The Indian medical devices industry is an important sector and is expected to be one of the flag-bearers of Make-in-India.
The Indian medical devices industry is an important sector and is expected to be one of the flag-bearers of Make-in-India. It has grown in size, from $2.02 billion in 2009 to $3.9 billion in 2015, at a CAGR of 15.8%. The government’s move to allow 100% FDI in the segment has also helped the Indian medical devices industry in attracting foreign capital.
Today, the Indian medical devices market is dominated by imported products, which comprise of around 70% of total sales, and the manufacture of low-end products for local and as well as international consumption. It is against this backdrop that the government has decided to give a push to domestic manufacturing of medical devices in order to reduce the country’s dependence on imports.
The most significant recent development concerning the medical devices industry has been the notification of Medical Devices Rules, 2017, which became effective from January 1, 2018. The introduction of these rules signals the government’s step in the right direction, in finally acknowledging the existence of a distinct industry within the ambit of the broader healthcare industry, and the need to regulate medical devices separately from that of pharmaceutical/drugs industry.
Prior to the notification of these rules, there were no specific rules governing the manufacture of medical devices. Moreover, the manufacture and/or import of certain notified medical devices were regulated as drugs within the ambit of Drugs and Cosmetics Rules, 1945. The notification of medical devices rules finally puts an end to the regulatory absence, and provides a clear set of norms governing the medical devices industry.
These rules provide for a risk-based classification of medical devices, whereby low-risk medical devices are classified as ‘Class A’; the devices having low to moderate risk are classified as ‘Class B’; the devices having moderate risk are classified as ‘Class C’; and devices having high risk are classified as ‘Class D’ medicate devices. The parameters for determining the classification of medical devices have also been specified in these rules, clearly stating the criteria to be taken into account for determining the exact class in which a medical device will fall in. For instance, according to the rules, classification of a medical device will be governed on the basis of its intended use, and if a device is intended to be used in combination with another device, the classification rules will apply separately to each of the devices.
In what could be a trend-setting precedent in the Indian scenario, these rules stipulate for two very important aspects. The first is time-bound disposal of applications, and the second is the online single-window application portal. The rules clearly lay down the requisite application forms in which various applications (for manufacture, import, clinical investigation, etc) are required to be made, and provide for a clear time-line within which the applicant will be either granted or refused the licence or registration.
Apart from the end-to-end time-lines, each stage of the application process (such as inspection of application, audit of manufacturing site, etc) is required to be completed within the time-lines prescribed under the rules. Further, the concept of seeking renewal licences has been done away with, and the licences granted under the rules will be valid in perpetuity, subject to periodic payment of renewal fee. The online single-window application portal would prove to be a game-changer for the industry, as it would do away with bureaucratic procedures typically involving physical applications. In addition, online applications would make it easier in tracking applications and faster resolution of any queries associated with the applications.
The above highlights all what is good. But announcements in this year’s Union Budget have dampened industry sentiments. The finance ministry allowed 2.5% exemption to device importers, while it raised the customs duty to 10% on certain devices from current 7.5%. Now, reports have emerged that immediately after Budget announcements, the government decided to reverse its decision. Such policy dilly-dallying is not good news for the industry. There has been much talk about making in India, but the tampering with tax rates doesn’t give the right signals to domestic medical devices industry. Even though we aspire to have our manufacturing industry rival that of China, tax uncertainties do not match our aspirations.
On one hand, the notification of rules signals the government’s intent to give fresh impetus to indigenous manufacturing to a sector that has the potential of carving a niche for India’s manufacturing industry, while on the other hand the tax uncertainties have dampened the impetus right when it just started.
With rising threats of protectionism and trade barriers signalled by western countries coupled with their economic recovery, it is important for India to take the right steps to ensure that it remains an attractive destination of global majors to set up shop here. Considering that medical devices have huge export-related potential, it is extremely essential for the government to not take any steps that will prove to be regressive.
By Sidharrth Shankar, Partner with J Sagar Associates. Views are personal. (CV Srikant contributed to this article)