Medical Devices Trade Margins Likely To Be Capped At 30%

NEW DELHI, 8 FEB 2020:

A cap on trade margins at 30% for medical devices is being considered, as India and US move ahead to sign a mutually acceptable trade deal this month, people in the know said.

The government seems to have found a middle ground between demands of the domestic industry and global MNCs investment. While it has decided to abandon the price cap regime for medical devices (as in the case of stents and knee implants), a limit of 30% trade margin on medical devices is likely to be approved soon, the same people said.

A series of meetings were held between drug pricing regulator National Pharmaceutical Pricing Authority (NPPA), Niti Aayog, Department of Pharmaceuticals (DoP) and the ministry of commerce over the last few days and “the government is likely to replicate the formula it applied for reducing cancer drug prices, which means capping trade margins at 30%,” said one of the persons.

The government had, in February 2019, slashed cancer drug prices, indicating the move is a pilot for more drugs and medical devices. “This is being rolled out as a pilot for the proof of concept, which means that it will be upscaled," NPPA chairperson Shubhra Singh had said then. The issue of first point of sale for domestic producers and multinationals is a concern, and is yet to be decided upon, said the person quoted above, requesting anonymity.

The government is of the view that the maximum retail price (MRP) of a device should be decided by adding the trade margin to the price at the first point of sale (stockist). However, “The work is in progress. We have to take a balanced view and seen that the formula used for cancer drugs have slashed prices tremendously without hurting the industry. The first point of sale is yet to be decided”, added another person. The trade margin is the difference between the price at which the manufacturers/importers sell to stockists and the price charged to consumers.

With this, the government seeks to abandon the current price control mechanism, as it allays the concerns of device makers, particularly importers of stents and knee implants, who have complained that price caps hurt innovation.

Currently, only 23 medical devices have been notified as drugs and are regulated under the Drugs and Cosmetics Act. Of these, only four—cardiac stents, drug-eluting stents, condoms and intra-uterine devices—are included in the National List of Essential Medicines and are, therefore, subject to notified price caps. Stents and knee implants were the latest to be brought under the price control under para 19 of the Drugs (Price Control) Order, 2013. The remaining medical devices are not under any form of price regulation.

Sources said India’s price control regime on medical devices was a key obstacle in trade deal pegged above $10 billion (more than Rs 70,000 crore). The government’s earlier move of price control on stents had become a contentious issue between the two countries. It led to a price cut of up to 85% resulting in many MNCs withdrawing their products from the country.

The US has since then been pressing India not to extend price caps on other medical devices.

US trade representative Robert E Lighthizer will be in India in the second week of February to finalise the trade deal. Economic Times