A request by Boston Scientific Corporation (NYSE:BSX) to increase a cap on the price of its high-end heart stent in India has been declined by India’s government. The request comes after the cutting of prices of drug-releasing stents by close to 75%, which was implemented in February. According to the Prime Minister Narendra Modi, the setting of a price cap at 29,600 rupees was reasonable in making the life-saving drugs and devices more affordable. However, the question really is can Boston Scientific keep selling them at below market price?
Boston Scientific’s justification for the increase of the price cap
The company is in fear of losing millions of dollars on the Synergy stent; the small mesh devices used to keep open obstructed arteries. It claims that the proposed cap is not matching with company’s cost of importing the device thus it is likely to incur a loss of close to $7 million.
Boston Scientific further states that the government is not acknowledging the superiority demonstrated by Synergy. In its letter to India’s drug pricing regulator on March 6, the company said, “The operations, careers of employees, training, and education on the latest techniques for better patient care, new innovations will all be effected in this environment.”
However, the government says that the company’s price cap request of 75,000 rupees ($1,160) is not warranted as it lacks significant innovation. How this is relevant to market prices is unknown. Nonetheless, the expected final decision from the federal health ministry will make it or break it.
Boston Scientific competes with Abbott Laboratories (NYSE:ABT) and Medtronic plc. Ordinary Shares (NYSE:MDT)
Boston Scientific’s global drug-releasing stent accounts for $1.2 million of sales in India accounts. The company is now in competition with Abbott and Medtronic each pursuing a share of India’s $500 million stent market. Last year the company sold nearly 5,000 Synergy stents in India.
Apparently, it is in India that Boston Scientific carries out the development of its products for its emerging markets. On the other hand, various analysts are of the opinion that Synergy stent is the stepping stone for the growth of the Massachusetts-based company. Meanwhile, Boston Scientific’s stock was trading at $26.38 a fall of $0.01 or 0.04%.
