Price cap on liquid medical oxygen, oxygen cylinders fails to have impact as fillers get more expensive

The National Pharmaceutical Pricing Authority (NPPA) has fixed the price of a cubic metre (CuM) of liquid medical oxygen (LMO) at Rs 15 and a CuM of oxygen in cylinders at Rs 25 because manufacturers have hiked prices of fillers as the demand went up multifold due to Covid-19.

"Price regulation at this end is imperative for continued availability of medical oxygen across the country," NPPA observed. But because of a rider in the NPPA's September 25 order that the price caps will not be applicable to existing contracts has put the hospitals in a vulnerable condition. As consumption due to Covid is much more than what it was when they signed the contract.

Dr Suresh Krishnamurthy, Medical Director at Excel Care Hospital, told DH that his 30-bedded hospital pays a company Rs 50 plus 12% tax per CuM of oxygen for up to 350 cylinders, which is double the price cap of Rs 25 set by the NPPA, and quite a stretch for small hospitals.

"Since the demand for oxygen has increased because of Covid, if we take any additional cylinder beyond the 350, we have to pay an extra Rs 7 for every CuM of oxygen plus tax. We have no legal contract with the company, hence we are yet to ask the company about the capped prices," said Dr Krishnamurthy.

Dr Ravindra Ramaiah, Medical Director of 70-bedded Suguna Hospital, said they have a 10-year contract that was signed three years ago and the price caps do not benefit them. Oxygen manufacturer Linde is the supplier to Suguna Hospital.

"I think the local suppliers in Bengaluru are charging a little more than the notified price. Our supplier is charging us Rs 16 plus GST plus transportation cost which comes to Rs 23.50 per CuM. Our consumption has increased three fold," Dr Ramaiah said.

Responding to an emailed query, Linde said: "The cap of liquid medical oxygen price is on an ex-manufacturing location basis. The cost of delivering the product from the manufacturing location to the hospital premises and other associated services are charged separately depending on various factors like distance from source, type of storage equipment installed, etc."

"The overall landed selling price of the product after adding these charges works out to Rs 23.5/ CuM (Rs 15.22/ CuM + transportation and other associated services). The manufacturing location of liquid medical oxygen in this case, is located at Ballari, which is more than 300 km from the hospital," the statement added.

Joseph Pasangha, COO, Narayana Health City said the move will benefit domestic private consumers, small urban hospitals, district / taluk level hospitals and rural hospitals. "Narayana Health City is one of the major consumers of LMO and medical cylinder oxygen in Bengaluru and we have long-term contracts with multiple service providers. Having an existing purchase agreement, with the unit price less than the capped price, NH is less affected in terms of LMO," he said.