Trade

US Makes First Public Comments Against India’s Price Cap on Medical Devices

The US has announced it will review import benefits which India receives, which was triggered, among other things, by India’s price control on medical devices.

Since February 2017, when India imposed price caps on cardiac stents, there has been fierce lobbying in India and the US to get a dilution or revocation of this regulation.

Now the US government has published a report which contains its first public comments against India’s decision to impose price control.

The National Trade Estimate Report on Foreign Trade Barriers (NTE), an annual report from the US government usually serves as a “barometer” to predict which topics get covered in the better known ‘Special 301 report’. While the NTE broadly looks at trade, the Special 301 reports look specifically at intellectual property issues. The reports release an annual list of countries which the US is closely watching. India has regularly been on their list for pursuing patent policies which are in India’s interests, but not entirely favourable for US’s interests.

In a subsection on India titled ‘Other barriers’, the US government speaks specifically about the National Pharmaceutical Pricing Authority’s (NPPA) order to cap prices for coronary stents in India that was passed in February this year.

While most of the comments on India in the NTE are also repeated annually in the 301 reports and brought up routinely in meetings between Indian and US officials, the comments on price control are new and thus significant.

“The order set price categories that do not fully differentiate for advanced technologies within a product class, requiring newer technology stents be sold at the same prices as older technology products, resulting in some technologically advanced stents selling at a loss,” the report says.

The report also refers to grievances expressed by US medical device companies and industrial bodies who have claimed that their products offer technological advancements and thus need to be sold a higher price.

But their claims have not always been borne out by evidence. As The Wire reported in August 2017, leaders in the medical device industry like Abbott and Boston Scientific were invited by the Indian government to submit scientific data to back up claims of “superiority” of their products, and thus a higher price. Despite repeated invites, companies like Abbott, Boston Scientific and Medtronic did not submit these data.

This notwithstanding, the US government’s NTE report repeats the same grievances raised by US medical device companies, as well as industry bodies: “Several US companies have applied to withdraw their most technologically advanced products from the Indian market due to the policy, but those requests have been repeatedly rejected by Indian regulators.”

The report also says “US stakeholders claim they must continue to sell their products at a loss in the Indian market for up to 18 months.”

According to Section 21 of India’s Drug Price Control Order, to prevent a shortage and avert a public health crisis, manufacturers are not allowed to suddenly withdraw their stocks from the market. Indian law mandates that manufacturers give at least six months’ notice to Indian authorities for any withdrawal.

US companies like Abbott had informed Indian authorities in 2017 that they wanted to withdraw their stents with “immediate effect“. The NPPA replied that there was “no provision” in Indian law to allow this.

The NTE report also says, “The United States has asked that India further differentiate the price controls for advanced products, allow the withdrawal of products, and not extend the policy to additional products.”

However India went ahead and regulated the prices of orthopaedic implants after cardiac stents.

“Despite these concerns, on August 16, 2017, NPPA issued an additional price control order on 15 different orthopedic knee implant systems,” says the NTE.

Following up their words with actions

Soon after releasing this NTE report, the US government announced that it will be reviewing India’s status as a recipient of the US’s Generalized System of Preferences (GSP).

The GSP is the US’s trade preference programme, “designed to promote economic development” for developing countries. It allows duty-free entry for some imports from certain developing countries into the US.

“GSP provides an important tool to help enforce the Trump Administration’s key principles of free and fair trade across the globe. The President is committed to ensuring that those countries who receive GSP benefits uphold their end of the bargain by continuing to meet the eligibility criteria outlined by Congress,” said Deputy US Trade Representative Jeffrey Gerrish in a statement.

Imminent unfavourable changes in tariff

India has found itself under review for its GSP status, owing to petitions by AdvaMed, a medical device industry body. In October 2017, AdvaMed petitioned the US Trade Representative (USTR) to withdraw GSP trade benefits that India gets for imports into the US.

A copy of this petition has been reviewed by The Wire. In it, they said they made this move because of India’s “failure to provide equitable and reasonable access to its market for medical devices.”

“Our intention is not for India to lose the benefits of GSP, but rather to advance engagement and meaningful discussions on restoring market access for medtech in India while keeping patients’ interests at the center of all discussions,” AdvaMed said in a statement. They want India to change its regulations such that they are “mutually favorable.”

The GSP works as a simultaneous carrot-and-stick mechanism for developing countries. Economic Times, which first reported that the GSP may be revoked, quoted a member from a lobby group saying, “US lobby groups had asked the Trump administration to renew the GSP so that they can use this as a bargaining tool with India to deter it from imposing price cuts on medical devices.”

Back room lobbying

Before these statements against India’s policies were published in the NTE, the US government engaged in back-door-pressure. Along with this, US lobby groups approached both the Indian government and the US government, asking them to review India’s decision on price caps in ways that can be “mutually acceptable.”

In June 2017, Reuters reported that 18 members of the US Congress wrote to India’s ambassador to the US in May, just before Prime Minister Narendra Modi was scheduled to visit the country. These lawmakers reiterated the industry’s argument and said that India’s decision to check prices would hinder “access to the newest and most innovative medical technologies.”

The Wire then reported that four other US lawmakers wrote a similar letter, this time to President Trump. In it, they urged Trump to convince Modi to roll-back price control in India when he visited the US.

Several civil society groups came together to oppose these efforts and told the US lawmakers that their attempts to dilute Indian regulation were “appalling“.

The Wire also reported a letter written in September by US Trade Representative Robert Lighthizer to India’s commerce minister which referred to India’s price control policy as “very troubling”. In October, when Lighthizer met Indian officials at the Trade Policy Forum, the discussion on price control was reportedly “the most difficult part.”

In October 2017, AdvaMed petitioned the USTR for India’s GSP status to be withdrawn, because of price control on medical devices.

Following that, in March 2018, LiveMint reported that AdvaMed approached India’s ambassador to the US and said that India’s decision to impose price caps was taken without regard “to patient needs and the likely impact on medical technology innovation in India”. AdvaMed reportedly also wrote to Prime Minister Narendra Modi, recommending that the Indian government adopt trade margin rationalisation instead of price control.

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