The NITI Aayog’s proposed changes to the current price control mechanism for medical devices are aimed at reducing profiteering and addressing the concerns of device makers. These recommendations include implementing a trade margin cap of 65% and altering the calculation of maximum retail price (MRP). However, critics argue this strategy could negatively impact consumers and the domestic industry.
Understanding the New Trade Margin and MRP Calculation
Under the proposed model, the MRP of a device would be determined by adding the trade margin to the price at the first point of sale, or the stockist. The trade margin is essentially the difference between what manufacturers or importers charge stockists and the price consumers pay. Currently, trade margins in India vary widely, ranging anywhere from 62% to 405%.
Device makers, particularly those who import stents and knee implants, have previously asserted that price restrictions inhibit innovation. They have argued that many of their costs, such as clinical education on deployment, come from the first point of sale, which justifies starting the trade margin calculation from there.
Upon approval, these new trade margin rules would apply to devices like cardiac stents, a product whose price was drastically cut by up to 85% by the National Pharmaceuticals Pricing Authority (NPPA) in 2017.
Concerns Regarding the Proposed Changes
Despite its intent, experts have criticized the government’s plan, calling it a regressive move that could harm consumers and domestic businesses. Critics argue that this change could make stents more expensive for consumers and negatively impact the domestic industry.
The Current State of Medical Device Regulation in India
At present, only 23 medical devices are considered drugs and regulated under the Drugs and Cosmetics Act. Of those, only four – cardiac stents, drug-eluting stents, condoms, and intra-uterine devices – are included in the National List of Essential Medicines (NLEM) and subject to notified price caps.
Cardiac stents were included in the NLEM in 2015, following a recommendation from a sub-committee led by Prof. Y. K. Gupta. They are now classified as “drugs” rather than medical devices under the Drugs and Cosmetics Act of 1940.
About the National Pharmaceuticals Pricing Authority (NPPA)
Established in 1997, the NPPA operates under the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers. It has the mandate to revise the prices of controlled bulk drugs and formulations and enforce their availability and pricing under the Drugs (Prices Control) Order (DPCO), 1995. Now, drug prices are fixed or revised under DPCO, 2013, and the NPPA also monitors decontrolled drugs’ prices to maintain reasonable levels.
The Role of the National List of Essential Medicines (NLEM)
The NLEM consists of essential medicines that address the priority health care needs of the population. These medicines are selected based on disease prevalence, evidence of efficacy and safety, and comparative cost-effectiveness. The Union Ministry of Health and Family Welfare is responsible for preparing the list.
