October 5, 2018
For ensuring the takeoff of AB-PMJAY, the MedTech industry has a huge responsibility. Huge financial resources and investments at various levels, with government support is one of the major pre-requisites, and this leap is an essential condition for its success.
Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana was long since overdue. With India having regained its position on the world map, it cannot be acceptable that even today nearly 55 million Indian people are pushed into poverty each year. MTaI MedTekon 2018: MedTech – Vitalizing Ayushman Bharat organized by the Medical Technology Association of India (MTaI) recently was timely as the MedTech industry’s role cannot be undermined.
The success of Ayushman Bharat largely depends on the synchronization of efforts between the main stakeholders, that is, the government, insurance companies, healthcare providers, and pharmaceutical and medical technology industry. In addition to these, information technology and human resources form an important part in ensuring the last mile healthcare delivery. In addition to strengthening the number of healthcare professionals, the government would need to focus on skilling, re-skilling, and up-skilling programs for existing as well as additional workforce. In a nutshell, the public–private partnership would improve equity, efficiency, accountability, quality, and accessibility of the entire healthcare service.
The government needs to identify additional sources of financing for the scheme’s successful operation and build an automated system for monitoring. A competent regulator for monitoring and ensuring equity and healthy competition among various players is essential. The onus of providing a mechanism for feedback
and timely redressal of complaints lies with the government.
Healthcare providers – the backbone of AB-PMJAY
From ensuring quality health services to operational improvement to reducing cost, hospitals/healthcare providers will be the hotspot of Ayushman Bharat. It will be their job as a provider to ensure the availability of beds and timely care. At the same time, they must work with the government to set appropriate package rates. The government must ensure that the empanelment process of healthcare providers is conducted in a transparent, time-bound, and non-partisan manner based on specific criteria, eligibility, and guidelines and also mandate a feasible package rate which is sustainable for these providers. Timely delivery of better health outcomes to the patients must not be hampered due to any miscommunication between the insurer and the provider.
Insurance companies to act as enablers
Due to an underdeveloped health insurance market, the coverage has been only available for the urban middle and high-income populations. However, the health insurance landscape is expected to undergo a complete overhaul and increase its outreach to poor and lower middle class.
The major role of the insurance companies would include negotiating with the government on service package rates, administration of the insurance policies, processing of claims, and timely payments to the EHCP. Among the challenges would be to ensure that claims are genuine, clinical services are audited, and hospitals are scrutinized effectively.
The major challenge, however, is that the private insurance players are not too keen with the government’s decision to keep the private retail and group insurance companies under the GST ambit, which they say makes it less attractive.
Pharma and MedTech are the lifelines of AB-NHPS
The role of the pharmaceutical and medical technology industry is vital as they would provide the medicines and latest medical devices and equipment to the healthcare providers.
The pharmaceutical industry must ensure the availability of affordable generic and bio-similar drugs while maintaining quality at all times, which will require stringent quality checks. The increase in the speed of manufacturing and distribution besides proper storage will help in reducing any shortage in the supply when the demand goes up.
The entire infrastructure and service delivery efforts would fall short if the access and ability to use medical technologies is missing. Besides ensuring the vital supply of medical devices and high-end equipment through the wide network of distribution channels, the MedTech companies have a key role to play in enabling training and educating the healthcare workforce. Since there will be a requirement of a massive skill development exercise of allied healthcare professionals, the industry can contribute through its expertise by training the doctors, nurses, and primary healthcare service providers and making them patient-ready.
While it is understood that the government intends to come up with a new pharma policy which will unify and synergize the pharma and medical devices sector, the focus on indigenous manufacturing and cheap products should not come at the expense of quality. Altogether, execution of Ayushman Bharat will be a challenge as it would involve identifying and focusing on appropriate success factors which will involve allocating the right financial support, incentivizing all stakeholders, and ensuring effective coverage for beneficiaries. In the long run, the scheme shall focus on strengthening the primary care, inclusion of out-patient treatment and a public healthcare delivery system, and achieve health coverage for the entire population of India.
Concerns of stakeholders
Before the full rollout of the implementation is undertaken, there are several challenges which require due attention by the government. To achieve the objectives of the program, a coordinated effort will be required from the various stakeholders involved in the value chain. In an ecosystem where different stakeholders play different critical roles, there is concern that even if a single cog in the wheel is unhinged, the overall scheme may flounder.
In addition to the huge gap between the existing and required infrastructure, human resources, capital and funding, there are other roadblocks, which need immediate attention of the government. There are several diverse laws, administered by several regulatory authorities and overseen by different ministries that impinge the healthcare sector. The present policy structure and regulatory framework still appears to be lacking in a cohesive and tangible action plan to address problems pertaining to the core of the healthcare system, that is access, affordability, and accountability.
One single uninformed policy decision with respect to any stakeholder, which is not in sync with the current requirement, can affect the whole ecosystem adversely. The government has to strike a balance among all the spokes of the wheel and therefore, it is necessary to move from an ad-hoc approach to a nuanced and overarching policy structure. This will end the uncertainty and trust deficit among the stakeholders and promote the ease of doing business, which in turn will be beneficial for the sector and ultimately for the patients.
Price control. The NPPA has played an active role in the price control of various drugs with an objective to provide affordable healthcare. Since the medical devices and consumables are regulated under the Drugs and Cosmetics Act, 1940, the classification of these devices as Drugs brought these under the purview of the DPCO and subjected them to the same kind of price control as drugs. Medical devices for the first time were brought under the price control regime beginning with the price ceiling of coronary stents in December 2016, which was again extended to include knee implants in August 2017. The medical device industry is hugely different from the pharmaceutical industry. Medical technology and devices evolve continuously and require high investment for research and development. The one-size fits all approach of the regulatory policy may hamper technological advancements and may force the market to stop innovating further. Such an un-nuanced attempt will not improve patient access and will most likely end up smothering this dynamic and vital industry. The industry wishes no further price control on any medical device, which does not have any positive impact as intended.
Trade margin rationalization. NPPA’s price capping move was well-intended and was aimed at bringing down the overall cost burden on patients. But the unintended consequences that manifested were not just limited to hiking up of procedure costs, industry’s aversion to introducing newer technologies, and poor investor sentiments. So much so that the FDI in the MedTech sector which has started soaring thanks to the government bringing it on the automatic route in 2015, also plummeted. It was also felt that the effect of such a move might actually restrict the patient access in the longer run. So, the industry demanded and supported trade margin rationalization (TMR) as a possible solution to the problem. TMR, if implemented, can prove to be an effective tool to control the maximum retail price (MRP), with a possibility to reduce it by up to 73 percent and hence make healthcare affordable for the patients. A report on The Committee of High Trade Margins in the Sale of Drugs commissioned and published by the Department of Pharmaceuticals (DoP), recommends that the trade margin should be the difference between the price to trade (PTT) – the price at which the manufacturer or marketing company sells the drug to the distributor or stockist (the first point of sale), and the price to patient (MRP). The report adds, “the government should consider capping the overall trade margins, thus, giving a level playing field to every trade channel. The industry should have the flexibility to decide intra-trade channel percentage considering multiple factors of market access and supplies.” The government has had stakeholders’ consultations on this subject beginning from October 2017 to ascertain their viewpoints and thereafter the government’s think-tank NITI Aayog floated a consultation paper in June 2018 with suggestions from the stakeholders.
The industry expects from the government that TMR should be implemented as recommended in the DoP report based on PTT as the first point of sale which will take care of various aspects of the market, ease of doing business, and quality and affordable access to medical technology in the country. Another important emerging reality is that in the wake of the dollar and euro depreciating this year by up to 20 percent, the government needs to revise the ceiling of 10 percent annual increase on MRP which the DPCO mandates.
Public procurement order. In June 2017, the Department of Industrial Policy and Promotion (DIPP) issued the public procurement order (PPO), 2017 (earlier termed as preferential market access – PMA) and identified DoP as a nodal agency to implement it for the medical device sector. Under this, public procurement will give preference to goods manufactured in India rather than the imported items. The sole intention behind this move was to promote Make in India for the medical device industry. This fateful order on public procurement policy for enhancing local production and giving a boost to Make in India for medical devices came as another blow to the industry which was already struggling with other pressing issues. Imposing such requirements and giving preference to local suppliers to the level of 100 percent of the value will limit the market access and will deny a level playing field for suppliers of technologies that are currently not produced locally. Almost 70 percent of the products (by value) and almost 80 percent of the critical care devices are currently imported. An immediate implementation of any level of local content requirements without a foundational assessment of the capacity of local production and import, may go counter to the true objective of Make in India. This kind of policy may also give rise to mushrooming of substandard and low-cost device providers, which could be catastrophic to the health of the nation. A vigorous step-wise plan for Make in India looks the sustainable way forward. Andhra Pradesh Medical Technology Zone (AMTZ) seems a good step in such a direction.
GST. The Goods and Services Tax (GST) is hailed as the biggest tax reform since independence. There were many types of prevailing tax systems in the past and to make the tax system more uniform, GST was introduced in July 2017. GST rates were supposed to be tax neutral, meaning; the overall tax incidence post-GST should have been equal to the embedded tax rate under the pre-GST regime. But in reality, the medical devices have suffered from higher GST rates. Under the GST regime, the tax slab for the medical device sector is pegged at 12 percent and for some devices the rates are even as high as 18 percent and 28 percent. This has affected the overall cost structure of the healthcare sector coupled with further increases in customs duty to the tune of almost 50 percent. Earlier, most of the medical devices attracted CVD rate of 0–12.5 percent and the VAT rate for almost all products were in the range of 5 percent but now the overall combined incidence of subsumed taxes on most of the devices comes to about 6–8 percent. This has resulted in most of the medical devices effectively being charged 6–10 percent higher tax. On the other hand, the healthcare services have been exempted under GST instead of being zero-rated, leading to cascading effect of the high GST on hospital cost, as the hospitals can no more take input GST credit. The government should, besides reducing the GST rate on medical devices to 5 percent, make healthcare services zero-rated. This would effectively reduce tax incidence on hospital input costs leading to lower healthcare service charges for the patients. The role of medical technology is vital, how can healthcare delivery be achieved without medical devices? Can it be imagined that a healthcare system be set up without the support of these devices and technologies? As stated time and again, the case of medical devices requires, and deserves, its own focused and exclusive agenda. There is an urgent need to set that agenda together with governments, healthcare experts and providers, practitioners, the private sector, academia and most importantly, the patient representatives. The overarching umbrella of Ayushman Bharat provides an opportunity to do so.
Roadmap for AB-PMJAY
Ayushman Bharat – Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) has already been dubbed as a game changer for the Indian healthcare system. It has the potential to become the most far-reaching social program initiated by the government. But for the scheme to fulfill the aspirations of the vast Indian populace, a lot of effort needs to be put in toward consolidating current resources and making way for new ones. India has just a couple of health economists, biostatisticians, epidemiologists, or public health managers and there is an acute shortage of human resources at all levels of the system. By the time AB-PMJAY becomes fully operational in 2022, it will require almost 2.2 million people at every level, from the highly qualified clinical specialists and super specialists to nurses and technicians, allied health professionals to hospital administrators, IT experts to insurance executives, and healthcare planners to community health workers to support the system.
As on March 31, 2017, there were 156,231 sub health centers (SHCs), 25,650 primary health centers (PHCs), and 5624 community health centers (CHCs) in India. However, most of these facilities suffer severely from poor infrastructure, under-staffing, and lack of equipment and medicines. Only 11 percent of SHCs, 16 percent of PHCs, and 16 percent CHCs meet the Indian Public Health Standards (IPHS). According to Rural Health Statistics 2017, there is an 82 percent shortfall in total surgeons, obstetricians and gynecologists, physicians, and pediatricians across CHCs in India. Furthermore, over 6000 SHCs did not have even an auxiliary nurse midwife/health worker. Under the AB-PMJAY initiatives, the government aims to upgrade 150,000 (of the existing 180,000) SHCs and PHCs to health and wellness centers (HWCs) by 2022.
The government has taken a few immediate steps to address the issues related to human resources. It has planned a rapid expansion of medical education as it forms the apex of the healthcare pyramid. The government recognizes that it is the quality of graduating doctors and specialists that determines the quality of services in the healthcare and hence has undertaken suitable amendments in the Graduate and Post Graduate Medical Education Regulations for making common counselling for admission in medical colleges mandatory. The post-graduate seats have also been increased by over 8500 and under-graduate seats by over 16,000.
The network of medical colleges is being expanded in a big way by upgrading 58 district hospitals to medical colleges and introducing super specialty blocks to 70 existing medical colleges. 24 new medical colleges have also been planned in this year’s budget only. Twenty state cancer institutes and 50 tertiary cancer care centers are also being set up. There are 22 new All India Institute of Medical Sciences (AIIMS) planned across the country to reduce the regional imbalance in tertiary care. There are many other initiatives such as increasing the retirement age of doctors to 65 years, setting up more medical and nursing schools, and multi-skilling of doctors, which will prove to be effective in overcoming such shortage.
In addition to this, the government has taken a target to train 14 lakh candidates by 2025 under the Skill India program. The Ministry of Skill Development and Entrepreneurship (MSDE), jointly with the Ministry of Health and Family Welfare (MoHFW) and the Ministry of Human Resource Development (HRD) have partnered and signed a MoU with the Indira Gandhi Open University (IGNOU) under the Skill for Life, Save a Life to make youth more employable in the healthcare sector and find opportunities of employment.
The National Health Agency (NHA) has signed a MoU with National Skill Development Corporation (NSDC) for skilling one lakh Arogya Mitras (AMs), the certified frontline professionals who shall serve as the first point of contact for beneficiaries of AB-PMJAY scheme. NSDC through the Skills Development Centers under the larger National Skill Qualification Framework including the Pradhan Mantri Kaushal Kendra (PMKK) platform will train and certify AMs who will be stationed at each hospital. NSDC through the Health Sector Skill Council (HSSC) is preparing training content and will train staff at PMKKs across all the states. In future, this platform is also expected to contribute to the skill development of staff other than AM.
Although these initiatives look very promising and will improve the current status of manpower, there is urgent requirement of training at the clinical front. It is only the trained clinical staff, which can make efficient healthcare systems, however, providing training, recruiting, and sustaining them will be a huge task under the AB-PMJAY program. The clinical side of human resource demand is complex where the candidates passing out of colleges have to go through various on-the-job training. They need to be trained to handle various devices and equipment to become industry and patient ready. Furthermore, these candidates need to upgrade their skills from time to time to keep up with the new technologies and procedures through continued medical education (CME) programs. The CMEs provide them the opportunity to get education materials, guidance, and training on the effective use of equipment and devices, and hands-on training for the procedure and technique associated with those devices. These programs have a very crucial role in ensuring the efficacy of various procedures and the overall patient safety.
The clinician training influences the clinical outcome directly. Until now, education programs were being carried out by MedTech companies. This is a highly technical and focused exercise, which involves lots of efforts and investment. The requirement of trained clinical staff for AB-PMJAY would be a challenge, which the private sector alone would not be able to handle. The industry bodies/associations can join hands with the government to strengthen and drive this initiative. They can conduct such trainings by establishing centers of excellence. The MTaI member companies alone contribute significantly toward skill and capacity building and provide training to more than 250,000 healthcare professionals annually across the value chain through various CMEs, workshops, centers of excellence, and seminars. These professionals include vascular surgeons, interventional radiologists, nephrologists, oncologists, general surgeons, urologists, radiologists, and paramedic staff. The time has come for the government to recognize the role and contribution of the MedTech Industry. This critical part of the skill building cannot be done in isolation but in collaboration where the MedTech Industry has a vital role to play.
It is essential to facilitate public–private partnership to create a long-term eco-system for healthcare worker training through the participation of MedTech industry. India is committed to achieve UHC as a signatory to the globally agreed sustainable development goals. In order to achieve this goal through AB-PMJAY, there is a requirement to evolve innovative strategies to facilitate and create an effective management of resources. The industry participation should be encouraged and quality healthcare must be at the center of any policy decisions. There is a need to create an enabling environment for all stakeholders so that it is through a wide-ranging partnership that AB-PMJAY becomes sustainable and is able to serve the un-served and under-served people of India enduringly.
The way forward
The present Indian healthcare system confronts many roadblocks including but not limited to infrastructural gaps, underutilization of existing resources, fragmented healthcare delivery system, inadequate skilled human resources, high out-of-pocket expenses, poor health insurance coverage, inadequate government finances, unregulated market, rural-urban imbalance, and high emerging disease burden. These challenges make the system complex, inaccessible, and unaffordable for the majority population.
As it sets the objective to serve the unserved and under-served, India is getting ready to implement the much-needed universal health coverage. The Ayushman Bharat program is such a gigantic scheme that it will require the perfect combination of strategies, political will, and vision. The present policy structure and regulatory framework appear at some places to be lacking in addressing the real problem. The government has to strike a balance among all the spokes of the wheel and for that, it is necessary to move from an ad-hoc approach to a nuanced and overarching policy structure. This will end the uncertainty and trust deficit among the stakeholders and promote the ease of doing business, which will be beneficial for the healthcare system in the longer run.
The Ayushman Bharat scheme has the potential to change the perception of the Indian healthcare landscape provided it is implemented in a methodical and systematic manner. It will require thorough planning, proper utilization of resources, collaboration among stakeholders, synergy between the public and private players, and transparency and accountability of systems. For the scheme to be successful, the pre-requisites are many and thus will require huge financial resources and investments at various levels. The government will need to promote an investor-friendly environment and proactively engage with the investors from the private sector. It would also need to engage with multiple stakeholders from the private provider space with a common agenda – making the collaborative effort to achieve the goal of Ayushman Bharat.
Success will also depend upon the quality care supported by the latest technology. The knowledge and expertise from the private sector coupled with support from the public sector will make an effective eco-system. Within the private sector, the MedTech industry has a vital role to play. An effective healthcare system cannot be imagined without quality medical devices, training, and skill building. The required transformation in the present healthcare system is only possible through working together and building synergies for creating greater gains for the healthcare as well as the people of the country.
The article is based on MedTech: The Keystone to Ayushman Bharat, a theme paper by MTaI.