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Preferential Pricing Needed to Boost Medical Devices Market

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Rajiv Nath, AiMeD

The Indian Medical Device industry holds immense potential contributing to the growth of healthcare ecosystem. There are number of factors responsible for jeopardising this vertical’s growth. Preferential Market Access is need of the hour to buoy domestic industry, says Rajiv Nath, Forum Coordinator, Association of Indian Medical Device Industry (AiMeD), in conversation with Elets News Network (ENN).

Q AiMeD recently expressed disappointment over the draft Medical Devices Preferential Market Access (PMA) Policy issued by DoP. What needs to be done on this front?

Many countries use Preferential Market Access as a policy measure to accelerate domestic manufacturing. The USA has a ‘Buy American’ policy and keeps out low priced imports from participating in the public healthcare procurement process unless they are signatory to TAA – Trade Agreement Act. Similarly, China , Malaysia , Indonesia, South Africa, Jordan , Uganda etc have preferential pricing to give competitive advantage to their domestic manufacturers and incentivise overseas manufacturers to put local factories to retain market shares.

The recently announced draft guidelines of Department of Pharma were found to be highly disappointing. The Draft PMA policy in its present form does not provide preferential pricing to Indian manufacturers, no incentives on maintaining and improving quality, indigenous development and no redressal/penal provisions against use of exclusionary 3rd country regulatory approval mandatory clauses e.g. USFDA.

It doesn’t provide any corpus for ensuring no late payments by the Government. Such a corpus would be necessary to ward off any adverse impact on a company in case of delayed payments by the Government.

We regret to say that following suggestions made by us to give encouragement and boost domestic manufacturers over imports have not been considered e.g.

• Preferential Pricing for Domestic Manufacturers based on World Bank norms

• Preference for ICMED / ISO Certified Manufacturers to boost quality

• Preference for Design India Certified Manufacturers to boost indigenous development

• Timely payment against Government Supplies

• Penal provision against Hospitals that keep exclusionary compliance Clause of USFDA Certification as 3rd Country Regulatory approval

The Prime Minister wants to boost Make in India with ‘Buy in India’ and DIPP provided a Preferential Purchase order with a 20 per cent margin of preference for domestic manufacturers. However, this margin of preference is not preferential pricing of 20 per cent as is the case in some countries like China which give 15-25 per cent price preference and others like Malaysia, Jordan, Uganda, Indonesia etc give 15 per cent.

DIPP order only allows Indian bidders to match the L1 Lowest price bid of a foreign manufacturer (read Chinese) if his bid was within 20 per cent range.

The USA which uses a non -tariff barrier that only countries recognised in their Trade Agreement Act are allowed to sell to the US Government Institutions and countries like India, China and South Africa etc are even unable to bid. Whereas the DoP PMA guidelines has no Penal Action or disciplinary actions like not allowing access to Finance to procure medical devices where tenders use exclusionary mandatory Clauses of compliance e.g. Regulatory Approval by US FDA (and CE) to keep out Indian manufacturers from bidding in their own country tenders.

medical devices

The option to match L1 Lowest price of a Chinese product is not a preference to an Indian manufacturer – it’s only an option and this will hardly incentivise Indian manufacturing. Compare this to other countries like Indonesia, China, Malaysia, Jordan, Uganda etc. that give 15 per cent or higher price preference to manufacturers who produce in their country.

This has motivated importers to shift manufacturing base to these countries to retain market share and given competitive advantage to domestic producers to add capacity. Sadly, an opportunity to boost Make in India Medical Devices is being lost.

We can match prices of any country other than China as it has no global market economies but a subsidised state sponsored eco system. How can we compete with low priced imports from china with non- remunerative, nonsustainable pricing unless the Indian Government has supportive policies?

India needs to follow the UN system of procurement based on sustainable costs and not based on L1 lowest pricing that motivates some manufacturers to cut corners in regard to quality and service delivery of product and give poor image to Brand India.

By denying preferential pricing to Indian manufacturers, the draft policy guidelines can be said to be bordering on encouraging ‘pseudo manufacturing’. It is sad that genuine concerns and suggestions of Domestic Medical Device Manufacturers are being repeatedly sidelined.

Q Tell us something significant about the existing policy framework related to medical equipment segment.

To boost manufacturing of medical equipment and electronics in India, there needs to be an urgent enforcement of the MoEF order restricting imports of pre-owned second equipment of over three years at least till we have a robust regulations to ensure Calibration and Patient Safety compliances . This needs to be followed by raising tariff to 15-20 per cent as done for Consumer Electronics including mobile phones followed by a 7.5- 10 per cent tariff on components to enable development of a manufacturing ecosystem.

Until we can have a separate medical device regulations law, the Government can initially make compliance to IS: 13485 mandatory under BIS law and rules to safeguard patients and act as a non-tariff barrier. Meanwhile encourage manufacturers to seek voluntary QA ICMED certification from QCI – NABCB accredited Certification bodies.

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