The National Institution for Transforming India (“NITI”), Government of India has released a Consultation Paper on 8th June, 2018 inviting stakeholder views on rationalizing trade margins in medical devices. All response to this consultation paper must be directed to medical.devices.consultation@gmail.com by 15th July, 2018.
Background:
India imports more than 75% of all its medical device/s and approximately 80% of the imports are in Medical Electronics, Hospital equipment, Surgical instruments, Implants and Diagnostic Reagents.
Apart from the following medical devices, the rest of the Medical Devices are not covered under any form of price regulation in India.
- 23 medical devices have been notified as drugs and are regulated under the Drugs and Cosmetics Act. Of these, only 4 devices viz. Cardiac Stents, Drug Eluting Stents, Condoms and Intra Uterine Devices have been included in the National List of Essential Medicines (NLEM) which is subject to notified price ceilings.
- Knee implants have been brought under price control under Para 19 of the Drugs (Prices Control) Order, 2013.
The Government intends to make critical and lifesaving medical devices available to the needy masses at affordable prices. The objective is to ensure reasonable prices to consumers and at the same time allow reasonable profits to all stakeholders in the medical device industry, including those involved in the supply – chain by rationalizing trade margins and thereby passing the benefits of the reduced cost to the final consumer.
What is trade margin?
The trade margin is the difference between the price at which the manufacturers/importers sell to trade (price to trade) and the price to patients (maximum retail price).
What’s there and what remains:
While there has been more or less a consensus on the concept of regulation of Trade margin on medical devices as also on the quantum of the margins; there is a debate on the location of the “First Point of Sale” (from where to calculate the Trade Margins?) in case of imported medical devices. On this the following views are shared in this consultation paper.
Viewpoint 1
Importers are also traders and the journey of trade margins should start from the import price itself. Hence, the MRP can be decided as follows:
MRP = landed Cost = %age of Trade Margins (as decided by the Government)
Viewpoint 2
Where several expenditures are incurred by importing companies in clinical education on deployment and use of such devices therefore the following formula is to be applied while deciding on the MRP:
MRP = Price at the First point of sale (“Stockist”) = %age of Trade Margins (as decided by Government).
Viewpoint 3
The companies can separately display the mark up for the services rendered (e.g. clinical education) above the final landed cost.
MRP = Landed Cost + mark-up due to services rendered (as declared by the manufacturer) + %age of Trade Margins (as decided by the Government)
Need of the hour:
While the National Pharmaceutical Pricing Authority has already called for such data from importers companies, the Government is also welcoming formal responses from all stakeholders wishing to contribute, on:
- The concept of trade margin regulation as such;
- The margin caps i.e., the maximum margin to be allowed,
- Clarity on Stockist in case of imported products;
- Classification of Medical Devices for application of trade margin caps;
- Any other issues pertaining to the present concept paper.
Source: National Institution for Transforming India
