High pricing taking a toll on medical device industry

Out of the 24 regulated medical devices listed as drugs by the Ministry of Health, four devices have been included in the national list of essential medicines and ceiling on prices have been fixed on them.

Four medical devices – cardiac stents, drugeluting stents, condoms and intrauterine; have been included in the national list of essential medicines and ceiling on their prices have been fixed, Union Minister Mansukh L Mandaviya said in Lok Sabha.

The Maximum Retail Prices (MRP) of 20 other medical devices are monitored by the National Pharmaceutical Pricing Authority (NPPA) to ensure that no manufacturer increases the price of a drug more than 10 per cent of the MRP during preceding 12 months shared the Union Minister. Experts from the Medical Device industry talk to Medical Equipment & Automation magazine and share their expert views on the topic.

Rajiv Nath, Forum Coordinator of Association of Indian Medical Device Industry (AIMED),
said, “I feel extremely aggrieved to see India being ranked 145 among 190 nations, lower than even Bangladesh, Sudan and Equatorial Guinea by the 2018 Global Healthcare Access and Quality Index. To change this landscape, we need to provide quality and affordable healthcare and reasonably priced medical devices.”

He further added, “In recent times, exorbitantly priced medical devices and medical treatment has caused distrust in the healthcare industry, adversely impacting healthcare business environment in the country. In this context, the government needs to protect consumers’ interest as well as allow domestic industry to flourish in a level playing field with multinationals. Excessive pricing is stifling India’s manufacturing growth story. In the absence of fair competition, reasonable price controls are desirable. One possible solution for ensuring reasonable MRP (maximum retail price) is keepingtrade margin at a rational level along the supply chain. The trade margin is the difference between the price at which the manufacturers (indigenous overseas) sell to trade and the final price to patients.”

Atul K. Sethi, Managing Director, Shree Pacetronix Ltd.,
said, “Price fixing by the government is good so that foreign multi-nationals do not get away with exorbitant prices. Currently, medical devices are largely out of government price control. Just four items — cardiac stents, drug eluting stents, condoms and intra uterine devices — are in the national list of essential medicines and fall under government’s purview. Apart from these, only knee implants have been recently brought under price control. While the government is ready with a plan to cap trade margins, the ceiling was under discussion and now has been included in the national list of essential medicines and ceiling on their prices have been fixed.”

Sethi further said, “The DoP along with NPPA has proposed to cap the margin at 30 per cent of the price to the distributor. However, Niti Aayog had earlier suggested fixing it at 65 per cent but after intervention from the PMO – which felt 65 per cent may be too high – the government think tank has proposed a 50 per cent cap.”

Talking about rationalisation of trade margins in medical devices, Nath said, “The main aim of rationalisation of trade margins in medical devices should be not only to help consumers, but also allow rationalised and reasonable profits for traders, importers, distributors, and wholesalers and retailers and create a level playing field for domestic industry vis-à-vis foreign manufacturers. There should be clear objectives for any policy intervention to provide quality and affordability and avoid distress (to consumers), distrust (in industry) and disruption (to market).”

He said, “The market place is, unfortunately, skewed where suppliers induce hospitals to buy and push their brands based on profit margins to be made and not on basis of cost savings to be made on the procurement cost by a hospital, thus spiraling prices of medical devices leading to an artificial inflation.”

Nath observes when it comes to trade margin rationalisation, importers of medical devices should also be included. He further questions, “Aren’t MNC importers traders too be included? How can we have importers having irrational 200 per cent margin as was indicated in NPPA report analysing trade margins on catheters and guide wires and rest of supply chain only 35-50 per cent margin as was being recommended by MNC importers’ lobby?.”

The Government may consider to cap trade margins along entire supply chain of specific devices to maximum of 85 per cent. This will help in reducing MRP of many medical devices to less than half of current prices while not being unreasonably detrimental to traders and hospitals. Additionally, manufacturers will be encouraged to attract clients on competitive features and hospitals will start buying on evaluating cost of purchase and quality, instead of considering margins to be made on higher MRP.

Based on evidence of successful price caps of stents, the Government must pro-actively make cohesive, industry-friendly policy giving at least a level playing field, if not a strategic advantage to domestic manufacturers while safe guarding consumers. “Devices are not drugs though both are medical products but differ in approach in marketing – any move to bring in Trade Margin Rationalisation that’s based on PTS (Price to Stockist) instead of 1st point of sales (when goods enter India), may not meet objectives “to boost domestic manufacturing, end exploitative MRP and unethical Marketing,” Nath said.

Conclusion
There is an urgent need for the government to move towards ending over 80 per cent import dependence, expedite steps for patients’ protection, stronger quality and safety regulations, judicious price controls to make medical devices and quality treatment accessible and affordable and promote indigenous manufacturing.

Nath said, “There is a need to counter attempts to spread misinformation vis-à-vis any kind of government policy to control prices of medical devices. When MRP or trade margins are capped the manufacturers’ margins are not impacted so fear mongering regarding detrimental impact on quality and innovations in medical devices on account of price control policy stipulations will not be in the interest of consumers or domestic manufacturers. Such misinformation by any particular lobby should be discouraged and countered effectively.”

Sethi said, “Medical devices will be manufactured in India in all categories as the government is giving support for Indegenisation. Already they have brought down import duties on raw materials required for essential devices such as pacemakers, cochlear implants, etc. Also they are developing these devices for giving a chance for commercial production so that prices come down further for our citizens.”