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To be Atmanirbhar in medtech, we should also be able to design in India medical devices for the world: Pavan Choudary

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Reiterating the continued commitment of global medtech companies towards India Pavan Choudary, Chairman and Director General, Medical Technology Association of India (MTaI) explains that while the country is the third largest medtech R&D employer of the world, after the US and Germany, they need support and reassurance from the government in order to reassure them of a stable regulatory climate for the industry, in an interaction with Viveka Roychowdhury

All governments are going to be watching prices of med tech products and services and their policies will be shaped to serve the needs of their citizens first and then corporate interests. Has any country managed to achieve a sustainable balance on this front?

Firstly, these two objectives (needs of citizens and corporate interest) need not be at odds!! In healthcare, ‘quality’ to ensure safety is equally as important as ‘affordability’. The answer to a sustainable balance is through thoroughly worked, nuanced policies which would protect patients’ interest and at the same time not stifle innovation and quality in the sector. It is important to understand and identify where in the healthcare value chain lies the fat (excessive margins) and then address concerns accordingly.

Instead of implementing price caps on medtech products, the government should adopt a mechanism to rationalise trade margins which will achieve the objective of reducing high MRPs as well as allow medtech industry to continue bringing the latest technology in healthcare to India, increase affordable access to quality care and support skilling and training of health care workers. Trade margin rationalisation from price to trade (distributors) was already been implemented for cancer drugs which had resulted in annual saving of approx. Rs. 984 crores to patients as reported by Ministry of Health and Family Welfare (MoHFW).

Increasingly, governments are starting to look at and implement value based healthcare. In other words, the payment/reimbursement system for healthcare reflects the value of care (i.e. achieve better outcomes for patients). This kind of system rewards companies, healthcare systems and providers that provide quality care. The current system of healthcare in India works in ‘silos’, which makes it difficult to provide the best possible outcome at the lowest possible cost. The fragmented system causes duplication of work and increases the cost while also reducing patient satisfaction.

Value-based healthcare will bring together all modalities of care delivery to create a well-coordinated ‘continuum of care’.  It is important for government to devise incentive systems to work for patients by encouraging companies and healthcare systems to deliver quality and better outcomes. Ayushman Bharat, with its focus on preventive as well as curative care, can lay the foundation for value-based care implementation in India. South Korea is a good example of a country implementing value based healthcare- it spends approximately only $20.2 per head, while 100 per cent of the population has health insurance cover.

Can India take any learnings from how other countries deal with the same challenges of scarce funding for public health, huge access issues, high disease burdens etc.?

Countries need to look at these challenges differently based on their demography (i.e. size of population, culture, healthcare system infrastructure, etc.)

India can take learning from countries like Philippines and Turkey who have over the time strengthened their health care infrastructure, but this has been done by making a conscious effort to increase their healthcare spend. At 1.29 per cent of GDP spent on healthcare, India needs to considerably increase its healthcare budget to at least four per cent of the total GDP; by doing so, we will have started our journey towards last mile healthcare delivery. Other areas of focus could be collecting taxes more efficiently, and raising additional funds through various types of innovative funding mechanisms.

Increasing taxes on harmful products such as tobacco (all kinds) and alcohol is another option. They discourage consumption, thereby improving health, and increase the resources governments can spend on health.

Telemedicine is another avenue that the government can facilitate to improve access to healthcare. The sheer size of India’s 1.3 billion demographic means that the applications for telemedicine are immense. Tele-medicine will also enable India to address its poor doctor-patient ratio of 0.85 which means barely one physician per 1000 people as compared to four physicians per 1000 people in Europe. A 2019 report by McKinsey Global Institute, ‘Digital India: Technology to transform a connected nation’, states that India can save up to $10 billion by 2025 if telemedicine services could replace 30 to 40 per cent of in-person consultations.

There are reports that several other countries dropped custom duties in the wake of COVID-19 pandemic. Can you share details?

In South America, countries like Columbia, Argentina, Peru and Mexico provided exemption from import duty on HS Codes related to medicines and medical equipment. India also reduced custom duties on a few essential medical devices used in the treatment of COVID-19, however for the rest of the products it did not lighten the load of the 5 per cent cess ad valorem imposed in April earlier this year. This, coupled with the INR depreciating by almost 7-8 per cent per cent in March 2020 against the EUR and the USD, meant a very significant hit for the medical technology industry where more than 80 per cent of the products are imported. Almost all the companies in the industry have heeded to the call given by the prime minister to preserve the jobs and the industry has done so. However, the global management’s stamina for generosity shakes when they realise that a percentage of their shrinking corpus, which is meant for their employees, is going to the government exchequer.

Medtronic has announced investments of Rs 1200 crore over five years in its Hyderabad R&D centre, Siemens Healthineers is investing Rs 1,300 crore in India by setting up an innovation hub in Bengaluru. Are there more such announcements in the pipeline? So should we see these investments in India as a success of the Make/Innovate In India campaign? Are there more examples of MNC medtech cos investing more in India?

 We should absolutely look at these investments as a part of our efforts towards achieving ‘Atmanirbharta’ and the continued commitment of global medtech companies towards India. To be Atmanirbhar in medtech, we should also be able to design in India medical devices for the world by utilising India’s rich talent in R&D. India is the third largest medtech R&D employer of the world, next to only US and Germany.

If you look at the FDI figures in the last few years, you can see the FDI in medical device increased from $62 million annually to $439 million in 2016, the first full year post the bringing of the FDI on the automatic route. Undisturbed, the trajectory would have propelled the investments to close to $1 billion per annum soon. But due to unintended consequences of some well-meaning policy measures, FDI fell down to even lower figures than that of the “pre-automatic route” era.

Inspired by the clarion call of our Prime Minister, we picked up the ball again and the first signs of industry efforts seem visible in the first and second quarter of 2020.

That being said, we must also be cognizant of the financial challenges that the pandemic has brought. There are some other aspects which the government needs to closely evaluate and consider to reassure the industry, these aspects include creating policies which provide a level playing field to all players, agnostic of their country of origin and a stable regulatory climate for the industry. Addressing these will move the make in India needle, steadily forward. The global companies hope to be eventually and once again, the main movers of this needle.

S how do global management boards view these investments? The cost of doing business in a high volume-low value market like India? Or is there a ‘long game’, a long term strategy and if yes, what is the timeline to the patience to see RoI on these investments?

The global managements have since long realised that India holds immense potential as a consumer market, which is bolstered by the fact that we are the third largest economy by purchasing power parity (PPP). Any investment to set up manufacturing or R&D requires patience as a procedure needs to be followed to set up these units by adhering to national and state regulations. The global innovators, for good reason, are not going to set up shop, make a quick buck, and leave thereafter. So it is in their interest to invest with a long term vision, as they know that India provides the unique benefit of a free market, stable political climate, immense consumption potential and a large number of highly educated workforce.

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