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BW Businessworld

What Does Medical Device Industry Expect?

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The global medical device industry has, over the past decade, shifted its focus from traditional developed markets to emerging markets. The increased demand from these new markets is due in large part to the rise in non-communicable diseases. In these high-growth markets, a noteworthy portion of manufacturers’ organic activities is channeled into building resources - both capacity and people power - to expand customer bases, according to AdvaMed, an association of medical device manufacturers which provides 40 per cent of the medical technology used across the world. “The  demand  for  quality healthcare in emerging markets has increased along with the size of the populations, government  funding and  reforms, changing consumer lifestyles, an increasing  penetration of medical insurance products, and a rise in awareness and disposable income.” Vice-Chair of AdvaMed’s India Working Group, Dr Vibhav Garg said.

The medical devices market in the BRIC countries today accounts for nearly $10 billion, and this figure is growing at an average CAGR of 8%. . It is somewhat startling that less than $2.50 (approximately Rs 155) is spent on medical technology per person. The under-penetration of medical devices in India provides a compelling opportunity for medical device manufacturers to increase their presence in the country and expand access to healthcare under a conducive regulatory framework.

Medical Technology Parks, for instance, where a cluster of manufacturers of medical devices is fostered through the provision of basic infrastructure, would encourage innovation. The association has also called for the inception of benefits such as reduced Customs duty on raw material, excise duty concessions, VAT holidays, IT holidays, etc.

Furthermore, there is a need for R&D grants and subsidies in the medical technology space to promote Domestic Innovation initiatives. “To ensure that there is thrust in the Research and Development area for design as well as innovation of these products, special incentives must be offered to get more participants in this,” Abby Pratt, Vice President of AdvaMed said. “As the benefits to society from such projects would be significant, the medical device industry is suggesting that incentives in the form of Income Tax write-offs for up to 250% of the value of investment for R & D and innovation of Medical Instruments, Diagnostics Instruments, Consumables, Devices, etc. should be offered.”

More specifically, AdvaMed calls for the following from the 2014-15 Budget:

Customs Duty Exemption for Medical/Dental/Surgical Equipments
Tariff barrier on imports of finished goods impacts healthcare costs because economies of scale will not permit manufacturing of all products in the country. Therefore, import of finished goods and raw materials/components should be at low customs rates.

Customs Duty on import of finished products should be prescribed at a very low level while NIL customs duty is specified for the import of Raw Materials / Parts / Sub-Assemblies required for ultimate local manufacturing of instruments / Accessories and Consumables.

It is requested that Nil Basic Customs Duty be specified for Medical Equipments, Medical or Surgical Implants, Medical Devices, Blood Glucose Monitoring Strips of heading 3822, Medical, Surgical or Laboratory Sterilizers and Sterile surgical catgut and similar sterile suture materials and sterile tissue adhesives for wound closure should also be exempted from customs duties. Duty on endovascular stents should be reduced from 6% to 0%.

Special CVD 4% in lieu of VAT
It is requested that a provision to be made to exempt Medical Products falling carrying an MRP sticker at the time of import and permission be granted to importers to affix MRP stickers post importation at their own warehouses

Other Customs Exemptions on the Industry Wish List
·   All life saving medical devices, consumables used with devices in the specific life saving treatment procedure and their spare parts should be exempted from Customs Duty. It is recommended that the following be included in the list of Life Saving Products: Patient monitoring systems & image guidance systems, Pacemakers, Image Guided Systems, External Defibrillators, NT & ENT Surgery Products including electrical/pneumatic drills & the consumables, Deep Brain Stimulation Implanters, drug pumps, lead etc, Heart Lung Machines & Oxygenators - During cardiopulmonary, Heart valves, Annuloplasty Rings and various Cardiac catheters, Respirators and Masks (industrial & healthcare), Dialysis Machines equipments and Devices (Hemo and Peritoneal Dialysis) and Peripheral Vascular stents.

·  The Sterilizers of Heading 8419 20 90 which are presently levied to import duty at 25.85% may be fully exempted from the levy of customs duties. Plasma sterilizers allow sterilization of all type of surgical instruments and devices.

·  Topical Skin Adhesive of Heading 3006 10 10 which is presently levied to import duty at 19.567% may be fully exempted. These devices are used for wound closure, instead of conventional sutures.

·  Custom Duty waiver for essentially required radiopharmaceuticals used in Diagnostics like Imaging and Scanning (PET & SPECT) & Therapy some of which are not manufactured in India like Iodine 131, MIBG 131, Lutetium 177, Yttrium 90, Ge-68-Ga 68 generator, Cold Kits for Tc 99m and Rubidium 82.

·  Polyurethane film (Heading 3926) used in the manufacture of adhesive-coated PU film, the medical-grade PVC (Heading 3921 90 99) required in the manufacture of dialysis products and Dextrose Anhydrous USP for use in manufacture of Intravenous fluids.

·  Medical Stretchers / Wheel Chairs / Medical Beds should be levied to a concessional rate of basic Customs duty of 5%.

·  Integrated Operation Theatre (Consisting of Routers, Booms, Pendants, Lights, Monitors, Camera, and Connectors etc) should be charged to a reduced duty of 5% basic and Nil CVD.

Excise Duty Recommendations
·   It is recommended that the excise duty on medical equipments be reduced significantly and may be prescribed at the lowest slab to enable the domestic industry to find a foothold.

Service Tax Recommendations
·   It is requested that the service tax on Service and Maintenance Contracts for medical equipments be either exempted fully or a minimal rate of tax prescribed for this sector.