Just a few months ago the relationship between India and the US was touted by President Donald Trump as having “never been stronger”. Will India’s policy of price capping medical devices sour this relationship?
This potential decision comes amidst escalating tensions between the US pharmaceutical industry and a number of other nations. Stephen Moore, President Trump’s former economic adviser has accused a number of nations of abusing US pharmaceutical patents. He specifically mentions Mexico as producing “knock off” versions of US drugs, infringing on patent laws as they do so.
Trump himself has launched an investigation into China’s apparent misuse and theft of US intellectual property. Beijing has expressed “strong dissatisfaction” with the decision, calling the move irresponsible and claiming it may damage trade relations.
The rising hostility of the US towards trade partners could cause problems in India. Issues have already arisen from India’s price capping, with US pharmaceutical company Abbott Healthcare withdrawing several cardiac stents from the market.
Some hospitals within India were reporting an 85 percent reduction in profit margins on cardiac stents following the price cap. Abbott noted the reduction in profit margins and applied to the National Pharmaceutical Pricing Authority (NPPA) to withdraw two of their stents from the market, citing their sale as being no longer financially viable.
The issues with the price cap were not limited just to US companies. The US Government outright requested the Indian government to not extend price caps. There has also been a request that, should companies based in the US no longer wish to provide their devices in India, they be allowed to withdraw from the market, referencing the decision by the NPPA to keep some brands of stents on the market for a set period before their withdrawal.
The price capping of medical devices was inevitably going to draw a degree of hostility from those exporting these devices, as profit margins are now limited.
The decision was made in response to high mark-ups in prices at every level of sale, from the imported stents to the hospital level. The increase in cost from the point of import to the patient was often as high as one thousand percent, prompting the imposition of an eight percent trade margin.