1. Narendra Modi government’s move to cap prices of medical devices rankles industry; here is why

Narendra Modi government’s move to cap prices of medical devices rankles industry; here is why

Currently, India is counted among the top-20 global medical devices market and is the fourth-largest market in Asia after Japan, China and South Korea. The government’s move to allow 100% FDI in the segment has also helped the industry attract foreign capital.

By: | Published: October 18, 2017 5:00 AM
As per the government’s Make-in-India survey, the medical devices industry in India is valued .2 billion at present, and contributes 4-5% to the .7 billion Indian healthcare industry. (Reuters)

As per the government’s Make-in-India survey, the medical devices industry in India is valued $5.2 billion at present, and contributes 4-5% to the $96.7 billion Indian healthcare industry. Currently, India has about 750–800 medical device manufacturers, with an average investment of Rs 170–200 million and an average turnover of Rs 450–500 million. The industry has steadily grown and witnessed a surge from $2.02 billion in 2009 to $3.9 billion in 2015 at a CAGR of 15.8%. As per industry estimates, the Indian medical devices market will grow to a $50 billion industry by 2025. Currently, India is counted among the top-20 global medical devices market and is the fourth-largest market in Asia after Japan, China and South Korea. The government’s move to allow 100% FDI in the segment has also helped the industry attract foreign capital.

Against this backdrop, it appears that the medical devices industry will be a key growth-driver for India. However, some of the recent moves of the government are worrying, to say the least. The year 2017 has sent mixed signals to the industry. The year started promisingly, with a new set of Medical Devices Rules getting notified by the government—this finally paid heed to the fact that medical devices should be governed and regulated separately from drugs. This was followed by the Union finance minister giving a positive speech in his budget in relation to medical devices and the healthcare sector. The latter half of the year has seen the government undertaking price-capping measures—these have given the diametrically-opposite signal to the industry. It seems that the government intends to introduce price caps on more devices, and in this regard, a core committee has been constituted to start deliberations on including essential devices under the ambit of a National List of Essential Medical Devices (NLEMD).

Prices of cardiac stents and knee implants have been cut up to 70-80% from their previous price-points. This move has sounded alarm bells for the industry, and has the potential to undermine the prospect of future foreign investments in the sector. Multinational companies are rightfully worried about the arbitrary nature in which the government announced the price caps. Moreover, the attempts by such multinationals to withdraw their products from the market, after the price cap announcement, has also been blocked by the price regulator. While the government wants to make essential devices available to general population at affordable prices, undertaking radical decisions involving capping of prices is bound to create problems in the long run.

Further, the government has been taking some steps in the healthcare that haven’t been very encouraging for the growth of the industry in general. For instance, a recent proposal on putting a ban on gelatin capsules and, instead, introducing vegetarian capsules. This move caused alarm among the Indian drug manufactures. The reason for such an off-beat proposal is primarily that a large part of the Indian population is vegetarian. The move, devoid of any scientific rationale, will have the effect of paralysing not only the business of pharma companies, but also put the life of patients at risk if it fructifies.

Then, the government introduced the draft National Pharmaceutical Policy which has got the pharma industry alarmed. We are living in a day and age where even a proposed move by a government can have the effect of creating a pervasive effect—positive or negative—on industry. The draft pharma policy has proposed certain concerning provisions including restrictions on loan licensing and recasting the National Pharmaceutical Pricing Authority. These propositions are having a negative impact on the industry. While it is not the case that each of these proposed moves is being pushed to become the final policy, it does create concerns for the stakeholders who require clarity of thought from the government. In the same breath, the PPP model proposed for non-communicable diseases is a step in the right direction; but a lot will have to be done on ground for the proposal to have real impact. Successive governments since the year 1991 have done enough to dispel the license-quota-permit regime that crippled the Indian economy for decades prior to that. While the economy has had to suffer from policy paralysis time and again, what the Modi government can do is ensure is that the economy does not suffer from policy adventurism. Post the 1991 reforms, the country has witnessed significant growth in various sectors with pharmaceutical, healthcare and medical devices being hugely successful. Therefore, the government must carefully consider the steps that it seeks to take keeping in mind the concerns of the industry.

Sidharrth Shankar
Partner, J Sagar Associates,
Advocates and Solicitors. Views are personal
With contributions from Srikant, senior associate with J Sagar Associates, Advocates and Solicitors

  1. Rajiv Nath
    Oct 18, 2017 at 1:51 pm
    Trade Margins rationalisation may not be needed by Pharma Industry but needed in Medical Devices as Customer has no choice and he has no access to lowest cost best product choice . In Medical Devices the MRP has reached astronomical unreasonable levels and is overly cross subsidising procedure costs.When a market no longer works as an open compe ion market for the benefit of the consumer or for Domestic manufacturer and even clouds the judgement of hospitals of what's reasonable leading to loss of trust in medical profession and rage and violence against Doctors then it's time for a government to step in and Regulate . But the cross lobbying continues via papers like yours - who is the Industry? Importers or Manufacturers? Since when did importers become voice of industry? Such pseudo Mfr without making in India and harming Actual Mfrs and Patients. They have a right to lobby but importers are not voice of Indian Industry so pls don't give them that badge .
    Reply
    1. Jayesh Sheth
      Oct 18, 2017 at 1:07 pm
      Sir, the price of stent is decrease but the rice of medicine is increased like surbex gold,pregab or ecosprin fold, that is daily need after heart surgery .although i am a patient of heart surgery so i have shared this.
      Reply

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