Indian medical devices market gets a booster dose from Union Budget 2010-11

Medical devices sector in India got a booster dose from Union Budget 2010-11 has initiated some good measures towards fostering the sector.

The Union Finance Ministry has brought in a uniform concessional basic duty of 5% for all medical appliances besides exempting import duty from specified inputs for the manufacture of orthopedic implants, are good initiatives.

The budget proposes to prescribe a uniform, concessional basic duty of 5 per cent, countervailing duty (CVD) of 4 per cent with full exemption from special additional duty on all medical equipment.

A concessional basic duty of 5 per cent is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty.

Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. is being retained. The concession available to government hospitals or hospitals set up under a statute is also being retained.

For the manufacturers of orthopaedic implants, the Budget 2010-11 has proposed an exemption of  specified inputs for the manufacture of implants from import duty. The manufacturer were  demanding that their inputs attract a higher rate of duty than the finished product.

Orthopedic/ prosthetic goods segment currently accounts for 19% of the current Rs. 5750 crores total market for medical devices and equipment, according to a recent sector report by National Institute of Pharmaceutical Education and Research by (NIPER), Ahmedabad.

These incentives will definitely spur the growth momentum of the already fast-emerging medical devices and equipment sector in India.

Medical devices and supplies market in India is expected touch USD 1.7 billion in 2010 , growing at the rate of 23% annually in the coming years from the current Rs. 5750 crores, the recent NIPER report.

Affordability by patients, increased awareness on health care, improved hospital infrastructure and the increased disease patterns are listed as the primary drivers boosting the growth medical devices industry.

Free market environment, a developed industry and investment in health infrastructure are amongst other factors that the growth of high quality medical devices industry.

Among the segments in the medical devices market diagnostic equipment leads with Rs. 2000 crores, surgical equipment supplies worth Rs 1300 crores comes second and imaging and electronic treatment devices follow with Rs 1300 crores and  Rs. 1000 crores respectively.

The Indian medical equipment market is dominated by the medical instruments and appliances used in specialties such as ophthalmic, dental and other physiological classes. This segment accounts for 26% of the total market followed by orthopedic/ prosthetic goods segment accounting for 19% of the total market.

Medical supplies such as bandages and disposables such as syringes, needles and catheters together constituted 21% of the total market. The other equipment which are in demand are high end speciality electro medical equipments that accounted for 11% of the total market. X-ray apparatus accounted for 10% of the total market.

Another high growth segment in the medical devices industry is diagnostic kits. Diagnostic kits has a growth rate of 30% and a market size of USD 133 million in 2005. They include the reagents and the medical kits. With over fifty companies operating in diagnostic kits, the market has seen several interesting trends.

The ministry has also announced some tax incentives for the business of setting up and operating “cold chain” infrastructure, which is an integral part in the logistics for vaccines and many biotech products.

An Increase in weighted deduction on R&D expenditure up to 200 percent on in-house research and development (R&D) expenses is one of the highlights of Union Budget 2010-11.

The budget also proposes to enhance the weighted deduction on payments made to national laboratories, research associations, colleges, universities and other institutions, for scientific research from 125 per cent to 175 per cent.

The excise duty on formulations will also remain unchanged at 4 percent. The Budget has also proposed an increase in the plan allocation for the Ministry of Health and Family Welfare from Rs 19,534 crore to Rs 22,300 crore for the financial year 2010-11.

In his speech, the Union Finance Minister also proposed that an Annual Health Survey to prepare the health profile of all districts  to be conducted in 2010-11.