Comment on Medical Devices

COMMENT: ON RATIONALIZATION OF TRADE MARGINS IN MEDICAL DEVICES-CONCEPT NOTE
[By Dr. Mathew Thomas]

1. The invitation for comments from medical device manufacturers within a week does pose a challenge. I am submitting comments on the issue as a citizen of the country and I have no other interest. I do not own any manufacturing firm or company nor am I an importer of any medical devices.
2. It is acknowledged that no human being wants to die early or seeks death before time usually, except under exceptional circumstances beyond his control. Medical hibernation (a term I am using) will be a reality in about two to three decades and by implication would mean a prolongation of life beyond the normal life of an average human being. The prolongation of life in a healthy state is the purpose of life science system. Medicines and medical devices play a critical role in extending that aim. Life style by choice and life style by ignorance (if may coin the terms) has induced a new set of chronic diseases. The health eco-system depends to a considerable extent on cutting edge medical devices and medicines.
3. The background to whole issue stems from three concerns, (i) from the US/European medical devices manufacturers, (ii) from domestic companies and MNCs who have set shop in India, and (iii) hospitals and doctors.
4. There are 15 notified categories of medical devices under the Drugs and Cosmetics Act,1940 (DCA) and its Rules. In 2017, the Ministry of Health and Family Welfare has drafted a set of Rules for Medical Devices notified under DCA. From the select categories of medical devices, 23 medical devices have been notified under DCA. From these 4 devices have been covered under the NELM and is governed by the price fixed by the DCPO, 2013. The markups in some of the medical devices, particularly knee replacement and hip joint replacement, are over 400%. In the case of coronary stents, it was over 650% in some cases. To understand this mark up one must also understand the role of the doctor/hospital and the company/representative in such huge trade margins. Whenever a stent is to be used in a procedure to remove blockages, it is easy for the doctor to suggest that a foreign made stent has a better performance level/ indicator than a stent manufactured in India. In most cases an angioplasty is unnecessary; the medication and change in life style pattern would have resolved the issue. But unfortunately, only a minuscule percentage of doctors would suggest it to the patient. Medicare and medicines have pushed many Indians into poverty. Visiting hospitals and medical stores burns holes into the pocket of every Indian whether rich or poor. The only difference being that while rich can bear the brunt the poor will slip into poverty. This does not exempt even the middle class. Even the middle class is trapped into a vicious cycle of debt and repayment. Just imagine what happens to a poor family. It is either a slow death or into the grips of moneylenders, from whose clutches the poor can ever escape.
5. There was a total sale of 8,92,358 stents during 2017, with 61% being the share of Indian Stent makers and MNCs with a share of about 33%(Economic Times). There were representations from the US medical device manufacturers to the US govt on capping the price of medical devices by the Indian Government. But the Indian govt was firm, in standing by the price controls. It would seem that the USTR special report puts India on its watchlist and cites that India has poor IP protection. It would be worthwhile to mention that India is a socialistic state while the US is a pure capitalist. What turned the tables is the Novartis case, on ‘evergreening’ and it has set alarm bells ringing. There was a threat by the very same company that they would move the product manufacturing to China. Given the size of Indian population India is a key and potential market for increased pharma products and medical devices. The issue of first compulsory licensing to Natco Pharma is written in golden letters in the history of IP in India. These are history creating events.
6. Clinical education in the concept note is to my mind nothing but the freebies given away to the doctors. The cost of these freebies, is what to my mind would be clinical education in the form of conference fees at some exotic hotel/spa/retreat and location. Just understand the issue, look at the reference made by a doctor for a particular test in a laboratory of his or her choice. The cut from the fee varies from 25-45% depending on the laboratory. In each case of use of the stents, the doctor pushes for a particular brand and the company rewards such use by way of trips, monetary dispensation, children’s school fee, conferences, jewelry and watches to name a few.
7. The price of Bare Metal Stents as per the NPPA is INR 7260 and that of Drug Eluting Stents and Bioresorbable Vascular Scaffold is INR 29600. We must also understand the preamble to our constitution i.e. in bringing social justice. What I find distressing is a lack of voice for the poor to be heard. While I do understand that our health care system needs tweaking, let me also place my appreciation for the steps that the government/s has/have taken to put in place a better health care system. People’s lives and their health do matter! Just as working of patents was an issue and still is, price control on drugs/medical devices is again a big issue. One cannot apply the same yardstick to price medical devices as in other countries of the West. We need a more nuanced approach to the whole issue.
8. I think that the issue of pricing of medical devices should be separate and be removed from drug pricing of pharmaceutical products. As a first step I think at least for a few years, remove the customs duty on Stents (both bare stents and drug eluting stents), scaffolds, knee implants, IUD. This may require special notification from the ministry concerned.
9. What is disturbing, is that the Association of Medical Device Manufacturers approaching the Honorable Commerce Minister with suggestions to permit capping the trade margins at 85%(if reports are taken from consumer circles). What this means is to say that a device which when imported is costing say INR 1,00,000 would at the consumer end be costing INR 1,85,000. Add to this the cost of hospital stay and other incidental costs. Though these aforementioned four devices are in the NELM list, even other devices if permitted to be capped at 85%, would numb the pockets of every middle-class citizen. Healthcare sector is a money spinner and if this sort of daylight robbery is permitted where do the poor or even the middle class go for succor. Not many hospitals in the private sector have failed, except a few (not naming them), which in itself is a standing testimony to the success of the business models adopted by private sector players, i.e. imposing unnecessary tests, inflating prices of medical devices, room charges based on demand and supply, unnecessary visits by non-related specialists to the patient, etc. which even the average middle class will find it difficult to foot the bill. Private hospitals even adopt the financial targets to be met by doctors. In such a scenario there is a compelling need for government intervention.
10. India is a country where there is ample scope for medical tourism and one of the attractions is the cheaper costs of medical care as compared to the developed world, whether primary, secondary or tertiary. If higher trade margins are offered then this too will impact medical tourists coming into the country.
11. Now to the issue of a model for working out trade margins, I think it would be appropriate to use the third formula with a rider;
MRP=Landed Cost + mark-up due to services rendered +% of Trade Margins to be decided by the government.
Now the rider is that the government should specify what constitutes the ‘services’ and allot weightage to the services. For example, factor in:
(i) Cost of transportation
(ii) Cost of Storing/warehousing
(iii) Cost of education/conferences
(iv) Margin for whole sale importer
(v) Margin for retailer
(vi) Taxes

In the cost of education, one must not permit fees paid to the doctor for pushing a particular brand, conference fees reimbursement, etc. We are definitely moving towards a healthcare system which will become a white elephant and burn holes in the pockets of every citizen of the country. Where will the poor go? If one visits the hospitals, one can see a differentiated treatment meted out to those who can foot the bill and for those who cannot(Arogyahsree). We are surely running the risk of being American in the healthcare model. America today is burdened with a health care system that is eating into its vitals, not that UK is far behind.
12. There is a strong argument to treat these devices as separate and distinct from pharma products. I think that would be in order. These must also in consonance with the ‘Make in India’ thrust, that medical devices made in India be given some additional special exemptions. This perhaps would reduce dependence on imports.
13. While the government has laid a lot emphasis on ‘innovation’ we are still a long way of way from being an innovative nation. A reading of the Global Innovation Index Rankings would show that India stands 60th while regionally we are Ist amongst countries in Central and Southern Asia. We need to rank in the top 10 at least, in the world rankings. We must lay thrust on bio-medical engineering and its allied subjects.
14. When we consider all things common to innovation, like medical devices, pharmaceutical products, semiconductor design and the like we find IP ruling the roost. more