New Delhi: On May 25, the Indian Council of Medical Research (ICMR) penned a letter to the chief secretaries of all states and union territories saying that since the prices of testing kits had dropped, it was doing away with the price cap of Rs 4,500 per test. Instead, the apex medical research body asked state and UT administrations to “fix up mutually agreeable prices” to test samples with private labs.
Straightforward as the ICMR’s decision seems, in practice, it’s anything but.
For starters, private laboratories are confused. “My guess is as good as yours,” an employee of a private laboratory said on condition of anonymity. “If the cost of equipment is now lower than what it was earlier, why would you remove the cap? That would mean private labs can increase the price of a test.”
Malini Aisola, the co-convenor of the All India Drug Action Network, interpreted ICMR’s decision as the body’s admission that the price cap was too high to begin with. “No surprise that state governments are reimbursing private labs at much lower than 4,500 [rupees]. Yet ICMR refuses to name a lower price cap and leaves it to states to negotiate, leaving individuals in the lurch,” she tweeted on May 26.
@ICMRDELHI @ProfBhargava finally admits the rs 4500 testing cap is too high. No surprise that state govts are reimbursing pvt labs at much lower than 4500.
Yet, @ICMRDELHI refuses to name a lower price cap & leaves it to states to negotiate, leaving individuals in the lurch pic.twitter.com/oHEHYMxWQV
— Malini Aisola (@malini_aisola) May 26, 2020
Aisola believes ICMR hasn’t been able to explain how the Rs 4,500 price cap was set in the first place. “ICMR claimed to have set it on the basis of the cost of … testing in government labs and repeated this in an affidavit to the Supreme Court,” she told The Wire Science. “This explanation was not believable, given that the cost of testing in government labs is estimated to be substantially lower than Rs 4,500” per test.
So its new announcement? “ICMR messed up badly. All this is now a cover up.”
Indeed, ICMR officials haven’t clarified their prices nor responded to questions about where the 4,500 figure came from. Today, an individual is charged Rs 4,500 per test in private labs. Several private labs also test samples for the government for Rs 2,000-4,000 per test, on a case by case basis.
The Wire spoke to several officials at private laboratories in different parts of the country. All of them said the costs of tests are unlikely to come down because of ICMR’s new decision.
‘Already charging less when possible’
One member of a private lab that operates primarily in South India said labs had been charging less when possible even before ICMR’s letter showed up. “We have already been entering into agreements with state governments and charging lower rates like Rs 2,500 or Rs 3,000 [per test] when our [own] costs are lower. If it was possible, we were doing it,” the member said.
But in spite of ad hoc attempts to lower costs, those who manage private labs have in general been complaining of the GST on all the necessary equipment.
“We are paying GST on every part of every equipment that we use – 5%, 12% and even 18% on certain items. So that is a major cost,” said the owner of a private laboratory in North India.
“If the government really wants to reduce the cost of testing, why can’t it remove or reduce the GST on these equipment? That will automatically bring down the cost of tests.”
An employee of another private lab in Uttar Pradesh echoed Aisola’s concerns, saying if the government really wanted to reduce the test cost, it would have. “The fact is the government is not interested in reducing it,” he said. “Before the Gujarat elections in 2017, they reduced GST on khakhra from 12% to 5%. But they are not reducing GST on medical equipment, which is probably more essential than khakhra.”
Indeed, all private laboratories we spoke to said they would like the GST rates to either be reduced or waived for test-related equipment. When asked if he had spoken to the government about this, one owner of a private lab said, “Who do I talk to? I don’t know who to talk to.”
“The Centre and ICMR are not doing any consultation with labs. They think they can just issue advisories and that private labs [will] follow,” he continued. “Maybe they are talking to some labs in Delhi or [Kiran Mazumdar] Shaw, but labs in South India are completely ignored by Delhi, like South India usually is.”
Shaw is the chairperson of Biocon, one of India’s more influential biopharmaceutical companies. She has said in interviews that she helped ICMR work out the modalities of testing by private labs. Notably, Shaw argued against free tests – which the Supreme Court ordered the government to undertake on April 8 only to backtrack a few days later – and said she doesn’t see why people would have a problem with paying Rs 4,500.
Low volume means high cost
Another reason for the high cost, particularly for smaller labs, is the low volume. All private labs we spoke to said how much a single test costs depends on how many tests the lab conducts in a day: the more a lab tested, the more opportunities it would have to recover costs.
“Diagnostics depend a lot on volume for their costs,” said the owner of a private laboratory in one of North India’s smaller states. “On average, I am testing less than 100 samples a day because the case load is not that high in our state, and because of government restrictions. The cost for me is more than for labs that are testing, say, 500 or 1,000 samples a day.”
According to him, it costs his lab Rs 4,000 to Rs 5,000 for one test, depending on whether he’s testing 100 samples a day or 50.
Then there are the fixed costs. “I have to pay the staff, and these are highly skilled workers working in difficult circumstances. Then someone has to go and collect samples from hospitals. That is a major cost. If the number of samples [that have to be tested] increases, the cost is distributed” over more tests, he said.
Herein lies the next problem. Private labs haven’t been able to conduct more tests, at least as many as will let them stay in business, even two months after having been given the go-ahead. According to the Indian Express, India’s private labs account for less than 20% of all tests being conducted every day in the country – but account for nearly a third of the total testing infrastructure.
(As K.J. Mukherjee, a former professor at the Jawaharlal Nehru University, Delhi, wrote in The Wire Science on April 21: “A small subset of biology labs present in the JNU-NII ICGEB cluster in Southwest Delhi has, by a conservative estimate, more than a hundred PCR machines and trained manpower to run them. In a single day, each PCR can run a thousand tests using the pooled-testing technique. This translates to a lakh tests per day – clearly enough to resolve the whole problem of low testing rates. And the cost per sample would also reduce drastically to a couple of hundred rupees.”)
“I would say private labs have only been able to use about 50% of the testing capacity that they already have,” the owner of the lab in South India said. “And if there is a potential for its full use, private labs can double their capacity. But unfortunately, due to government controls and restrictions, this is not happening.”
“While bringing down pricing and increasing the number of government labs are great steps, restricting testing and troubling private labs and health providers at a time of crisis will be counterproductive in controlling the pandemic,” an employee at another lab that operates in South India said. “There are too many rules and restrictions [imposed] on private players by different state governments, thus substantially slowing down private-lab tests.”
Restrictions on testing
According to ICMR’s guidelines, private labs can test an individual for COVID-19 only when a doctor has asked for it. Some states had tightened this condition further. Gujarat, for example, required the chief district health officer to sign off on test requests. (The Gujarat high court ruled on May 29 that this will no longer be necessary.) In Mumbai, the state government even served doctors who had prescribed COVID-19 tests with show-cause notices, presumably in an effort to conserve tests for those who really need them.
So “doctors are worried about prescribing tests. Government advisories keep changing every day. We are good at testing but not at understanding advisories that change every day,” he owner of the South Indian lab said. “We also fear violating them because we can also be served show-cause notices.” There’s often also more than one government, including those of states and municipalities, issuing advisories and guidelines.
“Everyone is issuing their own orders. At times, we find it impossible to comply with all of them. There should be a single point contact for private labs.”
He argued that relaxing the testing criteria could only be a good thing for all stakeholders: doing so will allow more people to get tested, yielding a more complete picture of India’s case-load, and labs will also be able to recoup some of their costs, especially since non-pandemic diagnostic work has nosedived.