India has responded to US criticism of the price capping of medical devices with defiance. It is refusing to abstain from continued price regulation.
India received a specific mention in the US Special 301 reports from the National Trade Estimate Report on Foreign Trade Barriers (NTE) regarding the price capping. The report identifies India’s National Pharmaceutical Pricing Authority’s (NPPA) price capping measures on cardiac stents as a potential barrier to trade between the two nations.
Grievances occurred when US-based companies such as Abbott Healthcare noted a toll on the profits of their more technologically advanced drug-eluting stents. “The order set price categories that do not fully differentiate for advanced technologies within a product class, requiring newer technology stents be sold at the same prices as older technology products, resulting in some technologically advanced stents selling at a loss,” said the report.
This lack of differentiation and subsequent loss of profits lead to Abbott Healthcare attempting to withdraw some of their stents from the Indian market. Some claim that the market may become dominated by cheaper, Chinese-imported stents. While making the product more affordable, this may lead to more poor-quality products on the market.
“A loss of new technology to India”
The price cap may eventually lead to more companies importing drug eluting stents to withdraw from the market. This would effectively cut off access to more technologically advanced stents to patients in India unless domestic companies are willing to produce them under narrow profit margins.
These sentiments were echoed by Dr Shirish Hiremanth, president of Cardiac Surgeons of India in comments to Firstpost.“This was the worry that many had expressed that high-end stents won’t come to India. It’s unfortunate and a loss of new technology to India,” he said.
Despite outcry from the US and numerous foreign medical device producers, the Centre continues to promote price capping. The NPPA intends to place more devices under the price capping scheme, particularly those involved in heart surgery as numerous other devices used in the surgery are now reportedly more expensive than the stents themselves.
Price capping “within the right of the government”
India’s medical device industry is currently valued at $5 billion USD. This has made it a lucrative market for foreign imports and medical device companies the world over have sent their products to India. The imposition of price caps, with the potential for this to extend to other products, has made the market a far more hostile environment to foreign imports.
The price capping was put in place in response to price hikes as high as 1,000 percent over the import price, with markups at every stage of sale from the import through the hospital to the patient. Since the price cap was put in place, some hospitals have reported an 85 percent reduction in profit margins.
Despite the condemnation from the US, as well as medical device companies, India is maintaining its position on the price caps. During a meeting in April with United States Trade Representative (USTR) Mark Linscott, Indian officials asserted “this position will not change, it is within the right of the government of India [to impose price caps]”.
Broader trade disputes exist between India and the US. The Trump administration’s imposition of steel and aluminium tariffs on a number of countries, including India, has been a particular point of contention. India has retaliated by imposing tariffs on 29 US imports. Higher levies will come into effect on August 4.
The US, for its part, has argued that India violates World Trade Organisation (WTO) rules through export subsidy programmes aimed at promoting domestic manufacturing. The US also claims India takes advantage of US General System of Preferences (GSP) rules to export certain products to the US tariff-exempt, while continuing to impose high duties on US exports to India. US trade officials claim this has driven the 29.6 billion USD trade deficit between the two countries, which favours India.
Talks have been held between US and India trade representatives in New Delhi this week. As such, there is some hope that friction between the two countries could ameliorate. However, the issues are not likely to be resolved soon. As such, the perspective of economics professor Biswajit Dhar seems apposite.