Despite cap on pricing import of medical devices rises

The growth in imports was led by product categories such as diagnostic items, ultra-sonogram machines, MRI and ECG apparatus, syringes with needles, suture needles, digital thermometers, malaria diagnostic kits, and hearing aids.

Both imports and exports of medical devices grew in double digits during FY19, with exports being higher in value terms.

However, India remains an import-driven market, despite price caps on key devices.

Key items under price regulation, such as stents and knee caps, have not seen any slowdown in imports.

In fact, growth in overall import during FY19 was higher than the previous three fiscal years.

The government, on its part, has started taking action.

It recently imposed a customs duty of 30 per cent on in-vitro diagnostic (IVD) medical reagents.

Data from the commerce ministry, compiled by the Association of Indian Manufacturers of Medical Devices (AiMeD) - an umbrella organisation representing the medical devices industry - shows that imports of medical devices in FY19 grew 24 per cent year-on-year (YoY) to Rs 38,837.28 crore, an increase of Rs 7,450 crore.

In comparison, exports grew 29 per cent YoY to Rs 12,748.8 crore, an increase of Rs 2,840.73 crore.

Interestingly, both imports and exports have registered good growth rates compared to the previous three fiscal years.

While imports grew 12 per cent, 7 per cent and 13 per cent during the previous three years, exports clocked 5 per cent, 14 per cent and 1 per cent growth.

The growth in imports was led by product categories such as diagnostic items, ultra-sonogram machines, MRI and ECG apparatus, syringes with needles, suture needles, digital thermometers, malaria diagnostic kits, and hearing aids.

Rajiv Nath, forum coordinator at AiMeD, claimed that after the goods and services tax (GST) on imported medical devices became cheaper by 11 per cent, the basic import tariff stands in the range of nil-to-7.5 per cent for most medical devices.

Before the GST regime, imported medical devices attracted excise duty and special additional duty, over and above the import duty.

After GST, only import duty and GST are levied.

However, since one gets input credit in the GST regime, the effective taxation reduces, explained Nath.

The government’s move to slap 30 per cent customs duty on medical IVD reagents was thus timely, he felt.

The import of this item in FY19 touched Rs 5,922 crore, up 22 per cent YoY. The US accounted for a 36 per cent share in the imports.

IVD devices are used mainly to store specimens collected from the human body for diagnostic or monitoring purposes.

Nath, also the joint managing director of Hindustan Syringes and Medical Devices (HMD) of Dispovan fame, said imports of auto-disable syringes from China have also risen significantly.

For items that are under price control, such as cardiac stents, imports have not slowed down.

Of the two product categories that include stents as items of import, one grew 35 per cent to Rs 1,610 crore, while another grew marginally (1 per cent) to Rs 289.7 crore.

Knee implant, another item under price control, saw imports grow 20 per cent in FY19, compared to 4 per cent growth in FY18 and a dip of 8 per cent in FY17.

Ganesh Sabat, chief executive of Surat-based Sahajanand Medical Technologies (SMT), said price control has had no impact on import of stents, and that multinational players continue to do well.

"The market for stents, as such, has grown in terms of volumes.

"Hence, Indian players barring a few have done well. There has been 10-15 per cent growth in volumes in the domestic market, primarily led by new cath labs coming up in smaller towns and cities," Sabat explained.

Between 225 and 250 new cath labs were added last year.

The top five countries from where medical devices were imported included the US, Germany, and China, apart from The Netherlands and Singapore.

Growth in imports from the US, however, fell - it clocked 3 per cent growth in FY19 compared to 7 per cent in FY18.

Germany saw double-digit growth of 22 per cent over the previous year, while China saw 13 per cent growth, Singapore 97 per cent, and Netherlands 257 per cent.

The Advanced Medical Technology Association (AdvaMed), a US trade lobby group in Washington, said price controls have led to a drop in foreign direct investment in the medical devices sector in India.

Abby Pratt, vice-president (global strategy) at AdvaMed, told Business Standard: “Between 2016 and 2018, the medical and surgical appliances sector witnessed a steady decline in FDI.

"Investments fell from $ 439 million in 2016 (Jan-Dec) to $ 184 million in 2017, and $ 66 million in 2018 (January-December) - a loss of FDI worth $ 373 million over two years.”

He added: “We believe that this drop in FDI is due to, in part, the systematic roll-out of price controls and steady calls by government officials to bring in further price controls.

"This dynamic has created an unpredictable environment in which companies are reluctant to invest in India and bring new innovative products to the market.

"There have been additional policy measures over the last three years that have further discouraged investment and growth, such as local content requirements and import duty hikes.”

AdvaMed feels price control on coronary stents and knee implants have had a negative impact on innovation, and have limited access to world-class medical care.

“Such regulations do not only impede innovation, but also the future of investment and FDI inflow into India,” it said.

On the other hand, exports were primarily driven by categories such as diagnostic apparatus (including electric diagnostic apparatus), magnetic resonance imaging (MRI) apparatus, ophthalmic instruments (especially surgical), X-ray tubes, endoscopes, and cardiac catheters, among others.

Cardiac stents are part of the cardiac catheters category, which saw 90 per cent growth in exports to Rs 104 crore in the last fiscal year. Sabat said SMT’s exports grew 90 per cent in FY19.

It accounted for the bulk of India's cardiac stents exports.

The Morgan Stanley and Samara Capital-backed company is bullish on the exports market, and has been working towards building a brand in European countries.

It is banking on a recent global study - which showed that its Supraflex stents are clinically on a par with Abbott's Xience stents - to aim for the top spot in the domestic market, and be among the top three players in Europe.

Europe is a tender market. SMT wants to be part of the tendering process, and hopes to eventually reach out to individual hospitals armed with the results of this study.

Photograph: Reuters