India: Department Of Pharmaceuticals (DoP) Releases Draft Guidelines For Public Procurement Of Medical Devices

On March 15, 2018, the Department of Pharmaceuticals (DoP), Ministry of Chemicals and Fertilizers, released a draft guideline for implementation of the provisions of the Public Procurement (Preference to Make in India) Order (PPO), 2017, with respect to public procurement of medical devices¹⁰.

Earlier, the Department of Industrial Policy and Promotion (DIPP) had issued PPO, 2017 and to facilitate its implementation, it had identified DoP as the Nodal Department for implementing the provisions of the PPO 2017 relating to goods & services related to pharmaceutical sector. The provisions of Para 3, Para 5 and Para 9 of PPO, 2017 are related to pharmaceutical sector.

• Para 3 of PPO, 2017, makes it mandatory for procuring entities to give purchase preference to local suppliers,
• Para 5 of PPO, 2017, empowers Nodal Ministry to prescribe percentage and the manner of calculation of minimum local content in respect of any particular item relating to Pharmaceutical sector, and
• Para 9 of PPO, 2017, deals with verification of local content.

Therefore, DoP has, now, issued the guidelines for implementation of the provisions of the PPO, 2017, with respect to public procurement of medical devices -

Percentage of Minimum Local Content

Medical Device Industry (MDI) is a multiproduct industry responsible for provisioning of wide variety of crucial medical products ranging from simple tongue depressors & glucometer strips to large radiological & electronic medical equipment. The medical devices industry can be broadly classified as consisting of

1. Medical disposables and consumables;
2. Medical electronics, hospital equipment, surgical instruments;
3. Implants; and
4. In-Vitro Devices/Diagnostic Reagents.

Individually, there are around 5000 different kinds of medical devices and it is not practical to prescribe the local content and percentage of preference in domestic procurement for each medical device. Moreover, DoP is in the process of collecting accurate and reliable data regarding:

• Total capacity and production of various categories of medical devices in India;
• The level of competition in the market in different segment of medical devices
• The processes involved in the manufacture of medical devices for prescribing the percentage of minimum local content for each category of medical devices, for purchase of supplies only from local suppliers where the estimated value of procurement is Rs. 50 lakhs or less and for determining the manner of calculation of local content in the medical devices to be procured by the public agencies.

However, for the time being, based on the present level of the understanding of the medical device market in India and discussion with various industry representatives, DoP has analyzed the following percentages of minimum local content in domestic medical devices for public procurement which are prescribed for the various segments of medical devices:

Manner of calculation of local content

1. Local content of Medical Device shall be computed on the basis of the cost of domestic components in the device compared to the total cost of the device. The total cost of a product shall be the cost incurred for the production of the medical device including direct component i.e. material cost, man- power cost and overhead costs including profit but excluding taxes and duties.
2. The determination of local content cost shall be based on the following: a) In the case of direct component (material), based on the country of origin b) In the case of manpower, based on domestic manpower
3. The calculation of local content of the combination of several kinds of goods shall be based on the ratio of the sum of multiplication of local content of each goods with the acquisition price of each goods to the acquisition price of combination of goods.
4. Format of calculation of local content shall be as contained in Enclosure-I.

Requirement of Purchase Preference

Purchase preference shall be given to local suppliers by all procuring entities as per provisions laid down in para 3 of PPO, 2017, subject to the condition that para 3(a) of the PPO 2017 shall be applicable only when there are two or more than two local suppliers for any tender of value up to Rs. 50 Lakhs and they certify that they can supply the desired medical devices in the required quantities.

Verification of Local Content

1. The local supplier at the time of tender, bidding or solicitation shall be required to furnish self-certification of local content in the format as contained in Enclosure-II.
2. In each tender, the procuring entity shall clearly mention the details of its competent authority which is empowered to look into procurement related complaints and the fees for such complaints, relating to implementation of PPO, 2017.
3. In case a complaint is received by the procuring entity against the claim of a bidder regarding domestic value addition in medical device, the procuring entity shall have full rights to inspect and examine all the related documents and take a decision. In case any clarification is needed, matter may be referred to the DoP.
4. Any complaint referred to the procuring entity shall be submitted along with all necessary documentation in support of the complaint regarding domestic value addition claimed in medical device and shall be disposed-off within 4 weeks of the reference by the procuring entity.
5. In case, the complaint is referred to the DoP by a bidder or procuring entity, the grievance redressal committee to be set up under DoP for the purpose, which shall dispose-off the complaint.
6. In case, the matter is referred to the DoP, the grievance redressal committee shall dispose-off the complaint within 4 weeks of its reference and receipt of all documents from the bidder after taking in consideration, the view of the procuring entity. The bidder shall be required to furnish the necessary documentation in support of the local content claimed in medical devices to the grievance redressal committee under the DoP within 2 weeks of the reference of the matter. If no information is furnished by the bidder, the grievance redressal committee may take further necessary action, in consultation with procuring entity, to establish the authenticity of the claim.
7. In case of reference of any complaint to the DoP by the concerned bidder, there would be a fee of Rs. 2 Lakh or 1% of the value of the medical devices being procured (subject to a maximum of Rs. 5 Lakh), whichever is higher, to be paid by way of a Demand Draft to be deposited with the procuring entity, along with the complaints by the complainant. In case the complaint is found to be incorrect, the complaint fee shall be forfeited. In case, the complaint is upheld and found to be substantially correct, fee deposited by the complainant would be refunded without any interest.

Note - All other provisions of PPO, 2017, shall be applicable as such and shall be adhered to by all procuring agencies for procurement of any medical device. The DoP has requested the stakeholders to furnish their comments and views on this draft guidelines within 21 days.

Footnote

10. http://pharmaceuticals.gov.in/sites/default/files/Guidelines%20for%20implementation%20of%20Public%20procurement.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.