Wanted: a ‘Preferential Purchase Policy’ for medical devices

RAJIV NATH | Updated on March 10, 2018

Make in India: A sound PPP does not amount to denial of market access

It will boost domestic manufacturing and level the arena without violating trade laws

At long last, the critical amendment to Clause 153 of the General Financial Rules, pertaining to reserved items and other purchases by the Central government, has been undertaken by the Department of Expenditure. This paves the way for the much-needed ‘Preferential Pricing Policy’ (PPP) in the medical devices sector, a move that could boost domestic manufacturing under the ‘Make in India’ program.

A PPP is neither discriminatory nor violative of WTO (World Trade Organisation) norms. All countries — big or small, developed or emerging — keep taking such steps. For example, countries like Malaysia, Uganda, Jordan and China provide 15 per cent (or even higher) price preference in public health procurement to medical devices made in their own country. This means that all technical parameters remaining the same, they will opt for a device that is made in their own country as long as it is not priced 15 per cent higher than the competing imported devices. Similar provisions exist in World Bank tenders or the World Health Organisation and other donor-driven projects too. The United States applies ‘Buy American’ provisions under the American Recovery and Investment Act 2009 to support its domestic manufacturers and uses provisions of the Trade Agreements Act to disallow foreign, low-priced competitors from China, India and South Africa from supplying to their Defence Forces Offset policy in defense procurement.

The case for introducing PPP in the medical devices sector rests on two points. First, India has a huge import dependency in medical devices, to the tune of over ₹25,000 crore, which translates to over 70 per cent general import dependency and 90 per cent in electronic medical devices. Second, India-made devices lose out to imported devices in public procurement due to flawed certification and tendering norms.

A sound PPP mandating 15 per cent price latitude for India-made goods would give a boost to domestic manufacturing of medical devices and yield concomitant benefits such as quality employment generation, a boost to research and development, and increased export competitiveness. This will also not be violative of any international trade obligations as India-made goods are not to be seen as devices made by an Indian company owned by an Indian but simply as a company which is ‘Making in India’, rather than a company which is just importing and labelling a device as ‘Made in India.’ The policy should call for at least 45 per cent value addition within an India-based factory. So, nobody is denying any market access to anyone, but simply asking and encouraging them to make in India.

Secondly, in most Central and State hospital procurement, due to legacy myopia, the tendering process has been tilted in favour of imported goods because of the need to comply with regulatory USFDA (Food and Drug Administration) norms as a compulsory or the only criterion. This is absurd as most Indian medical device manufacturers do not immediately target the US market or export to the US, so they do not inconvenience themselves with obtaining expensive and extremely time-consuming USFDA certifications. They rely on equivalent Indian or other foreign certifications to do a successful export business in many other countries. It is high time that in Indian public health procurement, we do away with foreign certifications and make only the domestic equivalent, like ICMED certification, the only criteria. I am positive that once we undertake these measures, and the Ministry of Health under the Central Government and various State Governments use the flexibility now provided by the Amendment of Clause 153 of the General Financial Rules innovatively, there will be no stopping ‘Make in India’.

The writer is Forum Coordinator of AiMeD, the Association of Indian Medical Devices Industry. Views expressed are personal.

Published on April 28, 2017

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