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India’s government plans to limit markups on medical devices

India’s government plans to limit markups on medical devices
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Image courtesy TMRBLOG.com

By Charles F. Moreira, Editor

India’s government plans to limit distributor and dealer markups on medical devices, the Times of India reported on 19th October 2017.

Limits on markups or ‘trade margins’ as they are called in India are considered fairer to the medical device industry than price caps on categories of medical devices, since trade margins limit how much the item’s price can be raised from its ex-factory of import price.

On the other hand, outright price caps may make it not worthwhile for distributors and dealers of certain medical devices to sell their products in the smaller towns.

This move is in response to medical device prices being excessively marked up by distributors and dealers.

According to a domestic medical device lobby group, in some cases, medical devices such as syringes, needles and other orthopaedic implants have been marked up as much as 10 times, whilst intravenous catheters and sets have been marked up as much as 20 times.

The maximum retail price of medical devices has reached astronomically unreasonable levels and is overly cross-subsidising procedure costs, according to Rajiv Nath, forum coordinator of the domestic group, Association of Indian Medical Devices Industry (AiMeD).

So to pre-empt further government intervention, medical device industry lobby groups have also sent proposals to various government agencies endorsing a limit on markups by distributors and dealers as a more viable solution.

An association representing some device companies wrote to the National Pharmaceutical Pricing Association (NPPA) in September proposing that it limit markups on devices categorised under the Drugs and Cosmetics Act at between 35% and 50%.

“Trade margin rationalisation may not be needed by the pharmaceuticals industry but is needed in medical devices as the customer has no choice and no access to the lowest cost, best product, since such a move could easily halve device prices for patients”, said AiMeD’s Nath.

India’s Department of Pharmaceuticals (DoP) has asked medical device associations, healthcare industry bodies and relevant regulatory agencies to help it categorise the devices. The DoP secretary will hold a meeting with various stakeholders on October 25 to fix trade margins.

Earlier on 16 October the DoP held a meeting with stakeholders where it was decided to hold a workshop which would decide on the categorisation of medical devices into different segments for the purpose of fixing trade margins.

The NPPA will present the data it has collected from the industry on ex-factory prices for 23 medical devices categorised as ‘drugs’, whilst in addition, the industry will provide data to decide on the various segments.

Image courtesy Indiamart India

Nineteen out of 23 classes of devices ranging from syringes to heart valves and cochlear implants are not under price control and even amongst devices categorised as orthopaedic implants, only prices of knee implants are controlled.

Coronary stents are also price controlled devices and the NPPA had slashed prices of coronary stents and knee implants as much as 85% and 69%, respectively, to make them more affordable.

It also limited markups on stents to 8%, while the maximum markup it allowed for knee implants was 16% for distributors and stockists and 8% for hospitals.

This move had polarised the industry, with multinationals such as Abbott, Medtronic, Boston Scientific, Smith & Nephew, Zimmer Biomet, Stryker and Johnson & Johnson being hit the most.

At the same time, domestic manufacturers that welcomed the price caps are also worried about more devices facing the same treatment.

After stent prices were slashed this February, some civil society groups wrote to the Prime Minister’s Office seeking similar price caps on devices such as intraocular lenses, heart valves and knee implants.

Image courtesy Pharmafile India

“In principle, capping trade margins for medical devices is a good move, but it is important for the government to understand how much margin to allow for each device”, said Malini Aisola, member of activist group All India Drug Action Network. “This would be a broad regulation spanning entire categories of devices, but it should not foreclose other options.

“If it is found that patients are not benefiting, then further measures like caps on the ceiling price could still be considered,” she said.

“The government also needs an understanding of the cost of production of these devices and should keep a consistent track of price data to ensure that companies don’t inflate import or ex-factory prices afterwards”, said Pavan Choudary, director general, Medical Technology Association of India (MTaI), a lobby group for international device manufacturers.

“Trade margin rationalisation would be better than ‘un-nuanced’ caps on device ceiling prices because it would prevent ‘unintended consequences’ like distributors becoming disinterested in providing these technologies to tier-II and III towns.

“It would also prevent major trading partner countries from considering retaliatory measures against Indian products”, Pavan added.

 

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