How New Government Pricing Strategies will Impact the Medtech Industry
By Arunima Rajan
India's medical device sector faces multiple challenges, including a fragmented regulatory framework, import dependency, inconsistent standards, and bureaucratic procedures. Will the new pricing regulations lead to a robust domestic market capable of competing globally? Arunima Rajan finds out.
Imagine a scenario where India streamlines its medical device regulations and emerges as a global standard-setter. Such a move could revolutionise the international medical device industry, ensuring the availability of high-quality, affordable devices worldwide and positioning India as a pivotal player in global healthcare innovation.
Now, this might seem like a far-fetched dream. However, media reports indicate that the government is actively exploring new pricing strategies for the medical device sector. Specific regulations are also being discussed to simplify manufacturers' licensing, trading, and exporting processes. If these steps are implemented effectively, India could be on its way to transforming its medical device industry and the global landscape.
The medical device industry is a complex and multidisciplinary sector encompassing various categories, including electronic equipment, implants, consumables, disposables, surgical instruments, and in-vitro diagnostic reagents. According to the CDSCO, there are 24 sub-categories of devices plus an additional category for in-vitro diagnostics (IVD).
As of 2022, the Indian medical device market stands at a robust $11 billion. But here's where it gets interesting: projections indicate this market is set to soar to an impressive $50 billion by 2030. This growth trajectory highlights the sector's potential and underscores the critical need for regulatory reforms and strategic investments to harness this burgeoning market fully.
Currently, imported medical devices dominate over 80 per cent of the domestic market, squeezing the profits of many small and medium-sized manufacturers. An analysis by the Association of Indian Medical Device Industry (AiMeD) of data from the Commerce Ministry paints a stark picture: medical device imports surged by an unprecedented 41 per cent, leaping from Rs 44,708 crore in 2020-21 to Rs 63,200 crore in 2021-22.
India's regulatory approach to medical devices differs significantly from that of the US and EU, in its regulatory documentation and submission of applications and requirements. Sreekar Kothamachu, founder and CEO of Nesa Medtech, notes that the requirements for medical devices vary based on their risk classification. "Similar regulatory frameworks exist in India, Europe, and the USA, including risk-based classification, Quality Management Systems, UDI, and Post Market Surveillance. In India, the CDSCO (Central Drug Standard Control Organisation) grants marketing approval for both domestic and foreign manufacturers and enforces a strict regulatory system for medical devices. The United States, home to the world's largest medical device market, is regulated by the US FDA (Food and Drug Administration), which controls sales through various application types (510k, PMA, DeNovo, HDE, IDE) for marketing approval. In Europe, the European Medical Agency oversees medical device manufacturers under the Medical Device Rules 2017, with involvement from the Notified Body in the European Union (EU)," he explains.
Kothamachu further adds that while India's regulatory framework for medical devices is evolving, it is less stringent compared to the US and EU. Aligning with global standards is crucial for improving international market acceptance and easing export processes. India's large and growing healthcare market offers significant potential for medical devices. The country benefits from robust infrastructure and R&D support, enhancing its competitiveness. "Maintaining consistent quality standards and regulatory compliance is essential for the Indian medical device market. To further boost competitiveness, India should align with international standards in manufacturing and innovation," he adds.
Excessive Bureaucracy
Challenges persist in the medical device sector. Vivek Mishra, founder of FibroHeal, a biotech startup producing wound care products from silk proteins, voices his dissatisfaction with the excessive bureaucracy that plagues the industry. "Initially, the committee that set prices needed more industry representation, only adding members later. Strict price controls benefit local manufacturers but could also lead to declining device quality as companies adjust to new pricing structures. Furthermore, these controls could prevent foreign innovations from entering India, making it financially unviable for them," says Mishra.
Mishra points out that startups face numerous challenges because investors hesitate to fund medical device ventures. The bureaucratic process involves navigating multiple government departments in the early stages. While improvements have occurred over the past decade, much progress is still needed. The COVID-19 pandemic highlighted India's capability to produce its own PPE kits, yet the country remains dependent on China for various raw materials and intermediate solutions.
Despite the government's attempts to rein imports from China, the neighbouring nation remains India's top supplier. Imports from China alone shot up by 48 per cent, escalating from Rs 9,112 crore in 2020-21 to Rs 13,538 crore in 2021-22. This reliance on imported devices hampers domestic manufacturers and highlights the urgent need for strategic policy interventions to bolster the homegrown medical device industry.
Ganesh Sabat, CEO, Sahajanand Medical Technologies Ltd.
"The domestic medtech industry has always sought regulations that make medical devices safe and affordable and enhance their market share. If implemented objectively, the market for all segments of cardiovascular care, including coronary stents, structural heart devices like TAVI, and peripheral interventions, is expected to grow faster," says Ganesh Sabat, CEO of Sahajanand Medical Technologies Ltd. He highlights that coronary stents were among the first medical devices to have their prices capped in 2016-2017 when the NPPA included them in the National List of Essential Medicines (NLEM). This action made coronary stents more affordable, available, and accessible while boosting domestic manufacturers like SMT, who have become leaders in this segment.
He also adds that the NPPA expert committee is examining existing price regulations in other countries to develop a unique pricing mechanism for medical device manufacturers in India. He continues: "This move will globally align domestic companies, harmonising the competitive landscape and encouraging investment in quality measures and clinical evaluations, which are essential for patient safety. SMT is now present in almost all continents and has been thriving with its effective pricing model, leading to constant market share growth and expansion into new and emerging economies. According to Sabat, such policy moves always have a positive long-term impact."
In the post-COVID era, there's been a significant global push for harmonised regulatory standards, and India has emerged as a pivotal player. Free Trade Agreements and strengthened bilateral relations with countries like Japan, the UK, ASEAN nations, South Korea, and BRICS are reducing our import dependency and positioning India as a global hub for medical device manufacturing. The focus is clear: health research, innovation, public health security, and regulatory convergence.
SMT is capitalising on this momentum. They proactively tackle inter-trade and regulatory challenges as they venture into new areas such as structural, peripheral, and endovascular spaces. Their goal is to cement their position in these critical markets.
Efficient Licensing and Strong Support Drive Innovation
Sabat observes that the government is actively working to simplify the licensing, trading, and exporting processes for the medical device industry, which he welcomes as it promises to streamline business operations. Post-COVID, the Drug Regulator's (CDSCO) efficiency has significantly improved, ensuring prompt license approvals. This has particularly benefited
manufacturers under the PLI Scheme and those pioneering innovative products. For companies like SMT, faster license processing means quicker access to import licenses, technology resources, and manufacturing permits, driving the development of superior and more innovative products, especially in structural heart devices.
Recommendations to Enhance Domestic Medical Device Manufacturing
Sabat proposes several strategic initiatives to make manufacturing medical devices in India as feasible as it is for consumer electronics and mobile phones. These include engaging stakeholders to establish a predictable tariff protection policy and acknowledging the significant investments required to develop advanced devices through rigorous clinical trials. He emphasises the need to protect ethical marketing practices by implementing caps on MRP or trade margins. Sabat is confident that if these measures are earnestly implemented, they could provide greater predictability for medtech companies in India, like SMT.
Impact on Common Man
Basavaraj CM, Head of Department and senior consultant orthopaedics and Joint Replacement Surgeon at Gleneagles BGS Hospital Kengeri, Bengaluru, states that joint replacement implants necessary for hip and knee surgeries are primarily imported from the USA, Germany, and Switzerland. These high-quality implants come at a steep price, costing between ₹60,000 and ₹1.5 lakh each, in addition to other expenses. These costs are ultimately borne by patients, making surgeries expensive and often unaffordable for many Indians.
Basavaraj suggests several measures to fully tap into the potential of domestic manufacturing:
Government Incentives: Offering tax breaks, subsidies, and grants to medical device manufacturers to boost local production.
Public-Private Partnerships: Encouraging collaborations between government agencies and private companies to expedite the development of high-quality, cost-effective implants.
Investment in R&D: Establishing research centres and funding innovation to develop advanced technologies and improve the quality of domestically produced implants.
Skill Development: Implementing training programmes for engineers, technicians, and healthcare professionals to enhance their expertise.
Quality Assurance: Ensuring that locally manufactured implants meet international quality standards is crucial for gaining trust and acceptance among healthcare providers and patients.
Many young startups have high hopes about the government's new pricing strategies and expedited approval process for medical devices, and Shivani Gupta, co-founder of Inochi Care, shares this optimism.
Inochi Care is developing innovative solutions for wound care management, with technology developed under the School of International Biodesign programme, a collaborative effort between AIIMS and IIT Delhi, supported by the Department of Biotechnology, Government of India.
Gupta hopes the new regulations will help eliminate poor-quality products from the market. The health tech startup faced many challenges, such as finding the right team, adapting to changing regulations, and locating manufacturing options, ultimately taking nearly five years to get their product to market. "Initially, our product was not subject to regulations, but it became regulated during the final stages of development. The new clear regulatory pathway will provide more clarity for startups like us," she adds.
Take Agatsa, another medtech startup. Founded in 2015 by Neha and Rahul Rastogi, Agatsa is a company born out of personal experience and a clear vision. Their flagship product, SanketLife, isn't just another gadget in the crowded medical device market. It's the world's smallest 12-lead ECG device, a feat that earned it the prestigious Aegis Graham Bell Award for 'Best Innovation in Diagnostics' in 2022.
Now, why should you care about yet another ECG device? Because SanketLife is not only a breakthrough in size but also in accessibility and speed. It allows both doctors and non-doctors to perform complete ECG tests swiftly. Imagine conducting a comprehensive heart health check in minutes and getting a cardiologist's analysis within 10 minutes. Agatsa claims this device could change how we monitor cardiac health, making quick, reliable ECG testing a reality.
Manvi Jha, Digital Team Lead, Agatsa
Manvi Jha, digital team lead at Agatsa, notes that implementing NPPA's proposed pricing model is challenging due to balancing cost reduction with maintaining high product quality and innovation. Potential issues include supply chain disruptions and increased regulatory compliance costs. Agatsa is enhancing operational efficiency by investing in advanced manufacturing technologies and optimising supply chain management to address these challenges. They also focus on strategic sourcing by partnering with reliable suppliers to ensure cost-effective materials procurement. Additionally, Agatsa is committed to continuous innovation through R&D to innovate within cost constraints, and they are strengthening their regulatory compliance frameworks to ensure seamless adherence to new guidelines.
"While there may be initial challenges in adjusting to these price controls, the ultimate benefit is improved public health outcomes. The pricing framework encourages us to innovate cost-effectively, ensuring that we continue to offer advanced technology at affordable prices without compromising quality and accessibility," explains Jha.