Not in good health

Published: April 10, 2020 4:55:57 AM

Simultaneous with the government's decision to regulate all medical devices under the act, the NPPA has also stated that all medical devices would be governed under the Drugs (Prices Control) Order, 2013, with effect from April 1.

The government's move to approve an approximately Rs 3,800 crore stimulus package to promote medical devices manufacturing in India is a step in the right direction. The government’s move to approve an approximately Rs 3,800 crore stimulus package to promote medical devices manufacturing in India is a step in the right direction. (Representative image)

By Rupinder Malik & Sidharrth Shankar

The medical device industry, witnessing a surge from its humble beginnings, has steadily grown at a CAGR of 15% over the past few years. As per industry estimates, the Indian medical devices market will grow to a $50 billion industry by 2025, contributing approximately 4-5% to the Indian healthcare industry. However, the recent Covid-19 outbreak has exposed the industry’s fault-lines by bringing India’s heavy reliance on imports to the forefront. The Indian medical devices market has been dominated by imported products, which comprise around 70% of the total sales. It is in this backdrop that the government has decided to give a push to domestic manufacturing of medical devices to reduce India’s dependence on imports. The government’s move to approve an approximately Rs 3,800 crore stimulus package to promote medical devices manufacturing in India is a step in the right direction. A policy shift is necessary to make a meaningful impact.

The most significant recent development has been the extension of the applicability of the Medical Devices Rules, 2017 to all medical devices. The government has achieved this by bringing all medical devices and software under the ambit of the principal legislation, the ‘Drugs and Cosmetics Act, 1940’ with effect from April 1. As a quick recap, medical devices in India have hitherto been largely unregulated. The act and rules are only applicable to such devices which have been specifically notified by the government. Until April this year, only thirty seven devices were notified by the government while the medical devices market consists of an estimated five thousand devices. While the notification of all devices under the act puts an end to the regulatory arbitrage, a key demand of the industry of having a separate regulator continues to remain unaddressed. Currently, the manufacturing, import and distribution of medical devices falls under the regulatory supervision of the CDSCO, India’s apex drug regulator. It may seem that the government has finally acknowledged the existence of a distinct industry within the ambit of the healthcare sector. However, the policy inaction on following the Niti Aayog’s recommendations of introducing a new act for the regulation of medical devices separate from that of pharmaceutical/ drugs industry shows ignorance of industry’s demands.

Simultaneous with the government’s decision to regulate all medical devices under the act, the NPPA has also stated that all medical devices would be governed under the Drugs (Prices Control) Order, 2013, with effect from April 1. As a result, any increase in prices of medical devices, including software, can now only be to the extent of 10% of the prevailing rate in any year. This order is in addition to the NPPA’s powers to provide a cap or ceiling on the prices of medical devices. Consider cardiac stents. NPPA’s capping of rates has only resulted in a paucity of innovation, with both domestic and foreign stent manufacturers choosing not to introduce the latest devices in the Indian market. In a study last year, CCI had highlighted the sub-optimal nature of ‘price control’ as a regulatory instrument.
Recently, the government has also decided to levy health cess on import of medical equipment/ devices. Given India’s heavy reliance on imports, it is reasonable to assume that the additional duty incurred by the domestic medical devices trading companies would be passed on to the end consumers. This is concerning, given that the industry’s suggestions for rationalisation of rates of GST on inputs/parts used in the manufacture of medical equipment/device and reduction in GST rates on manufacturing are yet to be implemented.

The Indian medical devices industry is expected to be a flag-bearer of the ‘Make-in-India’ scheme. While we aspire to have our manufacturing industry rival that of China, the policy uncertainties do not match our aspirational goals. India is already a leader in generic drug manufacturing, and Indian pharma companies have made their presence felt across the globe. With rising threats of protectionism, internal initiatives to control healthcare cost and trade barriers signalled by western countries, it is crucial for India to take right steps to ensure that it remains an attractive destination for global majors.

Authors are partners with J Sagar Associates. Views are personal

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