Learnings from pandemic

For the collaborative ecosystem that was established during the pandemic, India must adopt a methodical strategy. For India to become a medical devices manufacturing hub, everything from the inverted tax structure’s rationalization to the establishment of a distinct regulatory framework for the industry are essential.

With the Covid-19 pandemic testing even the more developed healthcare systems globally, the foundations of India’s healthcare system have naturally also been shaken. The overall response to the pandemic witnessed both the private and government sector working in tandem. The private Indian healthcare players rose to the occasion, and have been providing all the support that the government needs, such as testing, isolation beds for treatment, medical staff and equipment at government Covid-19 hospitals, and home healthcare.

India’s response to the coronavirus pandemic highlighted the country’s strengths as well as its weaknesses. Every facet of what a country needs to detect, diagnose, and respond to biological threats, like the coronavirus pandemic, requires scientific research and technical capacity to be mobilized at scale. To their credit, Indian researchers, innovators, and regulators have come together to introduce low-cost diagnostics, develop therapeutics, and conduct research to create safe and effective vaccines during the pandemic.

Soon after the pandemic broke out, InDx, a large-scale public-private partnership implemented by the Centre for Cellular and Molecular Platforms (C-CAMP), and funded by the Rockefeller Foundation, was tasked to ramp up the production of indigenous Covid-19 test kits in the country. Since most components necessary to produce test kits were imported, C-CAMP faced huge challenges to produce these components indigenously at the beginning of the pandemic. Later, with support from Tata Consultancy Services, C-CAMP partnered with Indian manufacturers of medical technologies to ramp up production of reagents and other necessary components needed to manufacture test kits locally. This public-private partnership helped more than 160 Indian companies to collectively manufacture more than a million test kits per day.

The Department of Biotechnology (DBT), set up under the Indian Ministry of Science and Technology, also supported manufacturing of indigenous Covid-19 diagnostic kits, ramping up the production capacity to about 1,500,000 kits per day. The department also worked with the Central Drugs Standard Control Organization (CDSCO) to expedite regulatory approvals for the development of diagnostics for the virus.

The collaborative ecosystem and the subsequent production of indigenous Covid-19 diagnostic kits now contribute around 20–25 percent of the revenues of the Indian diagnostic industry. The support to Indian companies to locally manufacture test kits can in the long run strengthen the country’s capacity in surveillance and infection prevention and control for other diseases.

Despite collaborative ecosystem, stakeholders faced several challenges during different stages of product development, including discovery, research and development (R&D), clinical trial, and commercialization of their products.

The coronavirus pandemic in India can pave the way for greater investments in the medical devices sector – including diagnostics, masks, gloves, ventilators, and so forth – which in the coming years will observe significant growth.

The current conditions, however, suggest a less promising scenario. India, until last year, imported 80 percent of its medical devices, including diagnostic instruments, from China, Germany, the Netherlands, Singapore, and the United States. Although close to 450 India-based companies were looped in to manufacture reverse transcription polymerase chain reaction (RT-PCR) kits for Covid-19 diagnosis, the diagnostic industry is plagued with major issues that should be addressed for it to observe sustainable growth.

First is the inverted tax structure for diagnostics, which means that the customs duty to import diagnostic instruments is 0 percent, while duty to import raw materials to manufacture diagnostics in India ranges from 7.5 to 15 percent. The correction for this inverted tax structure was, however, left unaddressed in the latest budget released by the Indian government.

Second was the absence of a separate law to regulate the import, manufacture, and distribution of diagnostics in India until 2017. The Medical Devices Rules 2017, issued under the Drug and Cosmetics Act of 1940, intended to distinguish medical devices from pharmaceuticals. It empowered the Drug Controller General of India (DCGI) to introduce risk-based classification into four categories – from A to D, with high-risk devices placed under class D. The rules have distinct provisions to obtain approvals for the manufacturing and import of diagnostics in India. It clearly distinguishes the role of central and state licensing authorities, with the former being in charge of issuing manufacturing licenses for devices that fall in categories C and D, along with the ones that do not have a similar device in the Indian market, and the latter responsible for licensing manufacturing of diagnostics that are placed in categories A and B. The import of all diagnostics, however, rests with the DCGI. In February 2020, the Indian government issued the Medical Devices (Amendment) Rules, 2020, which mandate medical devices, including diagnostics, to be regulated on the same lines as drugs. This move was to ensure the safety and efficacy of all medical devices introduced by their respective manufacturers or importers. Although the newly issued regulations have introduced better transparency in the approval system, concerns remain that manufacturers or importers might face delays, given the dual role of the CDSCO to regulate both drugs and medical devices under the ambit of the Drugs and Cosmetics Act of 1940.

Various arms of the Indian government have put forward proposals to regulate medical devices independent of drugs. NITI Aayog, the Indian government’s think tank, drafted a Medical Devices (Safety, Effectiveness, and Innovation) Bill in 2019 to provide users with access to safe, innovative devices and address concerns on patient safety. This bill opposes the view of the Indian Ministry of Health and Family Welfare (MOHFW) to regulate medical devices as drugs and instead recommends setting up of an autonomous medical devices administration that has powers to conduct audits, give approvals, and enforce penalties. The health ministry and NITI Aayog finally reached consensus on the Medical Devices Bill in 2020, which suggested that medical devices should be regulated by a separate division under the CDSCO, as opposed to NITI Aayog’s proposition. Furthermore, the regulation of medical devices will be under a separate Act and not the Drug and Cosmetics Act of 1954, as suggested by the health ministry. Despite the consensus between the two organizations, the status of the bill is currently unknown.

Instead, a high-level committee under the chairmanship of the DCGI has been constituted to frame a new Drugs, Cosmetics, and Medical Devices Act to harmonize the regulation of new drugs, medical devices, and vaccines in India. The eight-member panel, headed by the current DCGI, was expected to submit its first draft by February 2022, the status of which is also unknown. Moreover, the panel does not include manufacturers, medical devices experts, venture capitalists, scientists, doctors, and patient groups, thereby limiting the multi-stakeholder discussions needed to draft a comprehensive legislation.

Another initiative was taken by the Ministry of Chemicals and Fertilizers to introduce two schemes to promote greater investments in the medical devices sector, which were approved by the Indian government in 2020. The first was centered on the promotion of medical devices parks and the second focused on introducing production-linked incentives to encourage domestic manufacturing of medical devices. Although these are steps in the right direction, inverted tax structure along with complicated regulatory infrastructure hinders domestic manufacturers from stepping into manufacturing medical devices indigenously.

It is, therefore, important for India to skip through its piecemeal reforms and work toward developing a systematic approach to address the challenges of the medical devices industry. Right from rationalizing the inverted tax structure all the way to ensuring a separate regulatory framework to govern the medical devices sector is imperative for India to become a medical devices manufacturing hub.

The process of developing, testing, and bringing MedTech products to market takes a long time and is fraught with uncertainty. Although the different arms of the government have promoted many programs, the diffused and scattered nature of such programs often confuses the industry, thereby inhibiting successful development and commercial outcomes for the industry. In the private sector, venture capital and other sources of innovation capital tend to operate on shorter time frames and smaller scales than those necessary to bring such medical products or treatments to market. Therefore, there is a need for larger longer-term sources and different pockets of capital to build successful programs in this sector. Those sources, however, need encouragement and confidence through an enabling ecosystem of efficient and predictive regulation to enhance transparency in the approval process, structured and consolidated public resource deployment to streamline research expenditure, enabling market access support to introduce products to the market, and favorable private equity and capital market regulations to enable capital churn.

Despite initial hiccups, the healthcare system in India managed to withstand the pandemic. The various efforts in manufacturing of medical equipment, disposables, drugs, and the most recent vaccine efforts made by India have placed us as a global leader. India not only fulfilled the domestic requirements, but also rose to the occasion and supported other countries. The healthcare sector, therefore, as an investment opportunity looks promising.

Driven by better healthcare awareness, rise in incomes, increased access to insurance, and lifestyle-related diseases, India’s healthcare market is expected to reach USD 372 billion by 2022. The Indian government aims at increasing the healthcare spending to 2.5 percent of the GDP by 2025. The Covid-19 pandemic has also transformed the way the government and private players are planning to bring change in the healthcare system. There has been an increased focus on telemedicine services and the government also issued new guidelines to make telemedicine a legal practice in India. The Ministry of Health and Family Welfare (MoH&FW), along with NITI Aayog, has rolled out the new guidelines that will allow registered medical practitioners (RMPs) to provide healthcare services using telemedicine. Furthermore, the National Digital Health Mission (NDHM) laid the groundwork and India is today the second-fastest adopter of digital services. With internet users likely to reach 900 million by 2025. the pandemic has scripted a whole new chapter for Digital India and healthcare.

As envisaged by the Ayushman Bharat Digital Mission (ABDM), there is now an intense focus across the provider ecosystem on going digital, which will enable healthcare to be protocol-driven patient-centric trip. This paradigm shift will transform healthcare by bringing the focus back on primary care. Combined with increased investments, it will enable new-age companies to deliver holistic healthcare solutions.

The biggest health emergency of our times has not just laid bare the myriad challenges and gaps in our health system but also highlighted the importance of investing in well-being at both personal and system level. It has ushered in an era of digital and technological innovations and advancements that is expected to help communities fulfil those requirements at a much faster pace.