Healthcare cannot be indifferent to excessive margins. Unexplained mark-ups deserve closer examination, as highlighted most recently by the Maharashtra FDA survey.
Affordability policy also has a second responsibility: the remedy should not create another problem. A medical device reaches a patient through a chain that may include inventory, specialised logistics, instrumentation, servicing, technical support, and healthcare worker training. A pricing intervention that does not distinguish genuine value-chain costs from excessive margins may reduce one number on the invoice while weakening supply, choice or quality elsewhere, ultimately affecting patient access itself.
Price control can have effects beyond the controlled price
Economic history offers examples of well-intentioned price controls producing unintended effects. In parts of the Commonwealth of Independent States after the collapse of the Soviet Union, governments facing inflation and affordability pressures-controlled prices of essential goods and services. Where regulated prices fell below sustainable levels, supply weakened, shortages appeared and governments sometimes had to intervene again through subsidies or price floors.
India is obviously a very different economy, but the underlying lesson remains relevant: a price cannot be separated indefinitely from the economics of supplying a product. This matters particularly in healthcare, because continuity of supply is itself part of patient welfare.
Reducing the price of one component also does not necessarily reduce the patient’s total treatment bill by the same amount. Healthcare is interconnected. If the economics of one component are compressed sharply, costs can reappear elsewhere through procedural charges, services or other consumables. Pricing policy should therefore consider not only the price of a device, but what ultimately happens to the overall cost of care.
Medical devices cannot be treated as one economic category
The medical-device sector is unusually diverse. A high-volume disposable, an implant, an in-vitro diagnostic platform and a large imaging system may all be called medical devices, but their value chains and business models can differ substantially.An implant may require multiple sizes of inventory, specialised instruments and procedural support. An IVD platform can involve instruments, reagents, calibrators, controls, software and technical servicing, and may operate through a rental or reagent-rental model where the instrument is placed with a laboratory or hospital and the economics are spread across reagents and consumables over time. Capital equipment may need installation and years of maintenance, while a simple disposable may have few such requirements.
These differences matter for innovation and patient choice. Not every expensive product is better, and not every incremental feature deserves a premium. But when a newer technology offers meaningful clinical, functional or service value, patients and clinicians should have the option to consider it.
An affordability framework should ensure access to good-quality essential technologies without reducing every category to its lowest-cost offering. A market with no room for meaningful differentiation risks delaying or altogether discouraging the introduction of newer technologies.
Innovation, skills and investment are health-system issues
Innovation, healthcare-worker training and investment are sometimes presented as industry concerns, but they are also elements of healthcare capacity. Advanced medical technologies frequently require physicians, nurses, technicians and laboratory professionals to learn new procedures, workflows or equipment. Training is therefore part of safe and effective adoption. If pricing policy leaves no room for such activities, the effect may eventually be visible in utilisation and quality of care.
The same is true of innovation. India should not pay a premium merely because a manufacturer describes a product as innovative. But neither should its pricing architecture make it economically irrational to introduce genuinely improved technologies.
Investment belongs in the same discussion. India is asking global medical-technology companies to manufacture here, develop supply chains, build R&D capabilities and invest for the long term. These decisions are made competitively.
An India CEO seeking approval for a new manufacturing facility may be competing internally with a counterpart from Vietnam, Malaysia, Mexico or elsewhere. India can offer market scale, engineering talent and a growing healthcare system. Other countries may offer lower costs, stronger export ecosystems or greater regulatory predictability.
Pricing policy therefore forms part of the long-term investment calculation. Global management will assess not only India’s attractiveness today, but the predictability of the commercial environment over the life of the investment.
This is a national-interest issue. India’s ambition to become a major medical-device manufacturing hub cannot be separated from the regulatory environment in which those investments are expected to operate.
Regulation should begin by locating the excess
None of this argues for leaving prices or margins unchecked. It argues for identifying where the problem actually lies.
If an MRP is disproportionately higher than the price at which a device enters the distribution chain, the first question should be whether the concern lies in the underlying product price or in the margins accumulated thereafter.
Making that distinction benefits from consultation because margins can mean very different things across categories: what may be difficult to justify for a high-volume disposable may support specialised inventory, installation, servicing, technical support or clinical assistance in another. Any intervention should therefore be calibrated to the product and its value chain rather than impose one solution across fundamentally different categories.
Blanket price capping spawns unintended consequences and market distortions
Where pricing intervention is considered necessary, rationalising margins may be more effective than capping product prices.
Where excessive downstream margins are the problem, Trade Margin Rationalisation offers a more targeted policy instrument than reconstructing the underlying product price.
The relevant starting point should be the Price to Distributor (PTD). This approach was recommended by the Department of Pharmaceuticals’ committee examining high trade margins and was later implemented by NPPA during the pandemic for oxygen concentrators, pulse oximeters, blood-pressure monitors, nebulisers, digital thermometers and glucometers.
The results were significant, with estimated annual consumer savings of about ₹1,000 crore. In the five-device intervention, 91% of reported brands reduced their MRPs, with reductions of up to 88%.
This experience shows that affordability policy has instruments available beyond a conventional ceiling price. But TMR too must be applied intelligently. A single margin across all medical devices would simply recreate many of the shortcomings of a single price cap.
The better approach is segmentation. Products with similar economics and value chains can be grouped together, while categories involving significant inventory, capital equipment, rental models, technical service or clinical support may require a different margin structure. Administrative simplicity is useful, but not when it erases genuine differences between products.
The right intervention is the one that removes avoidable cost without reducing access, choice or the capability of the health system itself.
The article is authored by Pavan Choudary, Chairman, Medical Technology Association of India (MTaI), and Nadeem Anam, Associate Director, MTaI.
DISCLAIMER: The views expressed are solely of the author and ETHealthworld.com does not necessarily subscribe to it. ETHealthworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
