Why cap prices of medical devices

Medical devices and medicines are fundamentally different product categories and cannot be dealt with identical policy yardsticks

Access to healthcare is one of the parameters on which the success of any welfare state can be measured. India has its own share of healthcare burden, and citizens’ access to medicines has attracted attention from successive governments. Whereas the political will to provide adequate healthcare access has been dampened by resource crunch, governments have rather passed the buck on the issue to the industry by exercising price controls over medicines.

While medicines have been under some or the other form of price control, now there has been a widening of interest to cover certain medical devices under price controls as well, especially in case of cardiac stents, orthopaedic implants and intra-ocular lenses. The argument is that these devices are sold in trade channels with too wide a margin and that patients are burdened with exorbitantly high prices.

So far the government seems to have approached towards a possible solution to this problem in a rather mechanical manner—i.e. trying to supplant the existing system of price controls for medicines to medical devices. However, the seemingly one-size-suits-all approach may be of little help to patients. The moot point is that medical devices and medicines are fundamentally different product categories and hence cannot be dealt with identical policy yardsticks.

Compared to pharmaceuticals, medical devices are a diverse group of products. Some are as simple as adhesive bandages, tongue depressors and plastic tubing. Others are complex, like various implanted cardiac and neurological devices, stair-walking wheelchairs, robotic surgical systems, and magnetic resonance imaging devices.

In contrast to drugs, medical devices involve a number of components that, together, form a system. Even within the domain of medical devices, the diversity makes it inappropriate to apply the same price assessment methods to all categories. The active components of medical devices are generally based on mechanical, electrical and materials engineering. Many devices incorporate and are driven by software. In contrast, pharmaceuticals are based on pharmacology and chemistry, and encompass biotechnology and genetic engineering. In recognition of these differences, pharmaceuticals and medical devices are regulated separately in all major markets across the world.

Even the Indian government considers medical devices and drugs as two separate and distinct class/genre, as is evident in the Drugs and Cosmetics (Amendment) Bill, 2015. Medical devices are not in any way pharmaceutical, chemical, biological or plant products conforming to pharmacopoeial or other standards specified in the Second Schedule to the Drugs and Cosmetics Act, 1940, and are not used as such or as an ingredient in a formulation.

The out-of-pocket expense for the cost of a medical device is on a different footing than that for medicines. Whereas medicines are sold to the consumer who pays directly for the product, in case of medical devices the cost of the device is a component of the total cost for the procedure/surgery charged by the hospital. Even if one assumes a situation that prices of individual medical devices are capped by the government, how can one ensure that the benefits of such price caps are being passed on to patients by hospitals? In such a case, while device manufacturers will suffer losses on account of price control, the end-consumer would be left high and dry. The only beneficiary would be hospitals, who will amass more profits per procedure. This cannot be a policy goal for the government.

Expansion of price controls on medical devices will not resolve the country’s long-term health challenges and can lead to shortages, delays in the introduction of new devices, and quality concerns for price-controlled devices. The government has to manage rising healthcare costs, patients want access to latest technologies, and companies seek a fair return on their investment. Capping prices of medical devices based on methodologies used for a totally unrelated sector would do more harm than good for achieving the goals of the government, patients and the industry. There are alternative approaches like government procurement models that need to be looked into rather than passing the buck on healthcare burden directly to the industry.

The author is partner, Corporate Law Group, a Delhi-based boutique law firm

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