A China-India twist to price-capping medical devices

It has been a curious year for Indo-Chinese linkages in healthcare. A Chinese movie, Dying to Survive showed earlier in the year the real-life story of Lu Yong, a Chinese leukemia patient who smuggled cheap but unproven cancer medicine from India for 1,000 Chinese cancer sufferers in 2004. Taking a cue from this movie, multinational firms in China cut their prices of cancer drugs in July 2018, but this could not stop the Chinese government from including 17 life-saving cancer drugs in its national public insurance in October 2018, thereby reducing their prices even further. 

Such spillovers in market forces and regulation between China and India is not new and neither pharmaceuticals-specific. Speaking to the authors earlier in the year about price-capping of coronary stents in India in February 2017, country head of a leading Asian multinational stent manufacturer had noted to us the following: “Let us say a multinational firm launches a new advanced stent in India at the low mandated price. When the firm takes that product to China, the country will demand that they too get that stent at the same Indian price. Given that the medical device market in China is much bigger than the market in India, it is only rational for a firm to completely avoid introducing new advanced stents in India than risk harming business in China.”

Interestingly, it seems, India’s price-cap measures in coronary stents (with data analysis done by us from information retrieved from www.zauba.com, an import/export providing website) seems to be incentivising entry of Chinese low-cost firms like Lepu Medical Technology based out of Beijing who are fast capturing market share in reorganising Indian stents market. And they are not all. Newer firms seem to have anticipated the 2017 price-capping and have penetrated India’s market many months prior to the regulation. German manufacturer – Eukatech, exported nearly 2,000 units to India in 2016 with the landed cost of their device “eukalimus” just USD 135 in a world where the Indian price ceiling was set at around USD 470. Other new players in the market in 2015 and 2016 were Biotronik, an established German manufacturer, who doubled its exports of “ORSIRO” to India from 7,000 to 14,000 between 2014 and 2015, its landed cost being about USD 180 per unit. These new entrants, it seems, are replacing the established hegemony of US multinationals in this space even before actual regulation. 

In our data of 1.2 million stent imports to India between January 2014 and November 2016, we could observe the presence of 18 manufacturers, including from US firms like Abbott, Boston Scientific and Medtronic. But there were also newly emerging non-US firms from EU and China as we note above. 

We also found in this data that Abbott’s most premium stent – ABSORB, which was withdrawn from India in 2017, had a landed cost of about USD 665, 41 per cent higher than the NPPA set February 2017 ceiling price. Boston Scientific and Medtronics’ high-end versions – SYNERGY and Resolute Onyx – had a landed cost of about USD 770 and 650 respectively, much higher than the ceiling price. In fact, while US-based multinationals were selling more than 50,000 stents in India in June of 2014, this number had fallen to just about 20,000 by October 2016, likely in anticipation of regulation. Non-US low-cost MNCs including from China meanwhile penetrated the market faster during this period, rising to more than 10,000 stents being sold in October 2016 up twice from its June 2014 levels in our data.

Needless to say, these new entrants now also face domestic competition with entry from entities like Gujarat-based Sahajanand Medical Technologies (SMT) whose SUPRAFLEX stents recently was in the news with seemingly comparable performance effects on patients vis-à-vis Abbott’s Xience as reported in a recent San Diego medical conference. Obviously other medical device manufacturers like in knee or hip replacement or those in syringes can only be expected to keenly watch these developments with the National Pharmaceutical Pricing Authority (NPPA) of India expected to continue its pricing interventions in more than 20 medical devices as the 2019 national elections approach, healthcare forming a core issue in policy debates. 

But how will all this translate into patient outcomes and long run quality of care remains an open question. Earlier in the year, despite heavy lobbying from US (including from ADVAMED, a Washington DC-based association of US medical device manufacturers), NPPA struck off the idea of differential pricing and set a new uniform ceiling price. It looks like NPPA is betting that domestic players will provide quality and affordable care to India’s growing population especially in a world where we now also have the new national health insurance scheme of Ayushman Bharat. 

Author is with IIM (A); co-authored by H Molakapuri