Medical Device Margins to be Capped

• 23 Aug 2018

The NITI Aayog has recommended to cap trade margin at 65% for medical devices, abandoning the current price control mechanism.

• This will seek to curb profiteering as well as allay concerns of device makers, particularly importers of stents and knee implants, who have complained that price restrictions hurt innovation.
• According to Niti Aayog’s formula, the maximum retail price (MRP) of a device will be decided by adding the trade margin to the price at the first point of sale (stockist).
• The trade margin is the difference between the price at which the manufacturers/importers sell to stockists and the price charged to consumers.
• In India the trade margins are huge hovering around 62% to 405%.
• Since, many expenditures are incurred by the importing companies, including clinical education on deployment, and therefore trade margins should start from the first point of sale, that is the stockist.
• Once the new mechanism of calculation of trade margins is approved, it will be applicable on devices such as cardiac stents, prices of which were slashed by as much as 85% by National Pharmaceuticals Pricing Authority(NPPA) in 2017.

• However, experts have termed the government’s plan to as a regressive move that will hurt consumers and domestic industry. This will make stents not only more expensive for consumers but will also negatively effect domestic industry.

Background

• Currently, 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 were brought under price control after they were included in the National List of Essential Medicines (NLEM) in 2015 on the recommendation of a sub-committee headed by Prof. Y. K. Gupta.
• Coronary stents are among the categories of medical devices that have been notified as “drugs” and not as medical devices under the Drugs and Cosmetics Act 1940.

National Pharmaceuticals Pricing Authority

• NPPA is an organization under Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers which was set up in 1997 to revise the prices of controlled bulk drugs and formulations and to enforce prices and availability of the medicines in the country, under the Drugs (Prices Control) Order (DPCO), 1995.
• The prices are now fixed/revised under Drugs (Prices Control) Order (DPCO), 2013.
• It also monitors the prices of decontrolled drugs in order to keep them at reasonable levels.

National List of Essential Medicines (NLEM)

• Essential medicines are those that satisfy the priority health care needs of the population. These are selected with due regard to disease prevalence, evidence on efficacy and safety, and comparative cost-effectiveness.
• The list is prepared by the Union Ministry of Health and Family Welfare.