New medical devices procurement guidelines propose to make 20-50% of components in India

NEW DELHI: The Department of Pharmaceuticals has proposed that domestically sourced components have to contribute to 25-50% of the cost of medical devices procured by the government, depending on the category of the device. A draft of the proposed guidelines, created to give preference to products made in India, has sought comments from all stakeholders by April 5.

At the same time, the proposed guidelines lack measures to help the local industry grow and imposes conditions that may hurt the quality of medical devices procured through these tenders, claimed a lobby group of domestic firms in the sector. 

The guidelines also may not be possible to implement for high-end, critical products for which there is currently no ecosystem available to manufacture locally, according to two lobby groups representing several multinational medical device firms. 

Domestically sourced components have to contribute to at least half the cost of medical disposables and consumables and 40% of the cost of implants in order for the device to be eligible for procurement, according to DoP’s draft. Local content should contribute to 25% of the cost of medical electronics, hospital equipment, surgical instruments and diagnostic reagents/in-vitro diagnostics, according to it. 

DoP has prescribed the requirements based on its current understanding of the medical devices market in India, according to the draft. At the same time, it also said it is in the process of collecting “accurate and reliable” data on criteria like the total capacity and production of various categories of devices in the country. 

Purchase preference shall be given to local suppliers by all procuring entities, stated the draft. 

Yet, these criteria would only apply to tenders valued at Rs 50 lakh and below, according to a senior government official aware of the development. 

“These guidelines have been drafted in accordance with instructions issued by DIPP…This is expected to help the domestic manufacturers in competing with others,” the official told ET on condition of anonymity. 

For tenders valued over Rs 50 lakh, the contract for procurement would be awarded to the domestic firm if it is the lowest bidder, according to DIPP’s Public Procurement (Preference to Make in India) Order, 2017. 

In case the local supplier is not the lowest bidder, the domestic firm will be invited to match the lowest bid for 50% of the contract—a provision that both multinational and domestic firms have objected to. 

Without measures like accelerated focus by the government to create an ecosystem for local components, clinical trials and product development, the guidelines may not incentivise global medical technology companies to make in India for high risk products like pacemakers, vascular grafts and heart lung machines, said Probir Das, Chair Medical Devices Forum, Federation of Indian Chambers of Commerce and Industry. 

"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," said the Medical Technology Association of India, another lobby group representing several multinational medical device firms. Some of these segments are far from having an environment to manufacture them locally, it added. 

"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," it stated. 

DIPP’s order and DoP’s proposed guidelines only allow local manufacturers to match the lowest bid if their offer was within 20% of the lowest bid, according to Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMeD). 

This would put local manufacturers at a disadvantage when competing against medical devices imported from China, which are usually priced 10-20% lower than Indian products during such tenders, he said. Chinese medical devices bag over 20% of the public health tenders in India currently, he added. 

“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?” he said. 

India’s medical devices market was valued at nearly Rs34,000 crore last year, according to the 2016-17 annual report of the Department of Pharmaceuticals. 

On the other hand, AiMeD claimed the size of the market was much higher at around Rs 65,000 crore, with government hospital tenders estimated to contribute over Rs 15,000 crore. Around 30-40% of these tenders would be valued at Rs 50 lakh and below, according to Nath. 

DoP’s draft in its present form also does not provide any incentive to maintain and improve quality, said Nath. It also does not block government procurement agencies from mandating regulatory approvals from bodies like the US Food and Drug Administration, which has prevented Indian manufacturers from participating in several such contracts in the past, he said.