New Delhi: After strongly opposing price caps on medical devices, US medical device lobby Advanced Medical Technology Association (AdvaMed) has turned to the prime minister’s office (PMO) once again, raising concerns on the government’s move to regulate trade margins on medical devices.

Abby Pratt, vice president of the med-tech trade group has pitched for trade margins to be calculated on the point of the sale i.e. the distributor rather than on the landed cost of such devices. This comes in the back drop of India and US sparring over pricing issues.

Citing that a “lanced cost" based calculation would be “discriminatory" and “detrimental" to India’s medical devices industry, AdvaMed’s VP, in a letter written to a joint secretary in the PMO on 26 March, pitched for trade margins to be calculated from the first point of sale (i.e sale to distributor).

“The landed cost is an overly narrow and unfair framework that does not take into account a foreign firm’s numerous expenses in India for developing and serving the market in India". According to AdvaMed, the medical device industry would face challenges for new entrants and if landed cost or ex factory price are used, it would impact the industry’s ability investment in enhancing the capabilities.

However, according to domestic manufacturers, the suggestion by AdvaMed works only in favour of multi-national companies and will lead to “unethical marketing".

“By seeking rationalisation of trade margins between price to distributors by an importer or Indian manufacturer and by doing this, they will keep themselves out of the trade margins rationalization," said Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMed). The government’s move to fix trade margins would restrict how much a product’s price can be raised from the import or manufacturing cost.

According to the advocacy group, the proposal of trade margin rationalization is better than the existing price controls and could spur the medical device industry. “The trade margin proposal is a better approach than the current MRP price controls for allowing appropriate recognition for innovation. Trade margin rationalization allows for market based rationalization of product prices while controlling the level of mark-ups to avoid abuse. The current MRP price control where a mark-up on average landed cost was allowed, has not allowed price differentiation for more advanced technology and as such created a strong barrier to bringing leading medical device technologies to the Indian market," the letter further said. Mint has seen the copy of the letter.

Malini Aisola of All India Drugs Action Network says the MNCs’ argument is flawed. “The NPPA analysis on trade margins in cardiac catheters, balloons and guidewires notes margins in the range of 200% being taken by the importing entity which then sells on to the distributor. Imported medical devices involve an extra layer of profit-making because of the additional actor involved in the movement of the device (i.e., importer), which can be a contributing factor in unethical marketing and further fuel the market failure in healthcare. Therefore, the ex-factory price should actually be equated to landed costs in any exercise of trade margin capping. That said, the problem of high costs cannot be addressed only through trade margin capping which will not necessarily impact on retail prices. In fact, margin capping could end up legitimizing the real possibility of high landed costs and therefore higher selling price to the patient. Doctors would tend to prescribe foreign devices rather than lower priced Indian ones because the latter would give lesser commission to the hospital".

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