The United States Trade Representative (USTR), in its 2018 National Trade Estimate Report on 'Foreign Trade Barriers', has for the first time publicly raised concerns on India's price controls on medical devices. In a subsection on India titled 'Other barriers', the USTR speaks specifically about the National Pharmaceutical Pricing Authority's (NPPA) Price Control Order on Medical Devices44.
Background
The 2018 National Trade Estimate Report on Foreign Trade Barriers (NTE) is an annual series that highlights significant foreign barriers to U.S. exports. This document is a companion piece to the President's 2018 Trade Policy Agenda and 2017 Annual Report published by Office of the United States Trade Representative in March.
The NTE Report is based upon information compiled within USTR, the Departments of Commerce and Agriculture, and other U.S. Government agencies, as well as U.S. Embassies and supplemented with information provided in response to a notice published in the Federal Register, and by members of the private sector trade advisory committees.
The report discusses the largest export markets for the United States, covering 60 countries including the European Union, Taiwan, Hong Kong, and one regional body. The NTE covers significant barriers, whether they are consistent or inconsistent with international trading rules. The report classifies foreign trade barriers into ten different categories. These categories cover government-imposed measures and policies that restrict, prevent, or impede the international exchange of goods and services. The categories covered include:
- Import policies (e.g., tariffs and other import charges, quantitative restrictions, import licensing, customs barriers, and other market access barriers);
- Sanitary and phytosanitary measures and technical barriers to trade;
- Government procurement (e.g., "buy national" policies and closed bidding);
- Export subsidies (e.g., export financing on preferential terms and agricultural export subsidies that displace U.S. exports in third country markets);
- Lack of intellectual property protection (e.g., inadequate patent, copyright, and trademark regimes and enforcement of intellectual property rights);
- Services barriers (e.g., limits on the range of financial services offered by foreign financial institutions, restrictions on the use of foreign data processing, and barriers to the provision of services by foreign professionals);
- Investment barriers (e.g., limitations on foreign equity participation and on access to foreign government- funded research and development programs, local content requirements, technology transfer requirements and export performance requirements, and restrictions on repatriation of earnings, capital, fees and royalties);
- Government-tolerated anticompetitive conduct of state-owned or private firms that restricts the sale or purchase of U.S. goods or services in the foreign country's markets;
- Digital trade barriers (e.g., restrictions and other discriminatory practices affecting cross border data flows, digital products, Internet-enabled services, and other restrictive technology requirements); and,
- Other barriers (barriers that encompass more than one category, e.g., bribery and corruption, or that affect a single sector).
2018 National Trade Estimate Report – Specific Sections on India
The NTE report raises concerns on various issues impacting trade between the two countries; concerns raised w.r.t areas of pharmaceuticals, life-sciences, medical, biotechnology, and medical devices are discussed below:
IMPORT LICENSES
The report highlights that India maintains various forms of nontariff regulation on three categories of products - banned or prohibited items (e.g., tallow, fat, and oils of animal origin); restricted items that require an import license (e.g., livestock products and certain chemicals); and "canalized" items (e.g., some pharmaceuticals) which can be imported only by government trading monopolies and are subject to cabinet approval regarding import timing and quantity. These requirements are often not fully transparent as the timing and quantity restrictions are infrequently published in its Official Gazette or notified to WTO committees.
OTHER BARRIERS
Price Controls on Medical Devices
The report highlights that on February 13, 2017, India's National Pharmaceutical Pricing Authority (NPPA) announced a price control order on all coronary stents for sale in India. The order set price categories that do not "fully differentiate for advanced technologies within a product class", requiring newer technology stents be sold at the same prices as older technology products, resulting in some technologically advanced stents selling at a loss.
The report further states that several U.S. companies have applied to "withdraw their most technologically advanced products from the Indian market due to the policy", but those requests have been repeatedly rejected by Indian regulators. U.S. stakeholders claim they must "continue to sell their products at a loss in the Indian market for up to 18 months".
The United States has asked that India further differentiate the price controls for advanced products, allow the withdrawal of products, and not extend the policy to additional products. Despite these concerns, on August 16, 2017, NPPA issued an additional price control order on 15 different orthopedic knee implant systems.
USTR Announces New GSP Eligibility Reviews of India
Soon after the release of the NTE report, the USTR announced that it will be reviewing India's status as a recipient of the US's Generalized System of Preferences (GSP)45.
The Generalized System of Preferences (GSP) is a U.S. trade preference programs that provides opportunities for many of the world's poorest countries to use trade to grow their economies and climb out of poverty. GSP is the largest and oldest U.S. trade preference program, "designed to promote economic development" for developing countries. It allows duty-free entry for some imports from certain developing countries into the US46.
Now the USTR has announced that it is launching a self-initiated GSP eligibility review of India based on concerns related to its compliance with the GSP market access criterion and is also accepting two petitions related to the same criterion. The petitions filed by the U.S. dairy industry and the U.S. medical device industry requested a review of India's GSP benefits, given Indian trade barriers affecting U.S. exports in those sectors. India has implemented a wide array of trade barriers that create serious negative effects on U.S. commerce. The acceptance of these petitions and the GSP self-initiated review will result in one overall review of India's compliance with the GSP market access criterion.
One of such petition concerning India's GSP review was filed by the AdvaMed (Advanced Medical Technology Association) which is a trade association that claims lead the effort to advance medical technology. AdvaMed in October 2017, filed a petition with the U.S. Trade Representative (USTR) requesting that India's benefits under the Generalized System of Preferences (GSP) be suspended or withdrawn47.
Conclusion:
There has been fierce lobbying in India and the United States through various Industry bodies, Trade Unions and Lobby groups for the dilution or revocation of India's pricing control mechanism specifically for cardiac stents, and medical devices. Now for the first time the US government has published a report which contains its public comments against India's decision to impose price control on the medical devices.
Footnotes
46. https://ustr.gov/issue-areas/trade-development/preference-programs/generalized-system-preference-gsp
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