BREAKTHROUGHS IN MEDICAL DEVICES AND DIAGNOSTICS ( IVD ) INDUSTRY

Medical devices play an important role in the delivery of many health care services. Defined broadly, medical devices are items that are used for the “diagnosis . . . cure, mitigation, treatment or prevention of disease” and are not absorbed or metabolised by the body. India is among the top 20 markets for medical devices worldwide. India’s medical devices market stood at US$ 11 billion in 2020 and is expected to reach US$ 50 billion by 2025, according to the Indian Brand Equity Foundation (IBEF).

The medical device industry makes an enormous number of products— everything from surgical gloves to artificial joints to imaging equipment — and plays a crucial role in developing new medical technologies that can improve the ability to diagnose and treat illness.

AN OVERVIEW OF THE INDIAN MEDICAL DEVICES MARKET

The Government of India (GOI) has commenced various initiatives to strengthen the medical devices sector, with emphasis on research and development (R&D) and 100% FDI for medical devices to boost the market. From April 2000 to December 2020, FDI inflow in the medical and surgical appliances sector stood at US$ 2.18 billion. Given the global backdrop – the global medical device market size and share of revenue is expected to grow from USD 471 billion in 2020 to reach USD 623 billion by 2026 there is significant scope for a developing country like India to play a major role in developing and manufacturing medical devices and diagnostics for not just the local, but overseas markets as well.

The industry in India has a relatively small number of large, diversified companies and a large number of smaller companies that are mainly engaged in research and development of new devices for specific therapeutic areas. The industry is distinctive both for its tendencies to make frequent, incremental changes to its products and its extensive ties with physicians. Like prescription drugs, medical devices are regulated by the Food and Drug Administration (FDA).

The market dynamics for medical devices can vary greatly depending on the device. Markets for conventional devices such as surgical gloves and other routine surgical supplies are more competitive; companies compete heavily on price and often need high sales volumes to be profitable. In contrast, markets for advanced products like implantable medical devices involve opaque pricing, are harder to enter, and are less competitive, which allows device companies to charge higher prices and earn substantial profits.

IMPACT OF THE CORONA PANDEMIC

The doom and gloom of the pandemic is contrasted by a silver lining for the government’s flagship ‘Make in India’ initiative where medical device manufacturing is concerned. This sector was hereto neglected with import friendly policies and negligible duties. But this trend saw a reversal when many businessmen in the auto sector, garments, and hospitality and tourism industries

diversified into medical devices considering depressing times for their own businesses during the pandemic. They saw an opportunity for growth in medical devices’ manufacturing.

The Association of the Indian Medical Device Industry (AIMED) relentlessly worked at the forefront to fight the crisis. The COVID19 pandemic demonstrated that the Indian medical devices’ sector can rise to the challenge. When imports were disrupted, specific devices detailed with quantified production shortages and a focused interministry group coordinating with domestic manufacturers mitigated production bottlenecks and challenges so that capacity wasn’t only fully utilized but also rampedup amply. Government strategies enabled the medical devices industry to scaleup production during the pandemic. Help desks were even setup to address production bottlenecks of all medical devices specifically related to COVID such as sanitizers, masks, ventilators, gloves and COVID IVD test kits.

POLICY CHANGES

A policy announcement is awaited on some vital issues concerning the ‘Indian medical devices’ industry to end the 85% import dependence and an ever increasing import bill. Some of these issues are:

• Consumer Protection: Protecting the rights of the consumer is not disadvantageous for the industry. The need of the hour is ‘Trade Margin Rationalization’ which will protect consumers from overpricing. MRP labelling needs to be enforced on unit of sale of medical devices by the Customs Department.

Further, the Government of India may implement a trade margin cap mechanism of 75% between exfactory / import landed price and MRP.

• Regulate all medical devices under a patients’ Safety Medical Devices Law separate from drugs to protect patients and aid responsible manufacturing while decriminalisation of minor offences.

• Restriction on import of preowned medical equipment

• The government deployed a five per cent cess on some imported devices to encourage employment and Make in India of some medical devices, and this was a welcome move. However to address the 7090% import dependency a cess needs to be applied to other medical devices as well.

• Domestic component in healthcare products needs to be incentivised. This can be done through preferential pricing in public healthcare procurement.

FROM IMPORT DEPENDENCY TO EXPORT OUTLOOK

India has a 7090% import dependency on medical devices, with exports at US$2.1 billion in 2019. This is expected to increase at a CAGR of 29.7% to US$10 billion in 2025.

To increase export of medical devices in the country, the Indian Ministry of Health and Family Welfare (MOHFW) and Central Drugs Standard Control Organisation (CDSCO) introduced some initiatives: reexamination and implementation of

Schedule MIII (a draft which sheds light on good manufacturing practices and facility requirements), system for export labeling, clinical evaluation and adverse reporting clarification, free sales certificate validity from two to five years to allow exports, creation of a list of producers with export licensing for easy access by regulatory authorities worldwide.

WAY FORWARD

To further incentivise investments in manufacturing medical devices, in May 2020, the government announced incentive plans of at least US$ 4.9 billion over a period of five years, and these funds will be offered to manufacturers only if they invest in setups to manufacture key medical devices. Policy makers in India must have an action plan to reduce the country’s dependency on medical technology imports. At present, NITI Aayog is creating a strategic road map for medical devices similar to the incentive package that gives sizable capital subsidies for the electronics business. Medical device manufacturers should develop India as a manufacturing hub for domestic and international markets, undertake local innovation in conjunction with indigenous manufacturing, collaborate across the Make in India and Innovate in India schemes, and produce low to medium technology products to address requirements of the domestic market.