With the rapidly expanding Indian pharmaceutical and healthcare sector over the years, the growth in demand for advanced and innovative medical devices seems to be a natural next step to meet the needs of the sector. The medical devices sector is one of the most promising business segments of mutual interest to India and the United States of America and it would come as no surprise that the trade relations between the two nations on this front will go deeper and stronger in the coming years. The sector has been recognized as the "Sunshine Sector" in the Make in India campaign launched by the ruling government in the year 2014, which promotes and encourages FDI and domestic investment in manufacturing of medical devices in India.
The medical devices industry in India is presently valued at USD 5.2 billion and contributes about 4-5% to USD 96.7 billion, which is the total current value of the Indian health care industry. Given that the industry has grown steadily from USD 2.02 billion in 2009 to USD 3.9 billion in 2015, the industry experts estimate the market to grow to USD 50 billion by 2025. India is presently the 4th largest medical devices market in Asia after Japan, China and South Korea. However, there are more than one reasons for the expected growth in the sector with the United States of America playing a pivotal role in this growth story.
The medical device market in India is heavily dependent upon imports, which meet nearly 80% of the demand for medical devices. Out of this 80% of the total imports into India, the United States has an estimated share of 30%. The imported medical devices are mostly crucial, innovative and risk oriented in nature, which is the demand of the country as of today, being heavily populated and disease burdened. The growing complexities in diseases and ill health of the growing population in India, will only lead to more demand of advanced and innovative medical devices. The slow but gradual recognition to the unexplored and unexploited potential of this sector has encouraged substantial interest of the government and the major sector players in this business segment of the pharma sector. This is evident from the clarifications, relaxations and discussions on that medical devices gradually have come about over in recent years, followed by the setting up a specific regulatory regime for the 'sunshine sector'.
Liberalization of FDI Regime
While the FDI in brownfield pharma sector is reserved for approval, when over and above 74% for strategic reasons, it did not take much time for the ruling government to decide on opening of gates to FDI in medical devices industry after it came to power in 2014. Up to 100% FDI is permitted in medical devices through the automatic route.
The manufacturing of medical devices is dominated by MNCs, which are on the rise with relaxation in the FDI regime coupled with the huge potential to cater to the growing needs of the medical sector. There are about 700-800 manufacturers in India as of date, out of which the leading manufacturers are Becton, Dickinson and Company, Holister Incorporated, Johnson & Johnson and GE Healthcare to name a few.
State Level Policies
Interestingly, we can now see a clustered growth of the manufacturing set up in the field of medical devices in India, which is concentrated mainly in six states, Haryana, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu and Maharashtra. The cluster formation is due to availability of labour (skilled and unskilled) and various state level policies, which have been formulated and implemented to support setting up and growth of manufacturing facilities in the sector.
The state policies also propose setting up of few medical device parks, including MedTech Zone Limited in Andhra Pradesh), a park in Sultanpur village (Telangana) and HLL Lifecare Mediparks in Tamil Nadu, Maharashtra and Gujarat.
Introduction of a Regulatory Regime
The revolutionary change in the pharmaceutical sector in India is the introduction of the much awaited regulatory regime for medical devices. The Drugs & Cosmetics Act, 1940, regulated a few medical devices as 'drugs'. The lack of a proper regulatory framework has been an impediment for clarity and certainty in the sector.
The Medical Devices Rules, 2017 (Rules) were introduced and made effective by the government on January 1, 2018. The Rules distinguish the medical devices from drugs and pharmaceuticals and are specifically designed to cater to the quality standards, niche details and other requirements of the medical devices, which was a must to bring about confidence among the players in this nascent sector. Apart from providing a progressive, extensive and inclusive definition of medical devices, the degree of regulatory control and checks are proportionate to the risk orientation of a medical device. In line with the global practice, the Rules have introduced a risk-based classification of the medical devices depending upon the purpose of the medical device.
Some requirements as compared to those under the Drugs and Cosmetics Act, 1940 have been relaxed in respect of medical devices. One such relaxation is doing away with the requirement of seeking periodic renewal of licenses. Consequently, manufacturing and import licenses will be valid until it is suspended or cancelled. Another such relaxation is that the manufacturing licenses for certain medical devices are granted without prior audit of the manufacturing site. In such cases, the manufacturer has to maintain self- certification of compliance with the essential requirements.
National Health Policy
The government approved the National Health Policy in 2017, which proposes to introduce systems to strengthen the health care practices. Pursuant to guidance set out in the National Health Policy, a policy specifically dedicated to medical devices has been drafted.
The Draft National Medical Device Policy, 2015 proposes to strengthen the medical devices sector by reducing dependence on imports. Apart from easing the licensing process through a single-window mechanism, the policy focuses on making India as the global hub of production in medical devices with substantial incentives and relaxations. Among other things, the draft Policy envisages interest subsidy for MSMEs, concession on power tariffs, seed capital and minimum or zero duty on raw materials.
With great potential yet to be explored, the sector is witnessing rapid changes and growth. However, it does have its own share of issues and concerns to be addressed by the government and stakeholders. After a long wait, the setting in of regulatory regime is certainly a boon to the major medical device industry players, but the uncertainty due to a nascent regulatory framework cannot be ruled out.
Another issue that has seen intense debate since 2016 is the price control imposed on medical devices by the drugs and cosmetic price regulator in India, the National Pharmaceutical Pricing Authority (NPPA). These price controls have hit the sector with debates and arguments against controlling of price for devices such as cardiac stents and later, knee implants. Various news reports suggest that there have been several round of discussions between the NPPA and AdvaMed, a medical device industry body in the US which represents some of the leading US based manufacturers of medical devices and Advamed has been strongly arguing that such price control will be a discouragement for the leading and advanced medical devices companies to do business in India and the policy is not in favour of the patients in India who would be devoid of the innovations and advancements in the sector.
Although these issues are undoubtedly of a serious nature, the present government has managed to assure confidence among the players of the sector with the sheer visibility and importance that has been dedicated to the sector and the consciousness among the stakeholders to see, explore and exploit the potential for growth in the sector. All endeavors and efforts made by the government and stakeholders to push operations, investment and activities in the 'sunshine sector' have started to show good results. Moving on, the circumstances of the Indian health scenario only assures a growing demand, which would accelerate more supply and production of the medical devices.
This article was first published in IACC- 14th Indo US Economic Summit (book).
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