Home to one-sixth of the global population, the demand and need for healthcare delivery and allied services cannot be understated in India. The cost of bridging the gap for medical facilities (especially public infrastructure) and standards in India in line with global averages and norms is estimated to be at around USD 25 billion in the next few years. While a lot of this investment is proposed to be undertaken in the private sector, a natural offshoot of healthcare infrastructure growth is a spur in the demand for allied technologies, medical devices, medical equipment, and medical consumables, which aid in delivery of healthcare (together referred to as medical technology or MedTech).
As a collaborative effort between industry, associations and research groups, the MedTech industry was envisioned to be USD 50 billion by 2025 and a clear roadmap for achieving this goal was laid out. Exactly two years later, we have tried to evaluate our progress in this significant vision and growth trajectory. Industry keenly awaits the formalization of a strong policy document for the sector aimed toward strengthening and supporting the medical device sector in India. This can be done by implementing globally harmonized set of regulations for medical devices and supporting the domestic manufacturing framework for safe, high-quality, and affordable medical devices.
While there have been advancements either made or proposed to be made to eradicate the prime roadblocks identified in 2014, the industry continues to grapple with some fundamental issues pertaining to regulatory uncertainty, fragmented nature of the industry, and an ecosystem not conducive enough to foster cutting- edge innovation and indigenous manufacturing.
This concept paper, prepared with the active consultation of members of the CII Medical Technology Council, is an interim review of the proposed vision and roadmap. This is an attempt to provide an insight into various updates on regulatory, technology, and the market fronts in the Indian MedTech sector. The industry currently is heavily import oriented but shares a common vision to continue providing high-end and proven technology products, at affordable cost. The removal of existing barriers for growth will ultimately lead to increased investment into the Indian market by domestic and global players alike, whether in the form of local manufacturing, fostering R&D and innovation, partnerships for skill development, among other things.
Uncertainty and Disjointed Approach
A Few Positives, and Multiple - Not Well Understood
Multiple discussion forums for industry-government consultative interactions for seeking inputs on the Policy, permitting FDI in the sector through a landmark announcement, reversing the inverted duty regime to encourage local manufacturers, extending the SUGAM portal for medical devices by the CDSCO are all measures which were aimed at creating an identity for the MedTech industry. But why is the regulation being introduced? The answer to this question, keeping an unbiased view of domestic and international manufacturers and based on a pure reading of the Draft broadly indicates the following:
- Provide safe, quality, affordable MedTech for ultimately improving patient care
- Incentivize local manufacturing - provide access to capital, setting up of MedTech parks (the first of which was inaugurated this year), creating a level playing field and encouraging healthy competition, encourage innovations and R&D (ICMR, DIETY, DoP, CSIR, DBT) through a single window for coordination
- Develop export potential through local manufacturing facilities
- Gradually reduce import dependence - by growing the market to attract scale and investment essential for local manufacturing
- Create an autonomous body to give effect to this regulation (clearances, compliances, monitoring, and overall sector promotion)
- Discourage second-hand medical equipment imports
- Set a price control regime for medical devices
- Develop an institutional framework for R&D
As the Policy itself is in the draft stage, a number of departments and governing agencies (CDSCO, D&C, AERB, PNDT, BIS, etc.) have come up with their own sets of detailed/insufficiently detailed requirements that somewhere aim to capture one or more of the above intentions. However, lack of coordinated discussions amongst these agencies, in the absence of an overall guiding rule book, has led to interpretation issues and high approval times in complying with these interim measures. The industry and the regulator, both find this challenge difficult to deal with in the absence of Policy formalization.
Country's healthcare system is currently 75 percent dependent on imported MedTech. To gradually transition from an import-dependent to an export-oriented sector, we need to prepare and develop our MedTech ecosystem. This needs to be done before announcing measures and rules for operations so that there is no immediate adverse impact on patient care and quality of care. Interim announcements, without the overall guiding principles in place, should therefore be rolled out only after a well thought out consultative process. As we hear, these efforts are currently ongoing.
Creating the Rule Book - The National Medical Devices Policy
One of the least understood sectors MedTech is currently undergoing an identity crisis with the National Medical Devices Policy, 2015 undergoing multiple iterations and deliberations over the last year. The first impediment of creating an identity of its own is proposed to be removed by de-linking MedTech from the Drugs and Cosmetics Act. The move, however, may be partially successful as a policy initiative in this direction is still not formalized.
Additionally, multiple hurdles lie ahead of the industry as regulations that are being announced periodically are not well understood in the absence of any final regulation. There is no transitional view in place. Creating a sense of regulation without actually having a detailed action plan is the primary operational impediment in the MedTech industry.
Bringing in the Environment Factor
Policy in the Right Direction, Practical Difficulties Galore
A Mixed Bag - Biodegradable or Not
Healthcare facilities (HCFs) have so far segregated biomedical waste (the wastes involved in diagnosis, treatment, and immunization such as human and animal anatomical waste, treatment apparatus such as needles and syringes and cytotoxic drugs) at the individual level in colored bags - yellow, red, blue/white, and black according to the category of the biomedical waste. Post the maximum storage period of 48 hours, they either treat it in situ or a worker from a common biomedical waste treatment facility (CBMWF) collects it. The CMBWF then treats the waste according to the color of the bag. Different colors indicate different types of treatments - incineration, deep burial, autoclaving, shredding, chemical treatment, disposal in a landfill, etc.
The Ministry of Environment and Forests released the new Biomedical Waste Management Rules 2016 in March 2016. Key distinctions between the earlier rules and the current rules include:
- l HCF is now responsible for pre-treatment of laboratory and microbiological waste, blood samples, and blood bags through disinfection/sterilization on-site in the manner prescribed by the WHO or NACO, regardless of whether final treatment and disposal happens on-site or at a common BMW treatment facility (CBMWF).
- l Use of chlorinated plastic bags, gloves, and blood bags to be phased out by the HCF within 2 years (But do biodegradable alternatives exist?)
- l Ease of approvals: Bedded hospitals will get automatic authorization and healthcare facilities without beds will get a one-time authorization.
- l While the earlier rules have no provision for a monitoring authority, the 2016 rules state that the MoEF will review HCFs once a year - a welcome monitoring mechanism.
In the latest series of discussions and the outcome of technical committee meeting with the ministry (MoEF), it was communicated to applicants that the machines older than three years will not be considered for approval (NOC) by the ministry. Moreover, the ministry is debating that critical care medical equipment for re-use be placed under hazardous wastes - prohibited for import category, which would imply that import of refurbished critical care medical equipment into India will not be allowed.
Disregard for Indispensable Products and Refurbished Technology Alternatives
Considerable differences in the Draft Biomedical Waste Rules circulated to the industry for comments and the actual rules put into effect were noted. While moves on automatic approvals, authorizations, and several other consultative and thought-out initiatives were welcome, a few imminent and harming non-consultative aspects (which may affect not just the quality of care, but also the access to care) such as the following have caused concerns.
- Phase out of chlorinated plastic bags, gloves, and blood bags within 2 years from the date of notification of these rules could have the catastrophic effect of no surgeries being performed since a bio-degradable alternative does not exist and cannot be developed at such a short notice.
- With a clear aim for the inclusion of machines older than 3 years in the hazardous waste - prohibited from import category, previously unaffordable critical care equipment which became available to several healthcare institutions through the refurbished route (where the clinical life and longevity of the equip ment is technically extended through globally accepted OEM standards), may suddenly become out of reach (a matter which is still under debate). First-hand equipment would be unaffordable unless government aids in financing these equipment.
Striking a Balance
Import Dependence versus Export Promotion
Increase in Duties - January 2016
The customs department has raised import duty on medical devices used for surgical, dental, and veterinary use from the current 5 percent to 7.5 percent to help companies manufacture these products in India itself. Besides, the government has imposed special additional duty on these items of 4 percent by withdrawing exemptions. Also, basic customs duty will be reduced to 2.5 percent on raw materials, parts, and accessories of these items.
Sudden Substitution in an Import-Dependent Sector
MedTech in India, like several other countries in the world is largely import dependent. Over 75 percent of high-end medical devices and critical care equipment are imported whereas large volumes of comparatively low-end consumables and disposables are largely locally manufactured. While the inverted duty regime is being touted as one of the primary reasons for this imbalance over the years, the country's Make in India initiative is being implemented through a policy push to encourage local manufacturing and shift from an import-dependent to an export-oriented market.
The key issue remains that an import-dependent economy cannot suddenly shift to indigenous manufacturing simply through driving policy decisions in a sector such as healthcare. While MNCs are cognizant of the fact that import duties will continue to face pressures, it is imperative to realize that we will not be able to leverage global technology if this were the stand adopted by us. To create a healthy ecosystem in the near term, we will have to grant equal importance to imports and domestic manufacturing with a view to improve clinical outcomes and have continued access to global technology, enabling a smooth transition.
Focus on efficacy of devices and quality of clinical outcomes. Examples of medical devices policy reform and regulation in import-dependent economies can be taken, which use International Medical Device Regulators Forum (IMDRF) harmonized guidance documents on basic regulatory practices as reference. This helps countries maintain focus on global standards for quality and clinical outcomes and direct local efforts only toward creating access and smooth market operations to deliver healthcare to patients, while choosing to be import dependent.
Impact of NLEM Inclusions
Moving Backwards toward a Drug Treatment
Mere Extension of Drugs, Yet Again
Thwarting all efforts made in the last decade to segregate medical devices from drugs, we have seen some recent regressive pronouncements where a medical device has again been classified as a drug and has been included in a list of essential drugs. Recently, two categories of stents were included in the National List of Essential Medicines (NLEM).
The health ministry added drug-eluting stents (DES) and bare metal stents (BMS) to the NLEM 2015 list in a notification released in July 2016. The National Pharmaceutical Pricing Authority is expected to notify the new prices for these stents after due deliberations.
Counter-Productive to Make in India
Technology pricing spiraling downwards is a global trend including in the MedTech space. But do we see the benefits being passed on to the patient?
Understanding the complex distribution and marketing channels along with planned quality check on procedure, reimbursements will be critical to co-evaluate when assessing any form of price control. Factors such as longevity of the product may reduce in their significance, discourage innovation, and reduce access to better outcomes if a pricing barrier is imposed.
A pricing barrier may have a direct effect in the form of quality and disability adjusted products entering the market which may defeat the higher purpose of long-term disease management.
Manufacturing costs of medical devices is largely not a factor of where the product has been manufactured but is essentially a factor of scale. High-volume products, which provide economies of scale, are more advantageous and cost effective when manufactured in India. Indigenous manufacturing of precision and complex technology products should be encouraged in a phased manner.
If local manufacturing is set up, and is able to develop parallel/competing technology at low cost, it will create a healthy pool of alternate products in the market.
Standards and Compliances
Cornerstones of Any MedTech Ecosystem
Quality of a MedTech product is perceived through certifications and approvals. While Regulation is being finalized, there are no deliberations/discussions around developing infrastructure and quality of testing similar to CE/FDA locally. Raising our credibility in global markets through appropriate quality certifications is the key if we have to compete in the global arena. In select areas of consumables and low-precision devices, we are already globally competitive. This is largely because the manufacturers, with their own funds, have invested sufficiently to seek and abide by globally accepted quality standards and certifications (in most cases, CE approvals at the very minimum).
Free sales certificates (used as means of preventing sale of banned products) are denied by the Indian regulators for products not notified within the existing Act (only a handful of the several thousand devices are currently notified). We end up losing the export marketing potential of these products in most countries.
Approvals, without a Clear Governing Body
As a global quality reference point, a CE or FDA approval is often regarded as the primary approval criteria for products (much like pharma). An add-on local approval, without diluting the efforts and by fully leveraging on the outcomes of the CE/FDA approval is all that the country needs at this point of time without re-inventing the entire wheel.
Drug Marketing Code, Paradoxical Again
The UCPMP Code was brought into force to deal with ethical pharmaceutical marketing practices. However, it is once again being recommended that MedTech be brought under its purview. This was done without a careful thought about the difference in nature and stage of these two industries, bringing us back squarely to the root cause of regulation and segregation from pharmaceuticals. If the technology that is new, developed mostly outside the country, cannot be explained to doctors, technicians, and practitioners, it puts us back at the starting point on the R&D roadmap.
Patient Access and Reimbursements
Improving Patient Access
Unlike pharmaceuticals or many other industries, 60 percent of global MedTech market is controlled by a few large players. MedTech is far more complex and requires physical, financial, and clinical infrastructure. Only in the presence of all these can any player successfully set up base in a country and conduct smooth operations, provided there is also a strong local demand. With significantly lower average per capita spend on healthcare compared to other countries, the per capita spend on MedTech (which is essentially a subset of healthcare drawing its demand from beds/infrastructure) is lower too. Without a visibility on healthcare infrastructure development, which is the primary need, in the next 5 years, the demand for MedTech cannot be ascertained with accuracy.
Long-term view on re-imbursement costs. Re-imbursement policies should focus on long-term medical costs incurred by the patient and not the immediate surgery/product prices alone. While a low-cost product may be preferred, one fails to notice the recurring costs owing to repeated patient hospitalization due to clinical outcomes/lifecycle-related issues. In the absence of a quality re-imbursement mechanism coupled with imposition of price barriers, products that are quality- and longevity-adjusted may seep into the system.
India has a complex healthcare delivery system where there is a huge gap of quality and service between a tertiary care provider and a primary health center, and also between public and private hospitals. The higher we go up in the value chain of technology, R&D plays a key role making the cost prohibitive. Thus smaller providers cannot afford and, therefore, may rely on refurbished alternatives. Providers also get squeezed between insurance schemes and cash patients, where they are forced to provide same quality of care at subsidized cost based on the schemes. There is always a price and quality mismatch wherever these intersections play out.
Developing the MedTech Ecosystem
A Parallel Initiative, Demanding Equal Impetus
Currently, several companies including established domestic players often hire PhDs or engineers at entry level and develop talent through internal programs and training, unlike what happens in developed countries that have formalized knowledge teams to connect industry and academia to provide practical training as part of regular curriculum. While there are a few incubation centers to help in prototyping or design testing, a full-blown commercial self-sustained ecosystem to aid in scaling up manufacturing is missing.
A key agenda in the proposed NMDP is to develop medical device parks, knowledge networks with industry partners, set up skill development committees, incubation centers, promote international knowledge exchange programs, etc.
In determining our ability to set up and service our healthcare ecosystem, while lack of qualified physicians and availability of beds are core areas of improvement, building a MedTech ecosystem requires focused infrastructure (in the form of MedTech parks) and specialized skills.
Setting up the first MedTech park
Andhra MedTech Zone (AMTZ), established under the Andhra Pradesh government, has finally received approval for funding by the state cabinet on June 1, 2016 for setting up Asia's first dedicated medical device park at Visakhapatnam in the state. A second such park is also being envisaged to be set up in the state of Gujarat which would complement the first upcoming medical device testing lab of the country at Vadodara. These measures are already paving the way for development of similar such ecosystems throughout the country, as envisioned in the NMDP.
Qualified Pool, But Are They Trained Enough?
While we produce a healthy pool of engineers and PhDs, there is a lack of industry-academia interaction to develop such individuals as specialists with appropriate practical training. Physicians need to be better trained on using MedTech, which will reduce the burden on the industry that currently invests significant capital and efforts in upskilling physicians and technicians and creating awareness about new medical technologies and products (through CMEs and other training programs).
MedTech as a sector is unique and not exclusive in terms of its inter-linkages with the healthcare service providers. Accordingly, any view taken on the sector needs to be inclusive and should take into account the dependence on healthcare infrastructure, healthcare delivery, and reimbursement/insurance penetration.
- Payer cum provider: Government has to take the role of a payer or a provider or a combination of both. Untill the time uncertainties around the state of public infrastructure, shortage of capacity, and inefficient reimbursement mechanisms are resolved, it becomes arduous to devise inclusive strategies for MedTech, which is largely import dependent and survives mainly through private and foreign capital.
- Clarity of purpose of regulation: Through this current phase of policy formalization, all stakeholders including the government have to be mindful of the end objective of this regulation, whether it is - curbing of imports versus reduction in imports, selective price control versus market-forces-determined pricing, indigenous manufacturing only versus coexistence of MNC manufacturing, own technology versus borrowed technology, focus on quality versus focus on price, independent regulation versus harmonizing with global regulation, single body of regulation versus multiple bodies for regulation, etc. A course correction will be required at each stage if we digress from any of the stated objectives. Each of these entails a completely different strategy and approach to be taken in the short, medium, and long term.
- The demand factor: MedTech consumption market in India is much lower than that of China or other Asian counterparts rendering it unattractive for several large foreign or domestic players to formulate India-centric strategies. All issues such as pricing, environmental laws, quality/certification, lack of skilled knowledge base that have been discussed in this paper, necessitate a clarity in vision for MedTech clarity in vision for MedTech in the medium and long term and the need for structured programs to develop and grow the market.
- Regulation and implementation timelines: Once a vision is established, the most important step is to create a single cohesive body to control regulatory policies around the sector, which should solely take ownership of all issues and announcements affecting the sector. While the government has initiated steps in this direction through the Draft Policy, it is also important for it to be implemented in a timely manner. Industry is not against regulation and no industry enjoys a free market devoid of regulation or governing principles. Appropriate regulation is the key and players will automatically tune their strategies in line with the same. Market will carve out a demand supply mechanism for itself and pricing will be a natural output of a dynamic market. We have seen it happen in other sectors in India, and will see it happen in the MedTech sector.
- Incentives to foster innovation: Financial support to encourage and develop MedTech right from innovation through to testing and eventual manufacturing whether through a technology fund or through capital subsidies, tax exemptions in medical parks, etc., is essential.
What prevails currently is a sense of uncertainty for domestic and international players alike, indicating a need for radical and fast-paced regulatory initiatives for the sector. Preparing the eco-system for this radical change - setting up of the legal framework, enforcement (from both industry and government ends), and improving infrastructure and reimbursements are some of the steps that will help the market automatically thrive. Above all, access to safe, quality, and affordable healthcare will definitely improve and the patient will benefit.For original report, please visit www.medicalbuyer.co.in