Are India’s Private Labs Overcharging For Covid-19 Tests?
A Delhi court last week exposed the high mark-ups middlemen were charging for supplying rapid antibody tests kits for Covid-19 in India. These diabetes-like tests are not very accurate but can give health authorities an idea about the level of spread as the number of confirmed infections crossed the 56,000-mark.
But a lack of clarity in pricing is not just confined to this type of testing.
The pricing of the more accurate RT-PCR tests being conducted by private labs has kicked off a bigger debate. Even the Supreme Court ordered to conduct the tests free-of-cost before adding a rider to only include the poor.
About 453 laboratories in India are conducting these covid-19 tests. While public hospitals are doing it free, for 121 private labs, the government capped the price of the reverse transcription-polymerase chain reaction test, the gold standard of testing for the new coronavirus, at Rs 4,500 per test. This includes screening and confirmation.
BloombergQuint’s conversations with suppliers, however, revealed that each test kit costs less than half of that price. Meaning, private labs are charging Rs 2,000-2,500 as operating costs and margins.
A Covid-19 test requires:
- Viral transmission medium used for transport of swabs.
- An RNA extraction kit that isolates the single-stranded RNA, the genetic material, from the sample.
- An RT-PCR kit that detects the presence of the virus’s genetic code in a sample.
- Reagents—each kit has multiple such compounds that can be used repeatedly based on pack size, say for 100 reactions or 500 reactions.
- Personal protection equipment kit, labware such as PCR-tubes, plates, pipettes and tips, centrifuge; machines to run the tests, and technicians to conduct the tests.
The Rs 4,500 Cap
There has been no official explanation on how the government arrived at the Rs 4,500 cap. Kiran Mazumdar-Shaw, Biocon Ltd.’s founder who was roped in to coordinate public and private sector efforts, told BloombergQuint that when India allowed RT-PCR testing at private labs, it was decided that the maximum retail price should be based on how much one test costs government labs.
But Malini Aisola of advocacy group All India Drug Action Network said the Indian Council for Medical Research, the lead testing government agency, never shared the complete cost structure of the tests to explain how the Rs 4,500 figure was arrived at.
The ICMR said it is procuring RT-PCR kits for Rs 740-1,150 but offered no other details about extraction, manpower and logistics, she said in an interview. In the absence of clarity, private hospitals are charging patients in excess of even Rs 6,000, she said.
“ICMR should put out the prices, quantities and specifications for all Covid-19 test kits procured to date,” she said. “Manufacturers should also be asked to submit data of the prices of their kits.”
The Cost Of A Covid-19 Test Kit
The Central Drugs Standard Control Organisation had approved 58 PCR kits for testing India. According to BloombergQuint’s conversations with at least three suppliers on this list, a single test kit costs about Rs 1,500.
Pune-based MyLab, one of the few indigenous kit makers, has provided half a million kits and is looking to supply another half a million in the next one week. The company's managing director, Hasmukh Rawal told BloombergQuint that his firm charges around Rs 1.2 lakh for a kit of 100 tests or Rs 1,200 per test for RT-PCR. Extraction costs Rs 150-350 extra per test, he said. That’s a total of Rs 1,550 per test.
Two other suppliers who received approval from the CDSCO shared similar figures.
- The cost of RT-PCR kit for a single test ranges from Rs 900-1,000, and extraction kit costs about Rs 500, the first of the two said.
- The second person, a manufacturer, pegged the price of the RT-PCR kit at Rs 600-900 and of the RNA extraction kit in the range of Rs 150-400.
The total price of a Covid-19 test for a patient should not be more than at Rs 1,800-2,000, the two said on the condition of anonymity out of business concerns.
N Raghuram, former vice-president of the Society for Scientific Values and who teaches microbiology at a government institute, uses RT-PCR kits for plant and microbe research. He claims Covid-19 tests can be done for as low as Rs 600. He explained how:
What differentiates different kinds of RT-PCR kits is the primer—specific sequences of DNA designed to recognise complementary genetic material of viruses, according to him. The rest of the kit, usage and components are the same for RNA research in plants, animals, microbes, or viruses, he said in an interview.
Despite some components of the kits being patented, the market costs of all the single-use consumables used in RNA isolation and RT-PCR testing for Covid-19 fall within Rs 2 lakh for 500 tests—about Rs 400 per test, Raghuram said.
“Assuming the instruments used will have a fixed cost of Rs 15 lakh and are used for conducting 15,000 tests a month (500 a day) for two months, employing two technicians for Rs 25,000 a month, it all adds up to a mere hundred rupees per test,” he said.
Labs Justify Pricing
Quick checks with three private labs across India indicated tests were being priced at Rs 4,500, with some even charging a first-time user registration fee on top of the test price. Operators of labs, however, disagree that they are overcharging, citing overhead costs.
GSK Velu, chairman at Neuberg Diagnostics, said the approximate cost of materials for transport, extraction and testing is between Rs 1,500 and Rs 2,000 per test depending on the volume. Equipment depreciation, manpower, PPE, and other costs add up to Rs 1,000 to Rs 1,500, taking the total cost to Rs 2,500-3000 per test, he said.
Neuberg is also processing samples for governments in Gujarat, Karnataka and Tamil Nadu at subsidised price of Rs 2,000-2,500 per sample, while other samples are tested at Rs 4,500, he said. The firm has tested two-thirds of around 25,000 samples till now free or at subsidised rates for those living below the poverty line, he said.
Mazumdar-Shaw said private labs are also not running at their full capacity, which makes the tests more expensive because there are other costs that needed to be reimbursed.
Bringing Down Costs
According to Mazumdar-Shaw, fully indigenous production can bring down prices.
“While many players are now making kits indigenously, they are importing components from abroad and merely assembling the kits,” she said.
The Indian government and the domestic biomedical industry have started a resource indigenisation consortium to help local manufacturers make the kits indigenously, she said. They have started looking at companies to make primers, enzymes, RNA extraction kits, transmission medium and other things domestically, she said.
Volumes of tests will also bring down costs, she said, adding that with government hospitals reaching out to private labs for the tests, the price has halved. “Once indigenisation happens, it can come down further.”
A Velumani, chief executive officer at Thyrocare Technologies Ltd., a chain of diagnostic and preventive care laboratories, said a Covid-19 test kit's price can go as low as Rs 500 and test price to 2,500 when a lab processes 10,000 samples.
Velu said made-in-India kits will also help bring down the cost of materials to Rs 750 instead of current Rs 1,500, and the entire pricing can be lowered to Rs 1,500. “Below this, PCR tests are not possible. In the developed world, the charges range from $150 to $300 (Rs 11,000-22,000 at current exchange rate) per test.”
India needs 35 lakh sets of kits, of which 25 lakh have been ordered and 22 lakh have been received, the health ministry said last week. Dr Anand Krishnan, professor at Centre for Community Medicine, All India Institute of Medical Sciences, Delhi said the government needs to buy primers and probes in large quantities to drastically bring down these costs.