By Jisha Krishnan

Published on 27th, March, 2018

Regulating the prices of medical devices is a small, though significant step in the larger scheme of things. However, can it cure India’s ailing healthcare system?

The diagnosis

India is counted among the countries recording the highest health-related out-of-pocket expenditure at 62 per cent. According to the National Health Policy, 63 million Indians are pushed into poverty annually due to healthcare expenses.

While drugs account for the bulk of healthcare spending, medical devices - such as stents, pacemakers, and orthopaedic implants – also contribute substantially to the costs. Despite that, the medical devices sector in India has remained largely unregulated.

In other words, the high margins and commissions offered by medical device manufacturers to distributors, wholesalers, hospitals and doctors have been borne by hapless patients for way too long. Yet the majority of 1.2 billion Indians simply cannot afford to pay the inflated prices – often 10 to 20 times the import or manufacturing cost.

Valued at nearly Rs 34,000 crore last year – as per the 2016-17 annual report of the Department of Pharmaceuticals - India’s medical devices market is dominated by imported products, which constitute almost 80 per cent of total sales.

The treatment

Last year, in a bold move, the government notified 23 categories of medical devices under the Drugs and Cosmetics Act. Prices of four notified devices were regulated by India’s drug-pricing regulator National Pharmaceutical Pricing Authority (NPPA).

The ceiling price of coronary stents was notified at Rs 7,260 (from the average MRP of Rs 45,100) for bare metal type and Rs 29,600 (from the average MRP of Rs 1.21 lakh) for drug-eluting ones. Similarly, the prices of knee implants was slashed by 69 per cent, while limiting trade margins to 16 per cent for distributors and stockists, and eight per cent for hospitals.

Since the health ministry notified the Medical Devices Rules, 2017 - which came into effect from January, 2018 - the market share of domestic stent makers has risen to 61 per cent (according to the NPPA). Besides, the government expects the price control of stents to result in annual savings of about Rs 4,450 crore for patients.

The side-effect

On the other hand, there was a 59 per cent fall in foreign direct investment (FDI) in the medical devices sector during the January-September 2017 period, as compared to the previous year. Multinational stent makers filed applications to withdraw their new-generation stents from the country, citing unviability due to the new pricing regime. The Department of Pharmaceuticals (DoP) had to invoke its powers under the Drug Price Control Order (DPCO) to restrict the companies from withdrawing their products.

Over the last few months, there has been immense pressure on the Indian government from the multinational companies to review the price control. The price control measures, they argue, are hampering innovation and affecting future investment plans in India.

The prognosis

Recently, the Department of Pharmaceuticals issued the draft Medical Devices Preferential Market Access (PMA) Policy, leaving the industry further disappointed. To make healthcare truly affordable, there needs to be a consensus towards a more comprehensive regulatory framework.

The need of the hour is to reduce India’s dependence on imports for medical devices. There are talks of creation of a national medical devices authority to promote local manufacturing, furthering the ‘Make in India’ initiative.

The medical devices industry in India needs a long-term plan, a la the National Health Protection Scheme (NHPS) and the Pradhan Mantri Bharatiya Janaushadhi Pariyojana (PMBJP). Can India lower development costs and increase corporate competition? That’ll decide whether healthcare becomes affordable.

 

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