Medical Device Schemes

GoI is not delaying creating strutures to give effect to “atmanirbhar bharat”. After strategically, having got the digitech investment*[1] out of the way, is now focusing on getting the basics and essentials in place. After Agriculture, it is trun for Medical Device in strengthening healthcare.

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There have been 2 specific notifications issued by the Ministry of Chemicals and Fertilizers Department of Pharmaceutical on May 28, 2020.

1. Production Linked Incentive Scheme for promoting Domestic Manufacturing of Medical Devices; and

• Scheme for Promotion of Medical Device Park.

Synopsis of both the Schemes, along with the relevant notifications is being shared. These notifications will soon be followed by specific guidelines issued by the relevant departments.

In view of these, Medical Device importers in India could look at the following indicators-

1. The Schemes are to be implemented over a 5 year horizon, it offers time for Medical Device importers to reflect on their business strategy around import of targeted segments. Like, Cancer/Radiotherapy, Radiology, Imaging & Nuclear Imaging Devices, Anesthetics & Cardio Respiratory medical devices including catheters of cardio-respiratory category & Renal care medical devices, all implants including electronic devices like cochlear & pacemakers.

• For perspective, Consumables, Diagnostic Imaging, Artificial dialysis apparatus, defibrillator, ECG equipment, Laproscope, endoscope etc. are segments with high import dependency ranging from 35%-60% to 80% in some. This makes for overall attractiveness for Indian manufacturers to invest in.

• It also opens possibility of JVs and Public Private Partnerships in the sector. With the geopolitical shift and COVID-19 lessons, it is an opportunity for Indian importers to create manufacturing investing opportunities with their parent companies.

• Additionally, there is an existing high inflow of Medical Tourism in India, is a captive potential market on the deman side. By facilitating investment, partnerships and alliance in the supply side of the Medical Devices, an opportunity has been offered by the GoI.

• A WHO report indicates that Asia at 21% is the 3^rd largest market of medical device sale, which is steadily growing and if this requirement can be leveraged through Government supplementation and private partnerships, India can rapidly fulfill domestic requirements and export.

• In view of the above, the Medical Device importers, could face higher tariffs, price control and other regulations in the Targeted Segments. This can be a moment of reflection to re-align business motivations for enterprises.

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Synopsis of the Notifications:

I Production Linked Incentive for Medical Device Manufacturing in India

1. India’s Medical Device market is valued around Rs. 50, 026 crore for 2018-2019.
2. Exports were of Rs. 16,300 crore and
3. import of Rs. 43, 365 crore.
4. In 2018-2019 exports grew to 25.2%
5. Imports to 23.8%

• The share of Indian Medical Device in global device market is 1.6%. Presently India is counted among top 20 in global medical device market and is ranked 4^th in Asia.
• The Medical device manufacturing lacks a level playing field vis-à-vis competing economies and suffers a disability of around 12-15% due to lack of adequate infrastructure, high financing cost, domestic supply chain, inadequate quality power & low R&D.

PLI Scheme

• The PLI scheme aims Financial Incentive to attract large investments in Medical Device sector.

• It extends an incentive of 5% on incremental sales (over the base year i.e. 2019-2020) of goods manufactured in India under the target segments (Annexure A of Notification dated May 28, 2020) like

– Cancer/Radiotherapy,

– Radiology,

– Imaging & Nuclear Imaging Devices,

• Anesthetics & Cardio Respiratory medical devices including catheters of cardio-respiratory category & Renal care medical devices
• All implants including electronic devices like cochlear & pacemakers.

• Tenure of the scheme is 5 years from the base year i.e. 2019-2020.

• The expected incentive outlay which will be provided under the scheme is up to Rs 3420 crore. Incentive will be paid on incremental sale of manufactured goods (distinct from traded goods) over the base year.

• Eligibility is-
• Subject to threshold of incremental investment & incremental sale of manufactured goods (distinct from traded goods);
• The basis of this computation will be as per details furnished to the Departments/ Ministries/ Agencies/ Statutory Auditors certificates;
• Meet the criteria threshold as below:

• The eligibility under this scheme will not be mutually exclusive of other scheme and vis-versa;

• Scheme implementation is through a nodal agency acting as Project Management Agency (“PMA”). The agency will give secretarial, managerial and implementation support.

1. Details will be published in scheme guidelines.

1. Empowered Committee consisting of secretary of Pharmaceutical, secretary of DPIIT, secretary of commerce, secretary of Health & DGFT shall be formed to consider eligible applications.

II Scheme for Promotion of Medical Parks

1.         Medical device Industry is capital intensive with long gestation period. As the innovation cycle is not fully developed in India it is dependent up to 86% on the imports.

2.         The existing scheme “Assistance to Medical device Industry for Common Facility Centre” – umbrella scheme for development of Pharmaceutical Industry offers one-time grant-in-aid up to Rs. 25 crore or 70% of the project cost whichever is less, for creation of common facilities in the upcoming medical parks.

3.         Sparked by COVID-19, the revised scheme, aims at-

            – strengthening existing infrastructure facility;

            – easy access to standard testing and infrastructure;

            – reduction in cost of production of medical device.

4.         The scheme provides grant in aid to four (4) medical parks with a maximum limit of Rs. 100 crores or 70% of the project cost (90% in case of hilly areas and North-East) whichever is less.

5.         Assistance in the scheme will be offered for the creation of common infrastructure facilities like-

            –  component testing centre;

            –  electromagnetic interference lab;

            –  biomaterial/bio-compatibility testing centre,

            –  medical gray low vacuum molding, cabinet moldings, injection moldings centre, etc.

• The total incentive outlay is Rs. 400 crore for four medical parks. The tenure of scheme 2020-2021 to 2024-2025. Grant release will be in phases through State Implementing Agency (SIA) to be set up by state. 

• The Scheme Steering Committee (SSC) shall approve the project component and funding thereof depending on the merits of proposal.

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[1] The Jio/FB partnership

Disclaimer: This Note is for general information only and not intended for solicitation. Please do not treat this as a legal advice of any sort. Views contained in this, are personal with interpretive value of the author and teams assisting the author.Readers are encouraged not to rely solely on these contents before making any decision.