Niti Aayog To Re-Examine Proposal To Cap Medical Device Trade Margins After PMO Rejection

New Delhi, 9 Oct 2018: The central policy think tank, the National Institution for Transforming India (Niti) Aayog, is re-examining its proposal to cap the unreasonably high trade margins on medical devices and has started holding talks with various industry stakeholders to draw up an alternative plan, it is learnt. The apex policy-making body’s proposition to scrap the current price control mechanism for medical devices and set trade margin cap at 65 per cent on the first point of sale or stockist was rejected by the Prime Minister’s Office (PMO) last month. 

The issue of unreasonably high trade margins in medical devices has been adversely affecting the industry as well as consumers. As of now, of the 23 types of medical devices listed under Drugs and Cosmetics Act, only five - cardiac stents, drug eluting stents, condoms, intra uterine devices and knee implants - are under price control.

The mechanism mooted by the think tank calculated the maximum retail price (MRP) of a device by adding the trade margin to the price at the first point of sale or stockiest. The trade margin is the difference between the price at which the manufacturer or importer sells to trade (price to trade) and the price to patients or MRP. While the proposal was cheered by the Medical Technology Association of India (MTaI), a lobby group representing multinational companies, it has faced strong objections from Indian manufacturers. 

“Discussions are going on between Niti Aaayog and various industry stakeholders including us at present. The proposed formula is being under review and a consensus plan is expected to be put forward soon,” an industry lobby group representative said on condition of anonymity.  

MTaI had been supporting the formula of ‘MRP = Price at the First Point of Sale (distributor) + percentage of Trade Margins’. “We believe a level-playing field will emerge from this criterion while reducing the MRPs substantially. Using data mentioned in the NPPA report on MRPs of medical devices sold by a leading hospital, and assuming a reasonable trade margin of 50 per cent, we have seen that this formula will result in a reduction of as much as 73 per cent in MRP,” the group’s statement on the issue reads.

However, domestic manufacturers had made several representations to the government against the plan and Indian orthopedic implant manufacturers’ association, a group of 65 domestic companies, strongly objected to it in a letter to the PM. “For the Indian manufacturers, the first point of sale is the manufacturer, whereas for foreign multinationals or importers of foreign implants, the first point of sale is the first distributor in India, and hence for them the first sale price is not the price at which they import the implant, but their selling price to the first distributor after adding their cost, without any cap, claimed on education, awareness and R&D,” president of OIMA Rajeev Chabra told Pharmabiz. 

According to Association of Indian Medical Device Industry (AIMED) forum coordinator Rajiv Nath, the Niti Aayog proposal rejected by the PMO would have put Indian brands to a strategic disadvantage. “For trade margin rationalisation, first point of sale should be defined as the price on which GST is initially paid by the manufacturer, whether overseas or Indian. In contrast, importers who are also traders want first point of sale to be from their end to the distributors and not from overseas manufacturers to them to avoid coming into the trade margin regulation ambit,” he opined. Neither AIMED nor OIMA has so far been invited by Niti Aayog to attend deliberations on trade margin rationalisation plan. 

According to industry sources, the recent appointment of Dr VK Paul, who has been dealing with these issues at Niti Aayog, as the chairman of the governors’ board that superseded the Medical Council of India is likely to further delay the medical device trade margin rationalisation plan. “Dr Paul is bogged down with additional responsibilities and meeting him to discuss these issues is difficult now,” a senior industry executive pointed out. Pharmabiz