between 59% and 69% in August 2017. The expectation is that hip implant prices will be cut similarly.

“A price cap on the knee implants has worked extremely well. We feared that high-end implants would be phased out, but because of a clause put by the NPPA (National Pharmaceuticals Pricing Authority), the stocks could not be withdrawn. Over the past few months, more patients have opted for surgeries,” Dr. Pradeep Bhosale, joint replacement surgeon at Nanavati Hospital, told The Hindu. Nanavati Hospital has seen a 40% rise in the number of knee-joint replacements since the price cap was introduced, according to Dr. Bhosale.

According to the NPPA, estimates indicate that India is likely to witness 15% to 20% growth in arthroplasty by 2030, due to increasing incidences of diabetes, osteoporosis, osteoarthritis, obesity and increased awareness of the benefits of arthroplasty. At present, according to the NPPA, an estimated 15-20 million Indian citizens require orthopaedic surgical intervention, but they either remain undiagnosed or are diagnosed but can’t afford the cost of implants.

When announcing the knee implant price caps, the NPPA said that orthopaedic implants in India had unjustified, unreasonable and irrationally high trade margins, leading to exorbitant pricing.

Arguments against these price controls include possible curbs on innovation and the removal of certain proven products and solutions from the Indian market.

“While the [Indian] government’s intent is to cap prices in the patient’s interest and make healthcare affordable for all, this pricing has the potential to block innovations and limit access to world class medical care and options to patients,” AdvaMed said in a statement last year.

“The price ceiling will also negatively impact the future environment for investment and FDI inflow in the country. It is critical to evaluate the long-term negative impact of such decisions on patient outcomes, consequent increase in adverse events and subsequent rise in long term healthcare costs, which defeats the entire purpose and spirit in which this price control exercise has been undertaken in the first place.”

How are medical device companies being impacted by the price caps? Examples include:

  • Part of DePuy Synthes’ 2017 growth offsets arose from the impact of knee implant price caps in India, to the tune of $10MM in 3Q17 and $2MM to $3MM in 4Q17.
  • Zimmer Biomet reported a loss of $5MM in 3Q17 directly attributed to the knee implant price cap.

Going forward, we expect some companies to incur further losses due to the hip price caps, much as they did after the knee implant price caps were implemented. The economics of Indian healthcare could also be impacted adversely, as supply and demand issues may begin to occur.

Finally, we note that device companies can expect to continue to face cuts on implants as countries seek to rein in spending. In addition to India, China and Japan are slated to target pricing on total joint implants. While much of the Asian market is expected to experience double-digit growth, device companies and their supplier partners must consider how price caps impact their investments in the region.