Balancing Access With Innovation

The Indian Ministry of Health and Welfare has decided to take the path of price regulation to make available critical and life saving devices to the needy masses at affordable prices. This involves rationalizing trade margins, while allowing reasonable profits to the stakeholders in the medical devices industry.

The Medical Association of India, while lauding the sentiment, has cautioned the powers-that-be that the calculation of trade margin should consider the price to trade as suggested in the Report of The Committee on High Trade Margins in the Sale of Drugs, 2016 and not the landed cost, as the latter is the prelude to a lot of other expenditures incurred by importers on training the value chain. On the other hand, price to trade criterion takes into account all relevant expenditures. The formula of MRP being equal to price at the first point of sale (distributor) plus percentage of trade margins would provide a level-playing field, while reducing MRPs substantially. It would also take into consideration the value-added services of the manufacturers, which help in introduction of innovative technologies; ensure the regulation is non-discriminatory in its approach as far as treatment of MNC subsidiaries vis-à-vis indigenous companies is concerned; and ensure uninterrupted supply of vitally important critical care devices. With R&D and innovation not a possibility in the near future, the high import-dependence of the country cannot be ignored.

A recent empirical study by the Advanced Medical Technology Association, which comprises nearly 300 global medical technology companies, found that the price cap on stents led neither to better accessibility of angioplasty procedures, nor to affordability for patients bearing out-of-pocket expenses.

On the other hand, with healthcare systems under acute financial distress, as price pressures increase, medical device makers need to rethink product development processes and explore every opportunity to increase efficiencies and reduce costs.

In an attempt to weed out profiteering, misguided policy measures can kill incentives for innovation, and cripple the long-term financial sustainability of the sector, and with it the opportunity to ameliorate challenges in the healthcare system.