Trapped in a regulation labyrinth: The case of the Indian medical device industry (part 1)
The Open University
In the last decade the Indian pharmaceutical industry has emerged as a leading supplier of generic drugs to developing and advanced regions and gained praise all over the world for creating capabilities that are integral in satisfying healthcare needs for poor populations. The Indian pharmaceutical firms developed state-of-the-art of biotechnological capabilities and made the country self-sufficient in its vaccine needs. However compared with the success of the pharmaceutical and biotechnology industry, the medical device industry has not witnessed similar growth and capability development in India or any other developing country in spite of the key role that these devices play in providing effective and safe healthcare.
Importance of medical industry can’t be stated enough, it is an integral component in healthcare industries. It plays a central role in patient care, it starts with diagnosis, treatment, in the operating theatre, at the bed side, post-operative care and in some cases even after the patient is discharged.
A medical device is any instrument, implant, machine, intended to be used, alone or in combination, for human beings for one or more specific purposes such as diagnosis, prevention, monitoring, treatment or alleviation of disease. 1 Thus it includes everything from highly sophisticated computerised medical equipment such as X-ray equipment, surgical lasers, pacemakers, dialysis equipment, transducers and heart valves down to low tech products like simple wooden tongue depressors, medical gloves, bandages, syringes and catheters.
The global medical device market was valued at USD 210 billion in 2008 and has grown at a rate of 6% post 2000. 2 Similar to the pharmaceutical sector, in the medical device industry US along with Japan and Europe lead the world in the production and consumption. However, in the last two decades China and India are increasingly emerging as important medical device markets. In 2010 China’s overall market for medical devices was estimated to be $5 billion while the Indian market is valued at $3billion. Both of these countries are focussing on developing its medical device regulatory regimes and domestic market devices sector. However, in the case of India many challenges remain.
According to the NIPER report (2010) the import of high-end technology products has increased during 2001–07 and more than 70% of devices are imported from advanced countries such as the US, Japan, UK and Germany. 3 The US is the leading supplier to India with more than 28% products valued at $400 mn coming to India in 2008. There are about 14,000 medical devices marketed in India and almost 700 local manufacturers, but most make low-value products such as needles and catheters, leaving high-tech specialist devices, such as transducer and heart-valves, to MNCs such as St. Jude, GE, Medtronic and Siemens.
This creates immense problems for securing access of these devices to those who need them most in the poorer populations of India as well as other developing countries.
“There are three key salient issues that explain the current status of the Indian medical device industry and they relate to flawed industrial policy, lack of entrepreneurship and government regulation “
There are three key salient issues that explain the current status of the Indian medical device industry and they relate to flawed industrial policy, lack of entrepreneurship and government regulation. 4,5 Despite the high percentage of imports and consumption up until 2005, India did not regulate any medical device (either local or foreign) and this article explains the impact of this neglect on development of the medical device sector in India.
Era of no regulation (1947-2005)
Medical devices around the world are classified based on their safety requirements and standards of quality to be set and several criteria are considered to evaluate the potential risk: degree of invasiveness, duration of contact, affected body system and local versus systemic effects. The approach to quality of devices depends largely on regulation. In case of India till 2005 there was effectively no quality regulation for medical devices that were either imported or manufactured in the country. Dr Valiathan comments on neglect of the industry,
“Devices suffered from neglect by the medical profession, technologists, industry and Government”.
In the early 1980s the government realised the need for medical device regulation, however the problem was the clear lack of understanding in how medical devices work, their mechanism of action and criteria of performance measurement. As a result there was no regulatory control on how devices work in terms of technical specifications and performance. There was little information available on devices aside from that provided by companies for marketing purposes. All devices sold in India were done so without any monitoring by regulatory authorities or reporting by hospitals. For instance, in the case of Boston Scientific and Johnson and Johnson and the withdrawal of their stents worldwide in 2004, there was no independent information available in India on how many of these devices may have been used or if any patients had reported any adverse event.
“Thus, absence of regulation and any direction from government severely handicapped local manufacturers in the market place. “
Handicapped local manufacturers
There are not set uniform standards for these products and as a result quality and performance are not tested. This lack of regulation created a significant hurdle for local manufacturer to develop products and enter the domestic market as well as international markets. These local manufacturers had no idea whose approval to seek to launch products and all regulatory decisions were ad-hoc. Local manufacturers struggled to sell their products without proper authorisation or guidance and often fare poorly against MNC products which are approved by stringent western regulators and backed by huge amounts of clinical trials data. Murthy (2004) points out that from 1994 to 2004 there were more than 11,000 valve procedures performed per year in India. However, only 1000 valves developed the Sri Chitra Research Institute (a leading Indian research institute) were used despite being less than 50% of the average cost of imported valves. 6 Thus, absence of regulation and any direction from government severely handicapped local manufacturers in the market place.
MNC’s Monopoly Rent
MNCs benefited most because of this lack of regulation and absence of governance. These premier global companies charged high prices with significant profit margins for their devices. MNCs sold their products in the Indian market without really taking into consideration production cost as there were no local competitors to compete with low prices, and no regulation to monitor their profit margins. There was also no transparency in the production cost, and selling prices varied widely in the market. Most imported medical devices, such as cancer diagnostic, medical imaging, ultrasonic scanning, plastic surgery equipment and polymerase chain reaction (PCR) technologies specifically at high-tech end, were sold with high gross margins. Thus total lack of regulation created skewed market in favour of MNCs and as a result these companies could charge ‘monopoly rent’.
1. Shah, A., and Goyal, R., (2008) Current status of the regulation for medical devices, Indian Journal of Pharmaceutical Sciences, Vol. 70, 6, 695-700
2. WHO (2010) Medical Devices: Managing the Mismatch, An outcome of the Priority Medical devices project, http://www.who.int/medical_devices/en/
3. NIPER (2010) Recommendations for NIPERs medical devices in India, http://www.perdcentre.com/niperahd/one-day-seminar.html
4. Kale (2012) In search of missing hand of state? The case of the Indian medical device industry, paper presented at the Globelics conference, Argentina
5. Kale and Harmon (2012) A view against the grain? The role of regulation in innovation – Argentina and India
6. Murthy (2004) Glimpses of my thoughts, Presidential address, Indian Journal of Thoracic and Cardiovascular Surgery, vol. 20, 59-63
Part 2 of this article will be published next week
About the author:
Dinar Kale is a Lecturer of International Development and Innovation at The Open University. He can be contacted here at the following email address: firstname.lastname@example.org.
How can trust be increased in Indian medical devices?