Hypothetical talk circulating on Capitol Hill this week around the idea of price ceilings for certain pharmaceuticals set off alarm bells for industry. But on the medical device side, companies are already seeing what happens when a government, in this case India, sets price caps for certain devices and mandates that companies remain in the market and take a loss on sales.
The situation in India has reached a point where the Advanced Medical Technology Association (AdvaMed) this week requested that the US Trade Representative (USTR) suspend or withdraw, in whole or in part, India's benefits under the Generalized System of Preferences (GSP), which is a preferential tariff system.
Under India's Drug Price Control Order (DPCO) of 2013, the government may regulate prices of essential commodities and it includes a National List of Essential Medicines (NLEM), and provides for India's Ministry of Health and Family Welfare (MHFW) to update that list.
In early 2016, contraceptive devices were included in the NLEM, though cardiac stents and drug-eluting stents were only subject to NPPA's annual price monitoring to ensure prices did not increase more than 10% annually.
In July 2016, the Indian government decided to cap the prices of drug-eluting and bare-metal stents and in February 2017, the ceiling price of bare metal stents was set at Rs 7,260 ($108) and the price of drug-eluting stents was set at Rs 29,600 ($442) before taxes, which for some products was a reduction in price of between 75% and 85%.
“As a result of the Rs. 29,600 ceiling price, high-end imported DES [drug eluting stents] – including those produced and sold by AdvaMed members – can be sold in India only at a loss,” the group said in its petition to the USTR.
The set prices have been made applicable until 13 February 2018, and though some US companies, including Abbott and Medtronic, sought to stop selling some of their stents in India's market, they were told that they must continue to sell their products and take the loss.
And according to AdvaMed, any manufacturer or importer intending to discontinue production or import of a stent was required to seek permission from NPPA at least six months in advance.
“Numerous attempts by companies to seek differential pricing for newer technology or permission to withdraw products, because they were no longer commercially viable, have been rejected,” Advamed said.
And India did not stop with stents. On 16 August 2017, NPPA issued an order, effective immediately, to cut the price of certain knee implants by as much as 70%.
“Just as in the case of stents, the [Government of India] has denied manufacturers' freedom to withdraw some of their higher end products from the market – those that are being sold at a loss,” AdvaMed said. The industry group also said it recently learned that NPPA has calculated more ceiling prices for other devices and is just waiting for an order from Indian Prime Minister Narendra Modi.
Outraged by the ceiling prices and inability to withdraw certain devices from the market, AdvaMed is taking the matter to the USTR, which could put pressure on India to reconsider the price ceilings.
“If price controls extend to all US exports of medical devices, except capital equipment and in vitro diagnostics (because neither category has ever been mention as candidates for price controls), over $700 million of US exports could be adversely affected,” AdvaMed says in its petition.
The industry group is also worried that other countries, including Indonesia, Bangladesh and Pakistan, might take a page out of India's book and implement similar price controls.