On a cold day on 29th December 2014, Prime Minister Narendra Modi chaired a one day workshop titled ‘Make in India’. For the first time in the history of In the Indian Bureaucracy, the Prime Minister of India held an open session and asked, in the presence of Representative from all the Industries including, the Secretaries of all the Economic Ministries to make a presentation on the road map for the “Make in India policy.” Prime Minister and his Cabinet colleagues were seated in the Dias. The Secretaries were making the presentation and the Representatives from the Industries were watching. In the Morning the Secretaries had held a closed door meeting with industries to prepare for the presentation.
The event was one of the best which could happen to the Industry. Here was an opportunity to reach out to the to decision makers and contribute to the reform in a open manner watched by the Prime minster of India
This is where the top decision makers realized that, like Pharmaceutical Industry, the Indian Medical device industry can also grow and India like Pharmaceuticals can be hub for manufacturing for the world market and India. It was great discovery by the political leaders and Bureaucrats
With an expected estimated turnover of USD 7 billion by 2016 and an annual growth of 10-15%, the Indian Medical device industry became the focus for all in the corridors of power in the Ministries and organizations such as FICCI, CII and All India medical Devices association (AIMED).
In 2015 Government of India has taken many important decisions to promote Indian Medical Industry. A separate department for Medical Device Industry and IVD has been created under the Department Chemicals. We wish it was part of the Ministry of Health and Family Welfare (MoH&FW). Because CDSO and NIB, who come under MoH&FW, are the regulators of the medical devices &IVD industry. Also they are the one who, through the State Government and their Hospital and under various healthcare schemes are the largest buyers of the Medical Devices and IVD equipments and Reagents. Nevertheless it was an important step since the Government recognized that this Industry needs hand holding. Industry also welcomed it as the creation of a department meant that they have a Ministry to go and make a representation.
Task Force on Medical Device industry was created under the Department of Pharmaceuticals under the Chairmanship of the Secretary. The task force held many meetings with Industry to arrive at a consensus report. The core issue during the discussion was customs duty protection for Domestic Manufacturing industry. It is worth noting here that the tariff rate on imported Medical Devices was brought down from 40% in 2005 to 5% (or 0%) by 2014. So there were no incentive manufacture medical devices in India. To add to this the tariff on raw-materials/ components needed for Domestic manufacturing remained between 10% to 27%.
The task force could not arrive at a consensus since the Domestic industry and MNCs could not agree on this core issue. But the task force submitted balanced report recommending sleeves of measures such as R&D support, Medical Devices Park etc.
In January 2016, Government, announced the first fiscal policy to support the Indian manufacturing by withdrawing Concessional Duty for few devices and nearly 60% of the devices got relief. But the IVD Products were touched and the Inverted Duty Structure remains as a big obstacle for domestic manufacturing.
Reagents and their Importance; In the healthcare value chain, Diagnosis forms an important component in providing the accurate information about a physiological or pathological state and ascertains the congenital abnormality and also facilitates in determining the therapeutic measures. In short, a key tool in the disease management.
Based on the statistics available, 69% of the Indian population live in rural areas and on the contrary 73% of qualified consulting doctors are urban areas and 8% of qualified doctors are in rural areas and remaining 19% are in semi-rural areas. In addition to this, there is an enormous rise in chronic diseases in rural areas. All this has resulted in a high demand for diagnostic services across the country and more specifically in rural areas.
The IVD market is estimated at Rs. 5,000 crores and growing at an annual rate of 18-20% across different segments including Point of Care Testing, Automation, Hospital Laboratory Management etc.
Both raw materials and finished IVD products are charged Duties at the same rate, between 9.3% t o 29.44%. Though the duty structure appear to provide a balance for the import of raw material and final product but the fact of the matter is that this duty structure is not conducive for domestic manufacturing because for a domestic manufacture to be competitive with the imported product there is a need for a reasonable amount of cushion to persuade him to venture in domestic manufacturing.
To make it worse, for Indian manufacturers, the import of HBsAg, HCV and HIV Elisa kits import in finished form is allowed 0% duty. But on raw materials required to manufacture these kits indigenously, manufacturers have to pay 5.15%. Moreover, the POC (point of care) Diagnostic kits, which are rapid tests and new technology, used to diagnose the same diseases, are charged 29.5% duty, both for raw materials and finished goods
As the demand for better healthcare is higher in rural or semi-urban areas, it is important that the healthcare is made more affordable in these areas. As this market segment is dependent on imports, the cost pressure is increasing day by day as the demand increases.
Buy Indian Policy: Many countries have a policy to encourage Domestic Manufacturing. Even USA has a “Buy American Policy” of first to consider allocating supply to US Companies in US public Healthcare and its USAID procurement for overseas market.
Indian Manufacturing Companies are unable compete with Chinese origin Medical Devices and Reagents because of the type of incentives they receive from Chinese Establishments are innovative and unimaginable. Domestic Industry wants to have a policy of 15% preferential pricing for Indian origin Medical Devices and reagents.
The Indian medical devices and IVD industry is at a cross road. If the Government does not complete the best efforts started and provide tariff protection and preferential market access to domestically manufactured products, India will continue to remain import dependent and domestic manufacturing will remain confined to Gloves, Syringes, Hospital furniture etc.