Indian consumers in favour of absolute price cap on medical devices, suggest trade margin-based capping for premium devices

February 20, 2020, New Delhi: As the US and India get ready to discuss trade agreements with President Trump visiting India next week, citizens on LocalCircles have been discussing medical device pricing and affordability. This is in the context of media reports that India may consider agreeing for a 30% trade margin cap on medical devices.

LocalCircles conducted multiple polls and asked people what their opinion and thoughts were about capping of price versus trade margin. Over 15,000 responses were received.

In the first poll, citizens were asked how Government of India should best cap the prices of medical devices (stents, knee implants etc.) so they stay affordable for consumers. 54% said government should continue to cap the final price to end consumer, which is the existing model. 11% said the price cap should be removed and instead a cap on trade margin of 65% should be put. 26% want price cap removed and trade margin to be capped at 30% while 9% were unsure about it.

Majority consumers in favour of capping of medical device prices versus capping of trade margin

The trade margin is the difference between the price at which the manufacturers/importers sell to stockists and the price charged to consumers. In a follow-on question, citizens were asked that assuming basic versions of medical devices are available under fixed price caps, how should the pricing of premium medical device products work in India. 31% said a 50% cap should be placed on trade margins while 48% said a 30% cap should be placed on trade margins. 12% said there should be no price capping on premium medical devices.

People are of the view that those who can afford should be allowed to purchase premium medical devices and with a single price cap for the device type, most manufacturers wouldn’t have an incentive to sell their premium products in India. Permitting a trade margin capping for premium products will enable the same while ensuring there is no profiteering. Some consumers have reported hospitals procuring such premium devices via alternate channels and having to pay a heavy premium which was ultimately billed to them.

Citizens support trade margin based capping on premium medical devices

Some domestic players feel that this move of capping the trade margin will be a setback for the Indian manufacturers as it will disrupt a level playing field. However, the Government in the latest budget did increase duties on medical devices from 7.5% to 12.5% there by giving domestic manufacturers an advantage.

However, many consumers in a previous LocalCircles poll on stents had clearly suggested that to be eligible for selling a premium stent in a separate category or under trade margin capping, a medical device company must have a product in basic drug eluting category.

The United States has been asking India to remove price caps on high-end medical devices under a trade agreement which may be on the cards with President Trump’s visit. Whatever happens, all that the consumers want is for the basic medical devices to stay affordable and the premium medical devices to stay accessible at a reasonable price.