Margins are lower in orthopaedic implants: MTaI

Industry is appreciative of the Government's efforts to ascertain trade margins of various medical devices and has been forthcoming in providing all cost and price related data points to NPPA, from time to time.

While working on price governance for any industry, it is imperative that right data is used to derive right outcomes. While studying the statement on trade margin in the aforesaid circular, we have observed multiple discrepancies in the price points quoted.

NPPA data showcasing the range of MRPs needs to be understood in the correct context:

1. The MRP of the implant highlighted in the article as Rs. 4, 13,000 is used in rare cases, where the original implant has failed and a revision procedure needs to be carried out. These implants are expensive and have limited volumes of manufacturing globally, require a large inventory as well as advanced instrumentation. Since such implants are technically complex, they require highly skilled and experienced surgeons, skilled staff and advanced anesthesia support. Also, max price is merely the sum of the max MRPs of each component, which can be from different companies and different constructs. Taking this price point as benchmark for the entire industry is incorrect as well as misleading.

2. 30-35 percent cases are those of 'all poly' implants which are typically in the Rs. 60,000-70,000 range.

Orthopedic implants are different from drugs and those medical devices where prescription and end-point availability are the only critical factors for treatment. Value proposition to the surgeon, hospital and patient here is very different.

The orthopaedic industry is very different from other industries in the joint knee replacement space in the following ways:

•Every surgery needs instruments to support knee implants, which are very expensive, capital-intensive and fall under service-related cost

•Distribution channels have a huge level of inventory stock points across entire product lines, in addition to carting and servicing instruments for every surgery, including cleaning and sterilising every instrument prior to surgeries

•Extensively trained surgery scrub nurses to support surgeries in addition to logistical manpower to cart inventory and instruments

•Logistical cost of transportation of heavy instrumentation and implants to support every surgery across 2-250 kms

•All the above investments are quite significant and hence need to be considered when evaluating margins

Applying existing drug trade margin rules to this industry might lead to disruption of the entire ecosystem and poorer patient outcomes. Pricing authorities should understand the nuances of this industry, surgery processes, role of each member in the value chain and then take a decision on an appropriate pricing structure.

Industry is putting up a representation to NPPA seeking clarity on the source of data and basis for calculation, to ensure accuracy. The NPPA has already granted us time to make our case on August 9.