TECHNICAL WRITING 2

FUTURE OF MEDICAL DEVICE INDUSTRY AFTER

PRICE CONTROL

THE REPORT PREPARED BY

TUSHAR SINGH

PM-2021-2023

SUBMITTED TO IES’S MANAGEMENT COLLEGE AND RESEARCH

CENTRE,

BANDRA WEST- 400050

Annxeure-2- Format for Declaration by Student

I, Ms. / Mr. _ Tushar Singh_, hereby declare that I have

personally carried out the work depicted in the Research Report,
entitled- “___Changing Consumer Sentiments and Preference towards Heath
Insurance”
No part of this research project has been submitted for the award of
any other degree or diploma prior to the date.

Signature
Name of the Student Tushar Singh

Date: _19/05/22
Place- _Mumbai_
SR.NO TABLE OF CONTENTS PG.NO

1. INTRODUCTION 1

2. OBJECTIVE OF THE
STORY 2

3 MEDICAL DEVICES AND 3

PRICING AUTHORITY

4. IMPACT ON PRICE AND 5

SUPPLY CHAIN

5. INSIGHTS 7
6. REFRENCES 7
INTRODUCTION
There are many barriers to affordable healthcare in India. Several initiatives and
mechanisms have been suggested over the years, to tackle this. One mechanism is the
National Pharmaceutical Pricing Authority’s (‘Pricing Authority’) powers of price monitoring
and control. This article explores what the Pricing Authority’s powers mean for the medical
device industry.
An Overview of Drug Price Control:
The rationale for price monitoring and control is to keep profiteering in check and to
increase access to affordable healthcare. Periodically, a National List of Essential Medicines
(‘Essential Medicines List’) is compiled after stakeholder and inter-ministerial consultation.
The Essential Medicines List helps the government decide the pharmaceutical products it
should consider for price control and monitoring. The Pricing Authority has been tasked to
implement price monitoring and price control through Drug Price Control Orders, amended
from time to time.
The latest edition of the Drug Price Control Order was issued in 2013. The 2013 edition lists
several powers of the Pricing Authority. It also contains an Essential Medicines List   that lists
drugs, active pharmaceutical ingredients, and drug formulations. The Drug Price Control
Order also gives the Pricing Authority the power to monitor drugs that are not in the
Essential Medicines List.
To decide pricing, price control, and price monitoring, the Pricing Authority relies on inputs
from the Government, market surveys, and industry (through the periodic submission of the
information listed below, and other communications). The graphic below depicts how the
Pricing Authority exercises its powers.

OBJECTIVE
 To identify the the future of medical devices in India.

 To identify the factors that influence Medical devices Companies to Look at India as an
favourable or unfavourable market

 To find out the negative impact of price control on medical devices companies and positive
impact on the patients using medical devices.
Medical Device and Pricing Authority
Medical Devices and Pricing Authority:-

The Past: how the Pricing Authority started looking at medical devices
Price control was extended to devices, with the inclusion of two devices into the Drug Price
Control Order, 2013; bare-metal stents and drug-eluting stents (cardiac stents). This was the
direct result of a Delhi High Court Order. The writ petition sought the inclusion of coronary
stents in the Essential Medicines List to control its price.
After this Order, the Pricing Authority conducted a study on the matter and released a
report titled Report on Pricing of Stent (‘Stent Report’). The Pricing Authority recommended
that all types of stents be brought under price monitoring. This would prevent the price of
stents from increasing by more than 10% annually. The Pricing Authority extended its
powers to Orthopedic Implants (hip and knee), citing protection of public interests].
The Stent Report also captured written requests received by the Pricing Authority, from
various state and central government officials, to control and monitor prices of all the
medical devices listed under the Drugs and Cosmetics Act, 1940. In an earlier post, we
demonstrated that medical device regulation depended on the device being listed under the
Act. This meant that only devices that were “notified” by the Health Ministry, would be
regulated for quality, sale, import, manufacturing, and clinical investigation. This has
continued even after the release of the Medical Devices Rules, 2017 (‘MD Rules’), which also
requires devices to be notified before they are regulated. However, the MD Rules did
broaden the definition of medical devices and introduce risk classifications for these devices.
The present: recent developments and expanding scope:
In February 2020, the Health Ministry expanded the medical device definition to consider
devices, including software, intended for the diagnosis, prevention, monitoring, treatment,
or alleviation of any disease, disorder, disability, injury as a medical device [27]. This broadened
definition means more devices can, in time, be regulated. It also means that as more devices
get “notified”, the Pricing Authority will have more devices to price control and price
monitor.
The Pricing Authority acknowledged the likelihood of this increased oversight in a meeting
held in late January 2021. In this meeting, the Pricing Authority decided to review the
pricing information of the new devices that have been notified by the Health Ministry. The
Pricing Authority is currently accepting information from the industries that manufacture or
import four newly notified medical devices; namely, nebulizers, blood pressure monitoring
machines, digital thermometers, and glucometers.
This additional layer of compliance could slow down India’s Atmanirbhar Bharat drive in
healthcare, acting as a disincentive for an already compliance-heavy industry. The
Commerce Minister recently highlighted how manufacturing costs for pharmaceutical
products in India are lower than anywhere in the world, adding that innovation should
ideally drive down the prices of pharmaceutical products. If the aim is to increase access to
affordable healthcare, now is the time to evaluate and harmonize all laws and policies
affecting the medical devices industry’s ability to provide affordable healthcare. As shown in
the table, carve-outs have been made, even if only for a few years, for other pharmaceutical
products. Carve-outs that are time-bound can be considered for some notified medical
devices that have been manufactured under schemes like the Production Linked Incentive
Scheme.

Impact of Drugs (Price) Control order 2013 on price and supply chain
From April 1, 2020, all medical devices and medical equipment manufacturers and
importers will have to comply with the provisions of DPCO. The obligations imposed by
DPCO on all manufactures and importers of medical devices and medical equipment are as
follows:

Retail sale price to be mentioned on all medical devices, including ones for institutional
use: The DPCO requires that every SKU of medical device and medical equipment must be
labelled with its maximum retail price (“MRP”) that is to be set by the
importer/manufacturer/marketer. The said price must be prefixed by the words “Maximum
Retail Price” and suffixed by the words “inclusive of all taxes”.

Before April 1, 2020, there was an exemption available for medical devices and medical
equipment that weighed more than 25 kg or that were intended for institutional use,  from
declaration of MRP under the Legal Metrology (Packaged Commodity) Rules, 2011.
However, from April 1, 2020, all medical devices and medical equipment, irrespective of
their weight and intended use, will have to declare MRP on the label of each SKU in the
manner specified above.

% cap on variation of retail sale price: The importers, manufactures and marketers of

medical devices will have to be cognizant about variation of the MRP declared on the label
of their medical devices. The MRP of the product should not be varied by more than 10% in
any 12 month period, else the variation in excess of 10% will be recovered as ‘overcharging’
from the business concerned. For example, if an importer of medical device decides to
reduce the MRP by 20%, but after a single quarter decides to return to the original retail
price (i.e. increase by around 20%), then it won’t be permitted to do so. It can, at best,
increase its MRP by 10% of the reduced price. If it starts selling the product at the original
MRP, then the 10% excess will be recovered from the importer on MRP basis i.e. by
multiplying the number of units sold with the 10% excess, along with intrest and penalty.
Price related filings to be done from time to time: All importers, manufacturers and
marketers of medical devices and medical equipment will have to submit price to
distributors/stockists, price to retailers/hospitals and retails sale price in format
prescribed under Form V of Schedule II of DPCO (with appropriate modifications) in the
event of revision of MRP. The aforesaid information is to be submitted on an online platform
called Integrated Pharmaceutical DataBase Management System operated by NPPA.

Risk of price fixation: The NPPA has the powers to fix ceiling prices of any drug under extra-
ordinary circumstances and in public interest. Now, from April 1, 2020, this power will
extend to all medical devices and medical equipment. Once a price is fixed, the importer,
manufacturer and marketer of said medical device has to set its MRP either equal to or
below the ceiling price. Most of the times, NPPA also fixes the margins that may be offered
to the supply chain and makes the concerned importer/manufacturer/marketer liable for
any breach of margin by the supply chain.

In the past, the NPPA has used this power to fix prices of coronary stents and knee implant
systems (both devices were notified as drugs in 2005). In the aftermath of the price
fixation, many advanced coronary stents were sought to be withdrawn from India by the
manufacturers on the grounds of unviability. A prior permission from NPPA is required to
withdraw or to reduce production / import of medical device whose prices have been fixed
by NPPA in public interest.

Risk of being subject to market based pricing: The Ministry of Health and Family welfare
brings about a National List of Essential Medicines (“NLEM”) every few years. Medical
devices are also included in the said list from time (e.g. coronary stent). The consequence of
being included in NLEM from pricing perspective is that the medical device in question
automatically becomes subject to a market price based price control i.e. the MRP of the said
device must not exceed the average MRP of all importers, manufacturers and marketers
who sell the same device and who have more than 1% market share in that particular device
market. The said average MRP (referred to as “Ceiling Price”) is decided and set by NPPA.
The Ceiling Price may go up or down every year, depending on the wholesale price index of
the Government. The MRP of the medical device will have to be adjusted accordingly.  A
prior permission from NPPA is required to withdraw or to reduce production / import of
medical device which are recognized as ‘essential’ by the Government.

Consequences of non-compliance

There are different consequences associated with different violations. Any violation of DPCO
is serious because its parent legislation, the Essential Commodities Act, 1955, stipulates that
any breach of DPCO may result in imprisonment and fine for the company and person(s) in-
charge of the company for conduct of its business. However, undoubtedly, the most
draconian provision of DPCO is the liability to deposit any amount ‘overcharged’ by the
importer or manufacturer in breach of DPCO in addition to the interest and penalty.
Innovations in Medical Devices Industry

Software as a Medical Device (SaMD)

Defined by the International Medical Device Regulators Forum (IMDRF) as "software
intended to be used for one or more medical purposes that perform these purposes without
being part of a hardware medical device,” SaMD is having a huge impact on healthcare.

This technology enables patients living with chronic conditions to capture data and, if
willing, share it with their health professionals. By opening up new digital pathways for
screening, diagnosis, monitoring, and alerting, SaMD empowers people to become active
agents in their healthcare plans. And with the technology becoming cheaper, more
powerful, and more accessible, SaMD gives physicians the data and scope to develop
personalised treatment plans.

According to a Deloitte survey, just under half of patients are willing to share their personal
data for medical research. That said, protecting patient privacy is paramount, so we can
expect to see further regulation passed aimed at ensuring confidentiality and patient control
over their data.

Robotics technology
Over the last five years, major advances in robotics technology have led to a huge spike in
demand for minimally invasive robotic surgery (MIRS), causing the surgical robot market to
experience double-digit growth.

This trendline is set to continue its upward trajectory. By 2025, the number of global MIRS
procedures will more than double to 2 million, while the market is predicted to grow from
$5.5bn (£3.95bn) to over $24bn (£17.26bn).

The COVID pandemic has caused an upsurge in the use of robotics in a hospital setting. With
medical services being restricted and unprecedented demand being placed on hospitals,
robots have proven an efficient, cost-effective method to provide safe and socially-distanced
preoperative, intraoperative, and postoperative care.

According to a 2020 study by Zemmar, Lozano & Nelson, this rise in robotics “may well
outlast the pandemic and revolutionise surgical performance and management.” With
demand for MIRS only increasing, the medtech sector will look for innovative new ways to
create surgical robots that are more accurate, dependable, and easy to use.
Conclusion & Recommendation
It is extremely important for medical devices and medical equipment companies doing
business in India to be aware of the compliance requirements and obligation under India’s
price control law (i.e. EC Act and DPCO). Since all medical devices and medical equipment
are now regulated as drugs, and all drugs are treated as essential commodities, an
inadvertent violation of India’s price control laws may have serious consequences for the
business of these companies.

Also if company is investing in R and D of any medical device it should be first taken care of
the price capping as even after investing in R & D and successfully launching it in the market
the price capping may delay the time to recover the amount invested in R & D and the
company may also incur losses.

Just as changes to working patterns and consumer behaviours have facilitated the need for
remote technologies, so too has the evolution of the relationship between patients and
physicians. As the COVID-19 pandemic demonstrated, the medical device market is more
than ready to meet this demand for user-friendly diagnostics and monitoring devices.

The key challenge for the sector is how to best use data to optimise patient outcomes while
also safeguarding patient privacy. The success of this goal depends on medical device
companies and regulators coming together to build infrastructure with agreed-upon
expectations and boundaries.

Governments have a major role to play, too. The U.K. government, for example, has
launched incentives (such as waiving VAT and import duties on vital medical equipment) to
buffer the nation’s medical device industry during the pandemic. Beyond COVID, the U.K.
aims to become a leader in medical device technology and has pledged to pump tens of
billions into the sector in the coming years.
Insights
Last year’s medical device definition expansion, and the recent Pricing Authority’s meeting,
indicate that as more devices get notified for regulation, they also run the risk of Pricing
Authority oversight. A whole host of technology-based healthcare solutions could also come
under the Pricing Authority’s scope, as these solutions get notified by the Health Ministry.
This will be the case irrespective of whether they are imported or locally manufactured. If
the Pricing Authority decides to look into a newly notified device, it would mean that in
addition to complying with the requirements of the MD Rules and the Drugs and Cosmetics
Act, manufacturers, and importers will also need to comply with the Drug Price Control
Order of 2013. This also means that manufacturers and importers of these devices will have
to interact frequently with the Pricing Authority, by reporting to it periodically. The medical
device industry should engage with the Pricing Authority to build a meaningful relationship,
and achieve a balance between the concerns of the regulator and the interests of the
industry.

References-
Drugs (Price Control) Orders are released under Section 5 of the Essential Commodities Act,
1955.

Drugs (Price Control) Order, 2013 (Available

at: http://www.nppaindia.nic.in/wp-content/uploads/2018/12/DPCO2013_03082016.pdf)
Schedule 1, (Available
at: http://www.nppaindia.nic.in/wp-content/uploads/2018/12/DPCO2013_03082016.pdf)
Drugs (Price Control) Order, 2013, Para 2(i)
Drugs (Price Control) Order, 2013, Para 5
Drugs (Price Control) Order, 2013, Para 2(b)
Drugs (Price Control) Order, 2013, Para 6