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Government Not To Lift Price Caps On Medical Devices, Open To Rationalising Margins

NEW DELHI: The government will not lift price caps on medical devices but is open to rationalise trade margins to allay concerns of importers, officials briefed on the matter said.

Importers have opposed the decision to impose price caps on medical devices, arguing that the move will hurt innovation.

“The government will soon cap trade margins on medical devices instead of abandoning existing price caps,” a person aware of the discussions told ET.

The government communicated its stand on the issue during trade talks with the US last week.

It is now contemplating two formulae-—one suggested by the Niti Aayog to fix trade margins on medical devices at 65%, and other by the department of pharmaceuticals (DoP) that seeks to fix trade margins at 50 %, ET has learnt.

Commerce and industry minister Piyush Goyal held talks with officials of the Department of Pharmaceuticals (DoP), National Pharmaceutical Pricing Authority, NITI Aayog and experts contemplating differential pricing on coronary stents before he left for the US with a recommendation that price caps on medical devices like stents and knee implants be maintained.

According to the Niti Aayog’s formula, the maximum retail price (MRP) of a device should be decided by adding the trade margin (65%) to the price at the first point of sale (stockist). While DoP is of the view that trade margins should be capped at 50%. Trade margin is the difference between the price at which the manufacturers/importers sell to stockists and the price charged to consumers.

According to the people quoted above, multinational companies pitching to skirt price caps have been indicated that a formula to fix trade margins will soon be announced.

“The new formula may allow enough profits to both Indian and the multinational companies,” said one of the government officials.

But Malini Aisola, co-convenor of All India Drugs Action Network, called the proposals “flawed”. “The combination of excluding importing entities from TMR and excessively high margins will lead to high cost escalation in the supply chain and wide disparities in prices paid by consumers,” she said. “Makers of imported devices, often higher priced, will benefit the most. Our pleas that ceiling price caps are the most effective way to ensure affordability have been falling on deaf ears.” – Click Now