Domestic medical device manufacturers have hailed the new healthcare procurement policy introduced on October 29, 2021 by the Department of Pharmaceuticals (DoP) that gives preference to manufacturers with over 50% domestic content in the product.
DoP move gives priority to bidders of government contracts that use more local content. The revised order has introduced a concept of Class-I, II and non-local suppliers, based on which they will get preference in government purchases of goods and services.
“Around 1500 manufacturers who make medical devices in India and sell to public healthcare agencies are beneficiaries of the new procurement policy. The total public healthcare market for medical devices is estimated to be over Rs 30000 Crore. Rs 110,000 Crore (15 Billion $) is the market size estimated for India. The Indian industry’s market share of public healthcare is estimated at 20 % to 25%,” according to the Association of Indian Medical Device Industry (AiMeD).
Rajiv Nath, Forum Coordinator, AiMed further explains, “The new policy changes of giving preference to Quality over L1 (lowest bid prices) is especially of strategic impact for healthcare products where quality is very critical to users. The market was 80% to 90% import dependent but with the stated preference to make in India products, the market share of domestic manufacturers in public healthcare can now go up from 20% to 30% to around 40% to 50%. This will encourage more foreign investment by overseas manufacturers who will seek to protect their existing market share in India.”
This had been a long standing request to the Government of India to move from L1 (lowest price) procurement to Q1 (quality preferred) or R1 (rating preferred- rating based on service, quality and price performance).
He further added that the market share can improve if public healthcare procurement preference is also considered for Design India certification to encourage homegrown innovation and R&D in India.
Class-I local suppliers will get the most preference in all government purchases because their domestic value local content addition is 50% or more. They will be followed by Class-II suppliers, whose local content value addition range is more than 20% but less than 50%.
For verification of local content, the Class I and II suppliers shall be required to indicate percentage of local content and provide self-certification that the item offered meets the local content requirement norms.
The Concept of Class-I supplier has been introduced so that in cases where local suppliers are to be given the order, even within that group one should give first preference to the ones whose domestic value addition is significantly high.
Under the revised public procurement guidelines, it is envisaged that all Central Government departments, their attached or subordinate offices and autonomous bodies controlled by the Government of India should ensure that purchase preference will be given to domestic suppliers.
