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PRE BUDGET REPORTS

Medical Equipments: Exempt excise duty on Endovascular stents

The medical devices are used in today's medical facilities that strive to meet multifarious patient needs in differing economic landscapes. The speedy progress of medical science, laboratory research, the globalization of diseases and disease control are actively propelling the industry to new levels. The devices that are life saving by function become non-discretionary to the caregivers and patients. Insurance penetration, private or national, also dictates usage patterns and product design.

Interestingly, The emerging economies were recognized as consumption economies of the future, many local governments began investing in developing the health equity of their nations. Welfare state monies are being increasingly passed onto the healthcare sector where basic investments in primary health, diagnostic setups and rural access are causing double digit growth rates in many medical product segments. Additionally, access to foreign funds, industrialization and privatization are contributing to a growing affluence that is enabling the demand for advanced treatment options and world-class health infrastructure. The state encouragement to medical tourism, too, is a significant driver of demand for sophisticated medical technologies.

Today, the medical devices market in the BRIC countries, alone, accounts for nearly USD 10 billion and is growing at an average CAGR of 8%.

Also, The new medtech markets present massive consumption opportunities but a large majority of the products needed to satisfy their demands continue to be imported from the countries of their origin. North America and Western Europe are still dominant innovators from where all the latest medical developments are exported to other parts of the world. Therefore, many governments like those in Brazil, China and India are encouraging homegrown innovation and local manufacturing in order to render care technologies affordable and more accessible to their regions.

Budget Expectations and Recommendations:

The customs duty on medical equipment was rationalized to 5% in the budget 2010. However, there are few issues mentioned below which need consideration.

• The Orthopedic implants are used for treatment of disability to the skeletal system due to trauma such as fractures or age related changes. These are eligible for import at NIL basic customs duty. However, also exemption of CVD (Countervailing Duty) and 4% SAD (Special Additional Duty) should be considered.
• The raw materials for manufacture of these implants consist of special grade stainless steel, titanium alloys, cobalt-chrome alloys and high-density polyethylene. The Basic custom duty on these inputs was reduced to NIL in the budget 2010. However, these inputs attract 10% CVD and 4% SAD and the manufacture of implants cannot credit for CVD and SAD as excise duty is exempted. This makes the cost of indigenous manufacturing of theses implants higher. So, Exemption of CVD and SAD need consideration.
• The Endovascular stents are used for treatment of patients with cardiovascular disease. In the budget 2011, these were also exempted from basic customs duty by inserting sl no 543A in customs notification 21/2002 but excise duty of 5% is applicable which needs to be exempted.
• The Polydioxanone (PDS) plates are used as a scaffolding support in Nasal reconstructive surgeries and these attract basic customs duty of 10%, CVD of 10% and SAD of 4%. So, The Exemption of basic customs duty on these plates would reduce the cost and benefit of the patients.
• The Continuous peritoneal dialysis system with drain bags, tubing's and connectors attract 5% basic customs duty, 5% CVD and NIL SAD. Also, the Medical grade PVC sheeting falling under tariff used to manufacture these equipment will attract customs duty of 10%, CVD of 10% and SAD of 4% which should be reduced to 5%+5%+NIL respectively. This would be inline with the concession given for import of polypropylene, stainless steel and stainless steel capillary tube used for manufacture of syringes, needles, catheters and cannulae.

Analyst Expectations:

• The excise duty on endovascular stents should be exempted.

• The Exemption of basic customs duty on Polydioxanone (PDS) plates would reduce the cost and benefit of the patients.

• The Medical grade PVC sheeting used to manufacture peritoneal dialysis system equipment will attract customs duty of 10%, CVD of 10% and SAD of 4% which is likely to be reduced.

Scrip's to Watch:

Optocircuits

Outlook:

India's rapidly growing healthcare market provides significant opportunities for the medical devices business. However, the Union budget 2012-13 expected to have at least one are two decisions favorable to the sector. The rising trend in increased usage of technology in the Indian healthcare market will be expected to result in huge potential opportunities for the medical device companies.