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Last Updated : Jul 07, 2020 10:06 AM IST | Source: Moneycontrol.com

Mission Aatmanirbhar Bharat: COVID-19 crisis shows that Indian medical devices sector can rise to the challenge

Policymakers must consider Indian investors as brand ambassadors. Unless local manufacturers get enthusiastic and gung ho, the overseas investors will not come running.

Representative image
Representative image

Prime Minister Narendra Modi’s call for self-reliant Aatmanirbhar Bharat envisions India emerging as a manufacturing superpower.

The government has approved setting up of an empowered group of secretaries and project development cells for attracting investment in India.

This is not the first time the government is pursuing investments, especially in the medical devices sector, now with a production-linked investment scheme, dangling bait of five percent incentive for over Rs 120 crore, year-on-year sales growth over five years in manufacturing goods, from a Rs 60-crore investment year on year, over three years.

The Department of Pharmaceuticals recognised that indigenous manufacturers have a disability of 12-15 percent on account of:

  1. Lack of adequate infrastructure, supply chain and logistics.

  2. High cost of finance.

  3. Inadequate availability and cost of quality power.

  4. Limited design capabilities.

  5. Low focus on R&D and skill development.

Presently, there is no mechanism to address these disabilities in the manufacturing of medical devices in India viz. a viz. other major economies. DBT, BIRAC, NITI Aayog and the office of Principal Scientific Advisor to PM have been working earnestly and successfully to create an ecosystem for nurturing startups and incubators. But once they create a commercial product and have to graduate to MSME entrepreneurs, the real challenge comes for these startups to survive and cope with the above 12-15 percent disabilities and marketing challenges.

COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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rebootThe focus needs to shift from chasing investment value by foreign brands and onto creating an ecosystem for making in India to be a rewarding venture. Consider recognising and nurturing Indian manufacturing champions who will lead other mid-size and small-size manufacturers to follow and ancillaries to thrive on their growth. Indian medical device manufacturers scaled up manufacturing to tackle spiked demands for ventilators and other life-saving medical supplies. The COVID-19 crisis has shown that it’s the Indian manufacturers who are being the dependable suppliers to bank upon.

Policymakers may consider that Indian investors are brand ambassadors. Unless local manufacturers get enthusiastic and gung ho, the overseas investors will not come running. For how many years has the government been chasing these fence-sitting MNCs?

Most of those who came have invested in market access warehouses and brand building but mostly not in factories and why not? No wise businessmen will invest only for the sake of investing or to utilise a dole on investment by chasing investment numbers.

Investment always follows demand or capacity utilisation. Firms will only invest if they can utilise existing capacity which in most cases is by itself low post-COVID, as patients are scared to go to hospitals for treatments other than COVID-19. Forcing businessmen to invest when existing capacity levels are low may convert healthy businesses to be laden with non-performing assets post-investment, where should the sales not pick up, they will not have earned any production-linked incentive.

On the other hand, COVID-19 has shown when imports got disrupted, specific devices detailed with quantified production shortages and a focused Inter-Ministry Group coordinating with manufacturers via associations had addressed production bottlenecks and challenges so that not only capacity got utilised but also ramped up rapidly. For manufacturers, demand comes from local consumption or exports. Imports of medical devices are a negative demand as domestic purchasing power is diverted to foreign goods. Converting negative demand to positive demand is the key as successfully done in the policy for mobile phones and consumer electronics, whereby a nominal customs duty of 15-20 percent has transformed that sector from 60 million handsets in 2014 to 290 million in 2018 positive demand. This negative demand of medical devices can be similarly converted to positive demand to lead investments.

Import of pre-owned medical equipment is again a negative demand. Such imports are restricted in the case of mobile phones and cars. Until we have robust regulations for ensuring patient safety as well as perform calibrations, by restricting imports we can convert the negative demand to positive demand and boost the economy as well as create jobs.

The third area is addressing artificial inflation where labelled MRP instead of protecting consumers in case of medical devices has become a licence to charge the full MRP which may lead to profiteering at retail/ hospital end. By rationalising trade margin over imported landed price, consumers can gain and not feel exploited post- COVID-19. This will also help the Make in India programme, as proven in stents and knee implants and favour demand creation for domestic manufacturing.

The main aim of rationalisation of trade margins in medical devices should be not only to help consumers, but also to allow rationalised and reasonable profits for traders, importers, distributors, wholesalers and retailers and create a level playing field for domestic industry vis-à-vis foreign manufacturers. There should be clear objectives for any policy intervention to provide quality and affordability and avoid distress (to consumers), distrust (in industry) and disruption (to market).

The penal system of Drug Act is a disincentive for MedTech investors. Drugs Act is not appropriate for innovative engineering products like medical electronics. Ventilators could not have been made by multiple new manufacturers in 3-4 weeks, like by Maruti, had the Drugs Act already been applicable on ventilators. Additionally, in the absence of regulatory approval, manufacturers are discouraged to sell to public health, by exclusionary USFDA approval Clause. How many of the garment manufacturers and automakers will continue making PPE or ventilator remains to be seen, post visit of a drug inspector to their factories as the implication of manufacturing under a rigid Drugs Act sinks in for them. At the same time, consumers and buyers in hospitals do need access to high-quality PPE, ventilators, etc. even in the absence of product standard as is the case with most devices and an appropriate legal framework envisaged by Niti Aayog is awaited as a Medical Devices Law that would decriminalise most oversight and regulatory lapses and will have risk-proportionate penalties. This will encourage new entrants to venture into medical devices as being engineering products and not drugs.

The recent welcome move to use government procurement to give strategic advantage to domestic manufacturers with products having over 50 percent domestic content is baiting potential manufacturers by disallowing suppliers with less than 20 percent domestic content to participate in tenders less than Rs 200 crore. The government now needs to ensure that the concessional 20 percent domestic value should be at least from the assembly of Indian parts/materials, not salaries and marketing overheads or India will start promoting pseudo manufacturing which, like termites has been undermining effort of sincere manufacturers. The government e-marketplace (GeM) platform also needs to urgently list all manufacturers on the basis of domestic content > 20 percent and > 50 percent domestic content or as non-local supplier to aid buyers and enable Make in India. This strategic shift to chasing demand-driven investments is the beginning of the composition of lyrics on the song of Make in India for an Aatmanirbhar Bharat.

The Aatma Nirbhar Bharat Abhiyaan is definitely a ‘Make in India’ enabler. We are hopeful that the Aatma Nirbhar Bharat Abhiyaan will make the domestic medical devices manufacturers competitive so that they can compete locally as well as globally and make India a global medical devices manufacturing hub.

Rajiv Nath is Forum Coordinator of Association of Indian Medical Device Industry (AIMED)
First Published on Jul 7, 2020 10:04 am