Acting on a complaint filed by an NGO, the AP police have also frozen bank accounts of two franchisees of Speak Asia operating in the state and seized laptops, desktop computers, bank pass books and other material related to their MLM activities
The Criminal Investigation Department (CID) of the Andhra Pradesh police has arrested two persons running a franchisee of Speak Asia online Pte Ltd and frozen their bank accounts. Vijaywada-based Corporate Fraud Watch Society, a non-government organisation (NGO) had filed a complaint against the company, its promoters, directors, secretaries, representatives, employees and distributors.
In a statement, Dr Mahender Kumar Rathod, superintendent of police, economic offences wing, CID, Andhra Pradesh, said, "The CID once again appeals to the general public not to believe the deceitful promises given by this type of companies. It is pertinent to say that the amount of Rs3 lakh deposited by the franchise in AP have been frozen by the Reserve Bank of India since the company has no authorisation/registration under the Companies Act."
Syama Sundar, secretary of the Corporate Frauds Watch Society had filed the complaint, following which the police, arrested Devireddy (D) Srinivas Reddy and Lanka Venkata Ayyappa (LVA) Swamy on Sunday. Both were operating franchises of Speak Asia in the state. The police also froze their bank accounts and seized their laptops, desktop computers, bank pass books and other material pertaining to MLM activities. The additional chief metropolitan magistrate, Vijaywada, has sent both, Mr Reddy and Mr Swamy to judicial custody.
D Srinivas Reddy was working as a chartered accountant in a private company before joining and becoming a franchise of Speak Asia, about five months back. He had confessed to enrolled three panellists and the police are further analysing his laptop. LVA Swamy is a computer technician. He joined and become franchisee of Speak Asia along with Mr Reddy. However, he was using Mr Reddy's office and facilities for all his transactions with the company, the police said.
On 25th June, the Vijaywada unit of the CID conducted a surprise check under the supervision of deputy superintendent, YV Ramana Kumar, on the residence of Mr Reddy and Mr Swamy.
The Andhra Pradesh police had registered a case under Section 420 (cheating) of the Indian Penal Code (IPC) and Sections 4, 5 and 6, read with Section 2(c), 3 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
In Andhra Pradesh alone, around 30,000 persons were enrolled with Speak Asia. The company has no registration in India under the Companies Act 1956. Likewise, Speak Asia has been running the money circulation business illegally without any authorisation from the competent authority in India. "This is a bogus company having 150-170 franchises in India, among them the two above mentioned persons are from AP," the police statement said.
Moneylife has reported on how the Kerala state government is coming down heavily on "get-rich-quick" schemes, mushrooming across the state. The crime branch of the Kerala police had arrested promoters of two such schemes, Tycoon Empire International and Bizarre group of companies. (Read: "Kerala gets tough with money swindlers and MLM companies".)
One of our readers has informed that as part of its ongoing operation to curb dubious MLM schemes, the Kerala police banned the meeting of Amway, a popular MLM company. According to the reports, about 300 distributors of Amway had gathered at a hotel in Thrissur. However, the police declined to give them any permission for a meeting. The Kerala director general of police has also cautioned people against the illegal network marketing.
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In the absence of official guidelines on the quality and price of stents, different hospitals are charging different amounts for these critical implants
Some prominent hospitals in Mumbai are over-charging patients for stents, which they procure privately, as most patients are uninformed about the cost and quality of these tiny mesh tubes that are used to prop up open heart arteries.
Medical professionals are disturbed that there are no official standards to check the manufacture, sale and use of this critical device, which could endanger the patients undergoing the medical procedure.
"The stents do not have an MRP (maximum retail price) so hospitals charge according to their own discretion," said a senior doctor at one of these hospitals, requesting anonymity. "The Food and Drugs Administration (FDA) does not have guidelines regarding the cost of stents. And it does not have any guidelines on the import of these implants,"
When Moneylife inquired at some hospitals in Mumbai, we found they charged anything from Rs1 lakh to Rs2.5 lakh for drug-coated stents. But hospital staff refused to give any other details about the device-whether it is about the companies making the implant or on the advice given to patients.
Kokilaben Dhirubhai Ambani Hospital, in suburban Andheri, charged the most. Patients had to pay Rs2 lakh for a medicated stent. Lilavati Hospital, in suburban Bandra, said it charged Rs1.30 lakh-Rs1.50 lakh, whereas Hiranandani Hospital in Thane mentioned about Rs1 lakh-Rs1.20 lakh for a stent.
The difference in rates between hospitals is attributed to each hospital purchasing stents at different rates on negotiations with the supplier. Also, hospitals say they add on charges for handling and storage of the items. Clearly, they are taking advantage of the absence of guidelines to charge patients at their own rates.
Stents are tiny devices made of metal or fibre which are inserted through blood vessels to keep arteries open in the heart. They are also placed in the neck, the legs and other parts of the body to prevent conditions such as stroke. But research in recent years has suggested that stents are overused by doctors and that drugs may be a cheaper, safer and more effective way for many patients to avoid heart attacks or strokes.
"The stent is delivered by the distributor to the hospital and he gives them a price range, which means that the price is negotiable," a source at one of the hospitals said. Further, the hospitals usually get a lower rate as they purchase the items in bulk, but they do not pass this discount to patients.
The doctor usually has no say on what the hospital charges, the source explained. Sometimes, however, concerned about the financial position of the patient, a doctor may direct him to a particular hospital where the charges for the stent and the procedure are more reasonable.
Interestingly, medical insurance companies that are particular about verification of medical expenditure to be reimbursed, have been found to be lenient about the cost of stents and are known to have cleared the cost of the device even without corresponding evidence of its purchase. In fact, while mediclaim lays the parameters for bed charges, there are no guidelines on the cost of the stent.
Insurance rules commonly stipulate that the bed charges should not be more than 1% of the sum assured. So patients are known to register for a lower-cost room category to be able to claim a higher amount on cost of the implant. The cost of the stent does not change with the class in which the patient is admitted.
According to Shreeraj Deshpande, head-health, Future Generali India Insurance Co, "Hospitals do a bulk purchase of consumables, but do not transfer the differential benefit to the insurance company or the patient. Prices vary across the importer/marketing agencies and the batch/year of import, which further adds to the difference in costing. We do not ask for the stent invoice if it is mentioned in the consolidated bill and the amount is not unexpectedly high."
Rajagopal Gopalan, operations & claims head, Bharti AXA General Insurance, has a different approach. "We have found price discrepancy between stents of the same company for bills coming from different hospitals. We check the invoice price. Only the invoice price is paid and handling charges, if any, are not paid," Mr Gopalan says. "We do case management with the help of TPA (third party administrator) to find out the exact price of the stent of that particular make. Most often, hospitals buy them in bulk, hence they would not have individual invoices. We request for invoices or the box. Most of the time price is not printed on the stent box. With the help of the TPA, we determine the exact price of the stent."
"Most of the time the hospitals buy stents from one or two companies in bulk, so that patient doesn't have much of a choice. They are forced to use what the hospital provides," said the senior doctor.
Abbot Laboratories, Boston Scientific Corp and Johnson & Johnson are among the prominent stent manufacturers globally. In the past fortnight, New Jersey-based J&J announced that it would stop selling drug-coated heart stents by the end of the year, apparently over safety concerns and competition from rival products.
In the United States, the practise is that the price is marked on such implant items by the FDA. "They put an MRP at which price it can be sold. In the US there are guidelines, but here the FDA doesn't have any guidelines on implants that are imported and used in India," the senior doctor said. "There is a discrepancy in the amount and the government needs to put an MRP on the stent."
Once the government lays down guidelines it will be a race among hospitals to charge less for stents to attract patients.
Claim-paying ability of the insurers is one of the factors that needs to considered
Insurance companies are supposed to be experts in managing risk but many in the US and Europe did a poor job of it in 2007-08. In India, the insurance regulator enforces a solvency margin to be set aside towards potential claims liability, in case the insurer goes bust. This solvency margin has to be declared every year to IRDA. While comparing insurers, you should consider the company which can be gauged by its solvency margin. (Solvency margin is the surplus of liquid assets that all life insurance companies must stash away and hold to meet any policy claims that may arise). If there is a really adverse claims ratio due to unrealistic premiums, it is possible that an insurance company may go bankrupt. There are lower chances of adverse claims ratio across products, so policyholders have less to worry about. The solution to protect the insured is for IRDA to formulate a detailed plan of action and set up a policyholder protection fund to which every insurer should contribute every year from the premiums received, and this fund should be independently managed by the trustees appointed by IRDA.
IRDA has given leeway to term products by reducing the solvency margin to improve term life insurance penetration in India. How it will impact the financial status of insurers is yet to be seen. The overall solvency margin specified by IRDA for life insurers is the higher of 150% of liquid assets or Rs50 crore. This implies that the capital and value of the assets of insurance companies has to be at least 1.5 times more than the insured liabilities. According to Mr Viswanand, “Some of the new entrants have solvency margin requirements within the absolute Rs50-crore limit which also enables them to price more competitively.” If true, this is something of a concern.