Regulating Prices of Medical Devices Can Benefit – If Done the Right Way

New Delhi, June 24, 2018: Recent developments in the medical devices industry have captured the interest of entrepreneurs, doctors and stakeholders. Upon the formulation of the Medical Devices Rules, 2017 there has been a debate on whether or not the government should regulate prices of medical devices. The Rules are in their early stages and yet to be established as a policy, so there’s plenty of room for the government to take a decision on this issue.

The fundamental reason for enforcing price capping is compelling: it increases the affordability of medical devices for the underprivileged, rural and semi-urban populations. A survey in New Delhi, for instance, showed that reduction in stent prices resulted in approximately 8-18 per cent reduction in the cost of overall angioplasty procedure for patients undergoing single vessel procedure (approximately 70% of the total angioplasty patients). Affordability of medical devices are essential in developing countries, especially one like India where the doctor to population ratio is abysmally low at 1:1428. Medical devices aiding diagnosis and treatment can tackle this gap, enabling doctors to obtain more accurate results.

However, popular opinion states that price regulation on medical devices can hurt innovation, profits and future investment. The Indian government slashed prices of medical devices such as knee implants and heart stents in 2017 by as much 69 and 85 per cent respectively, to make them more affordable. In reaction, the Medical Technology Association of India (MTAI) pointed out that “any protectionism would not be a facilitator but would only sow seeds of doubt in the minds of global investors”. Leading US firms established in India protested against these moves and pressurized the Indian government to revise its stance on price caps for medical devices, but PM Modi clarified the government’s view on the issue: providing affordable healthcare to patients takes precedence over the interests of companies.

Affordability of medical devices is a crucial factor, but providing and retaining impetus to innovation, production and investment in the industry is equally important and must not be sidetracked. The government needs to maintain a delicate balance, it should device a price capping range in such a way that: (a) It is affordable for the majority of the population and (b) It covers the production cost and guarantees profit for the producer. To promote exports the device can be sold at a relatively higher price range, still keeping the prices competitive at the global level. If the Medical Devices Rules solidify into a policy, the National Medical Device Promotion Council (NMDPC) will be responsible for researching, managing and consolidating the medical devices sector. The scope of the NMDPC can be expanded to include determination and implementation of price capping, enforcement of its rules and monitoring their implementation.

Subsidies or grants currently disbursed to the industrial sector by the government will certainly reduce import dependence and foster the ‘Make in India’ scheme. However, going one step ahead and offering tax credits or reimbursements to innovators will further lower the overall cost of the device and enable more profitable manufacture of medical devices under the price-capping mechanism. The net result would be a vibrant manufacturing ecosystem producing innovative, good quality, profit-making and yet affordable products. Over the last few years, China has been successful in manufacturing and exporting low range devices with the added support of government subsidies; India can also incorporate a similar system to boost its sales abroad.

The biggest challenge for today’s medical technology innovators is to invent novel technologies, which replace complex and exorbitantly priced products with simple, reasonably priced and equally performing alternatives. The fact that medical devices are a diverse set of technological, electrical and mechanical instruments and their production techniques can be extremely multifarious intensifies the challenge. However, once designed and produced, such a product would be immune to any adverse commercial impacts of a price capping mechanism. India’s upcoming medical device zones encourage innovators and inventors to tackle this challenge, and similar projects need to be implemented across the country.

The Indian government intends to reduce the premium on devices by implementing a price ceiling for medical devices similar to the pharmaceutical industry. The pharmaceutical sector flourished exceptionally due to the patent regime, low cost of production and exemptions to small-scale industries. The National Pharmaceutical Pricing Authority (NPPA), which regulates the prices of more than 600 drugs, is likely to regulate about 14 more out of 23 medical devices mentioned under the Drugs and Cosmetics Act, 1945. Similar to the National List of Essential Medicines (NLEM) of NPPA, the government under the new Medical Devices Rule, 2017 can notify a list of emergency devices, home medical equipment and indispensable devices, which can be sold at regulated prices between certain price ranges.

Price capping is an excellent system for increasing affordability of medical devices. However, this is not the only solution. Price regulation on devices can be supplemented with encouraging social innovations, emphasizing on preventive healthcare, creating well-equipped medical stores facilitating accessibility of devices in remote locations, improving medical education and human resources, providing adequate medical infrastructure in remote areas, adopting the PPP model to enhance the distribution system, and increased investment in health care can bolster the sector altogether. Further, manufacturing-friendly and export-promoting policies must accompany the price capping mechanism to offset any of its adverse impacts.

The combined result of these actions would be an innovative, good quality and affordable healthcare sector, and that should be the sector’s – and the country’s – paramount objective.

Corporate Comm India(CCI Newswire)