Imports Ailing Medical Devices Industry, Manufacturers Say Govt Intervention Paramount

The Indian Medical Devices Industry is in a fix as more and more manufacturing units are closing in the country due to an unparalleled competition from the nation’s imports from foreign countries. As per a report prepared by AiMed ( Association of Indian Medical Devices Industry) imports in the medical devices sector has been steadily increasing over the last 5-6 years to a point where in the financial year 2021-22, it rose to Rs 63,200 crore, i.e five times of what was imported in the year 2016-17 amounting to Rs 12,866 crore. The report analysed the Commerce Industry data and pointed out that imports rose by 41 per cent in 2021-22 from Rs 44,708 Cr in FY 2020-21.

The major imports included Consumables, Disposables, Electronics and Equipments, Implants, IVD Reagent & Surgical Instruments, with electronics and equipments showing the highest growth in imports, the report enlisted.

At present the report pointed out 80 per cent dependence of medical devices falls on foreign shoulders, with the likes of China, USA, Germany, Singapore and the Netherlands contributing to more than two thirds (68 per cent) of all imports in the country. With China & USA being the major exporters for India’s medical devices needs, together contributing to one third of all imports. 

The report argues that government initiatives like ‘Atmanirbhar Bharat’ during the pandemic opened the pandora’s box which led to setting up of many  domestic medical devices manufacturing units to meet the demands posed by the Covid-19 virus, but as the pandemic is starting to recede backwards these units are also losing their demand especially in the presence of competition by foreign counterparts which are much more advanced and preferred by the healthcare industry.

“Imports are lower priced than Indian products due to negligible custom duty and the Indian manufacturers who put up capacity in times of shortages when international prices were up now find to their dismay that the price in their domestic market are dropping rapidly as there are no more shortages and the domestic manufacturers are unable to compete with lower priced imports.” said Mr Rajiv Nath, Forum Coordinator, AiMeD.

The report highlighted that more domestic units are on the verge of closing down as close to 300 units have already shut their operations. 

Multifold Challenges 

The challenges that the medical devices industry faces against the imports are multifold in the Indian context, Mr Nath explains that most imports have no MRP labels, so resellers have a blank cheque to apply to any MRP label and then push the more profitable imports rather than lower MRP labelled Indian brands which would provide resellers lower profit margins. “ And secondly, government tenders usually go to lowest priced products in most cases of public procurement without preference for quality,” he added.

Gaps also exist in policy intent and execution in the industry although the government incentivises production through Product Linked Incentive (PLI) schemes, a vacuum is formed when there is less adoption of implementation of such policies.

“Despite all the policy assistance, the PLIs and the building of medical device parks across various states to achieve economies of scale, the local private sector has not fully embraced those opportunities. Secondly, the value chain for both components and finished products has struggled to develop in the nation since many medical equipment, such as ventilators, continue to depend on outside suppliers for essential components,” stated Mr Ashok Patel, CEO, Founder, Max Ventilators.

Dr Tathagato Rai Dastidar, Founder, CEO, SigTuple explains that a high quality medical device needs high quality precision parts, and most of these parts have to be imported, which not only result in long lead times, but the resulting costs also render our manufacturers in a fairly uncompetitive spot to begin with.

Neutralising The Disability Factor 

The report stated that indigenously manufactured medical devices have 12-15 per cent disability factor, and urged the government to neutralise, so that manufacturers are able to compete with foreign goods. 

Mr Nath says the product disability gap comes due to weak and inadequate infrastructure and logistics costs, higher capex financing costs as well as higher power costs of poor and inadequate quality of electricity which needs to be neutralised by 10-15 per cent custom duty protection as done for mobile phones and consumer electronics.

Dr Dastidar believes that the products which have little differentiation face greater competition from foreign imports and if the free market is to prevail, these domestic companies will continue to lose business continuing on its downward spiral. “If the government doesn’t intervene here, this is a certain death knell for most of the companies here, making us completely dependent on companies outside India for the bulk of our medical needs,” he added.

The government can also lead by example by purchasing from indgenious units, Runam Mehta, CEO, HealthCube says that the government sector hospitals and medical institutions should focus on procuring medical devices from domestic manufacturers, wherever possible as this will also encourage the private sector to do the same.

Boosting The Industry

The sector requires a hand held growth trajectory to come out of the current situation, and the government needs to play its part by taking several measures to reduce the capital expenditure of the domestic units, and also making PLI schemes applicable on all imports. Mr Nath says this can be done by creating common manufacturing facilities in natural existing clusters and upcoming clusters at Medical Devices Parks to help reduce Capex for upcoming projects, by revamping the PLI schemes so it’s widely available and applicable on all imports substituting devices and not limited to only a few high-end devices.

The government also needs to invest more in research and development to bear domestic solutions to domestic problems. “By investing in research and development facilities and incentivising manufacturers who are willing to set up such facilities and undertake innovative research, the government can build a hedge to protect and encourage them,” said Ms Mehta.