The Department of Pharmaceuticals suggested on March 19, 2018, that domestically sourced components must contribute to 25-50 per cent of the cost of medical devices that are procured by the government. However, the contribution depends on the category of the device.
Created to give preference to products made in India, a draft of the proposed guidelines has obtained comments from all stakeholders by April 5, 2018.
A lobby group of domestic firms in the sector claimed that the proposed guidelines lack measures to assist the local industry grow. Moreover, it imposes conditions that may injure the quality of medical devices acquired through these tenders.
According to two lobby groups, representing several multinational medical device companies, the guideline may also not be possible to implement for the high-end, critical products, which at present do not have any ecosystem to manufacture locally.
According to DoP’s draft, the domestically sourced components will be liable to fund at least half the cost of medical disposables and consumables. Besides, they will also have to contribute 40 per cent of the cost of implants, which are in order for the device to be eligible for procurement.
Whereas, local content will have to contribute to 25 per cent of the cost of medical electronics, surgical instruments, hospital equipment, and diagnostic reagents/in-vitro diagnostics, it said.
As stated by the draft, based on its current understanding of the medical devices market in India, the requirements has been prescribed by DoP. Besides, it also stated that it is in the process of collecting “accurate and reliable” data on criteria, which includes the total capacity and production of various categories of devices in the country.
The draft stated that the procuring entities shall be giving the purchase preference to the local suppliers.
According to a senior government official who is aware of the development, these criteria would only apply to the tenders valued at Rs 50 lakh and below, so far.
The official said, “These guidelines have been drafted in accordance with instructions issued by DIPP…This is expected to help the domestic manufacturers in competing with others.”
As per the DIPP’s Public Procurement (Preference to Make in India) Order, 2017, the contract for procurement would be granted to the domestic firm if it is the lowest bidder, for tenders valued over Rs 50 lakh.
The domestic firm will have to match the lowest bid for 50 per cent of the contract, in case the local supplier is not the lowest bidder. This provision has been objected to by both multinational and domestic firms.
Probir Das, Chair Medical Devices Forum, Federation of Indian Chambers of Commerce and Industry, said that for high risk products such as vascular grafts, pacemakers, and heart lung machines, the guidelines may not incentivise global medical technology companies to make in India, if the measures like accelerated focus by the government to create an ecosystem for local components, clinical trials and product development, will be absent.
The Medical Technology Association of India, another lobby group representing several multinational medical device firms, said, “Unlike several other sectors, medical devices are comprised of thousands of very varied products that significantly differ from each other in engineering and design complexity.”
“Some of these segments are far from having an environment to manufacture them locally,” it added.
It also stated, “A uniform 50% local content ask, preceding any meaningful scaling up of the missing sophisticated component ecosystem will create a risk of ‘garage manufacturing’ with low cost.”
According to Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMeD), the guidelines proposed by DIPP’s order and DoP’s allow local manufacturers to match the lowest bid only if their offer was within 20% of the lowest bid.
Owing to this, local manufacturers will be put to a disadvantage when they’ll be competing against medical devices that will be imported from China, which are usually priced at 10-20 per cent lowest than Indian products during such tenders. Moreover, Chinese medical devices currently cover over 20 per cent of the public health tenders in India, he added.
He also stated, “We can match prices of any country other than China, as it has no global market economies but a subsidized state sponsored ecosystem. How can we compete with low priced imports from China with non-remunerative, non-sustainable pricing unless the Indian government has supportive policies?”
According to the 2016-17 annual report of the Department of Pharmaceuticals, the medical devices market of India was valued at approximately Rs 34,000 crore last year.
AiMeD, on the other hand, claimed that the size of the market was much higher at around Rs 65,000 crore, along with government hospital tenders that were estimated to contribute over Rs 15,000 crore.
According to Nath, around 30-40 per cent of these tenders would be valued at Rs 50 lakh and below. He said that currently, the DoP’s draft also does not provide any incentive to maintain and improve quality.
The draft also doesn’t block government procurement agencies from mandating regulatory approvals from bodies such as the US Food and Drug Administration, which has blocked Indian manufacturers from taking part in several such contracts in the past, he said.