The stringent regulatory measures coupled with the high imports, customs duties imposed on the medical devices in the country may increase the burden on small scale companies and the cost of treatment, making the treatment unaffordable for patients without insurance coverage, alerts a latest report.
A sector analysis on medical devices, prepared by the National Institute of Pharmaceutical Education and Research (NIPER) - Ahmedabad, points out that the high cost of obtaining the required documentation for the regulatory submissions according to the recent amendment would lead to increase of prices for medical devices.
As per the regulation, the importer has to pay US$ 1500 towards the registration of the manufacturer from whom the domestic supplier is importing. Further, the importer has to pay a fee of US$ 1000 for registration of a single medical device, which may include variation in sizes or shape without any change in the material or method of use and an additional fee of US$ 1000 for each additional device. The report speculates that the high fee could become a burden for smaller manufacturers and also affect the available range of products in India as the sales per device are, normally, quite small.
"It is expected that the cost of devices is expected to rise primarily because of registration costs, which include the registration fee, salary of additional staff hired to follow registration process and paperwork and increase in countervailing duties to 4 per cent announced in the 2006-07 budget," comments the draft report submitted to the Department of Pharmaceuticals lately. The financial burden will be passed down the value chain to patients, rendering devices more expensive and treatment unaffordable.
The increase in cost would be higher in larger devices such as stents, which constitutes almost 70 per cent of the total medical bill, as ay increase in cost of these products will increase the cost of treatment. The local labelling requirements for imported devices may create issue of logistics for supplies while increasing the cost of surgical products.
Further, the special additional duty of four per cent for medical devices and instruments in Union Budget 2006-07, along with the customs duty and the state level taxes will increase the cost on patient to 10 to 20 per cent in diagnostics, states the report. After the impost of special additional duty, medical instruments like CT Scanners, MRI machines, Cathlab and ventilators which were earlier under the five per cent customs duty slab now attracts nine per cent duty while ultrasound machines, patient monitors, defibrillators and blood cell counters will be charged under the 26.8 per cent customs duty category.
The duty exemption for diagnostic kits used to detect life threatening disease still apply only to basic techniques like the ELISA and CLIA tests though the methods are frequently replaced by newer and more precise methods like Polymerase Chain Reaction (PCR) test, which attracts 37 per cent duty per kit.
The tax measures mixed with huge customs tariff structure are expected to escalate the cost of treatments and finally restraint the delivery of modern healthcare. "Though increased cost of treatments will not affect the insured patients, but the coverage of health insurance which is less than 1 per cent then becomes a concern," explains the report.
The tax measures will lead the margins to shrink for the medical devices companies, as they have to accommodate a four per cent increase in custom duties. As a country depending more on imports for medical devices supply, this will also lead India to loose its cost advantage in medical tourism.
Dependency on imports for supply of medical devices, low level of healthcare insurance and low levels of healthcare facilities and awareness especially in rural areas are the other factors which would cripple the medical devices industry in India, says the report.