Bad design
PLI for medical devices should be tweaked
he domestic medical devices industry has come under considerable policy attention, particularly after Covid. The focus has been a two-pronged one. First, the performance linked incentive scheme, introduced in July 2020 and expanded in scope in February 2023, marks a concerted move to reduce 90 per cent import dependency in a sector that is worth $11 billion and is growing at a CAGR of 14 per cent.
TSecond, efforts have been underway since February 2020 to bring medical devices under better regulatory scrutiny, with the Central Drugs Standard Control Organisation building capacity to regulate this technologically complex sector where both engineering and biotechnology come into play. However, the question is whether the PLI scheme for medical devices as well as its nascent regulatory framework could do with some changes. Recently, the Centre said that 13 greenfield projects for manufacturing medical devices have been approved under the PLI scheme, entailing an outlay of ₹3,420 crore for the period FY21FY28. The eligible products relate to cancer care, imaging devices, critical care devices and implants, as spelt out in the February 2023 circular. The outlay is modest, but the intent is unexceptionable. It could also spur the education ecosystem to provide the necessary skillsets.
However, the PLI scheme raises a familiar apprehension — namely, whether it is tailored to the specific nature of the sector. At the design level, the sales incentive will be given only if incremental sales of ₹60 crore, ₹120 crore, ₹180 crore, ₹230 crore and ₹280 crore are achieved annually in the first five years. These absolute targets are unrealistic, as they do not take into account the diverse market sizes of the eligible products. They can create an entry barrier for small companies which cannot achieve such sales volumes overnight. This is a sector where quality and technological innovation, and not just volumes, should be prioritised. Industry bodies have argued, and not without reason, that incremental sales of 710 per cent would be more realistic. The scheme should also take into account the fact that the regulatory requirements for different categories of medical devices could differ.
High risk, ‘class D’ products such as implants require stringent regulatory approvals, while meeting them could exceed the time window given under the PLI scheme. This could create credit and liquidity issues for the enterprise. If this scheme is to attract more applicants, its provisions with respect to sales incentive and the time window for clearances must be reexamined. Besides, the window for PLI applicants must be kept open for more than a month at a time, so that domestic players seeking to firm up tieups with foreign partners do not run out of time and miss their chance. India can leverage its scientific talent and unleash both medical and technological innovations, if the scheme is redesigned to create opportunities for all.