medical technologies · 5, sardar patel marg, chanakyapuri, new delhi-110 021 tel: 011-46550555...

THE ASSOCIATED CHAMBERS OF COMMERCE AND INDUSTRY OF INDIA

January 2018

A Roadmap for UnlockingFuture Growth Opportunities for India

Medical Technologies

Knowledge Partner

The Associated Chambers of Commerce and Industry of IndiaASSOCHAM Corporate Office:

5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021Tel: 011-46550555 (Hunting Line) • Fax: 011-23017008, 23017009

Email: [email protected] • Website: www.assocham.org

January 2018

Medical TechnologiesA Roadmap for Unlocking

Future Growth Opportunities for India

Knowledge Partner

MESSAGE

It gives me immense pleasure to note that ASSOCHAM is organizing Conference on Future of Medical Technology in India: Propelling the Medical Device and Diagnostic Industry Forward.

With continuous advancements in medical technology, the healthcare landscape is rapidly changing. Technological innovations in the healthcare industry continue to provide physicians with new ways to improve the quality of care delivered to their patients. Through technology’s integration with areas like disease prevention, surgical procedures, better access to information, and medical telecommunications, the medical industry and patients in India continue to benefit.

I am sure that this Conference shall help in understanding current rules, regulations and the new innovations in the field of medical technology in India. I heartily wish the Conference a great success.

(Sandeep Jajodia)PresidentASSOCHAM

AGAPPE is one of the fastest growing Indian MNC in the

field of IVD and has emerged to No.2 Indian Player in the

market. We are manufacturers of Diagnostic Reagents

and Analyzers and have over 20 years of experience in the

field. The company today mans over 550 team members

along with over 300 loyal distributors and more than

23,000 satisfied customers. Agappe is proud of having

State of the Art manufacturing facility (the biggest

compared to any IVD company in India) with current

capacity to manufacture more than 200,000 kits on a

single shift per month. A customer base of over 23000 and

presence in over 55 countries is a testimony towards

acceptance of our products and its quality.

AGAPPE holds a head start position in IVD research for

reagents and engineering. Our reagents team has been

successful in developing immunoturbidimetric reagents

(LEIT – Latex Enhanced Immunoturbidimetry)

indigenously for first time in India. Also, our team is

equipped with the development of reagents in Clinical

Chemistry, Immunochemistry, Nephelometry, Urine

Strips, Controls & Calibrators etc.

On the other hand, a team of research engineers breeds an

intelligent category of clinical and protein analyzers

through our world class equipment manufacturing

facility. Our expertise and passion for technology was

greatly recognized by a number of organisations giving

AGAPPE the titles viz. “Best Innovative Diagnostic

Company in India”, “Corporate Excellence for Technology

Innovations Implemented and Initiated”, “the Most

Innovative Company” etc. for developing revolutionary

Mispa i2 the Specific Protein Analyser and its upgraded

version viz. Mispa-i3 a Cartridge Based Specific Protein

Analyzer. Agappe is always focused on providing high

quality diagnostic solutions at an affordable cost, which

can be accessible to all including the rural population of

the Country.

Advancement in the development of electronics,

imaging, information technology, microfluidics and

robotics are the key for the new trends in the IVD

industry. In today's world, the modern laboratories are

equipped with the latest analytical automated

instruments to give the best result to the clients. Since

most these instruments are controlled by dedicated

software, it is easy for the technologist to operate the

instrument and to understand the analytical errors if any.

It is estimated that 70% of the error in the clinical

diagnosis is due to pre-analytical variables. This is mainly

due to human errors that can crept in when the blood is

taken, transferred to the test tube and labelled.

In line with providing effective solutions in pre-

analytical segment, AGAPPE's R&D team has taken a step

forward and has developed “MISPA LABEL” – the Tube

Labelling System. The system is having 6 channels with

capability of connecting with Hospital information

system/Laboratory information system. The System is

developed with minimal robotics and very low recurring

cost to support productivity and efficiency in the

laboratories. “Mispa Label” will reduce the pre-analytical

variation thus assuring the quality of testing.

YOUR BEST PARTNERIN DIAGNOSTICS...

Corporate off: / Factory: “Agappe Hills”, Pattimattom (PO), Dist. Ernakulam, Kerala - 683 562, India.

TEL: + 91 484 2867000 | FAX: +91 484 2867222 | [email protected] | www.agappe.com

In line with providing effective solutions in pre-analytical segment, AGAPPE's R&D team

has taken a step forward and has developed “MISPA LABEL” – the Tube Labelling System.

INTELLIGENT TUBE LABELLING SYSTEM

Label

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ACKNOWLEDGEMENT

We are happy to share that ASSOCHAM is organizing Conference on Future of Medical Technology in India: Propelling the Medical Device and Diagnostic Industry Forward.

The Indian medical technology sector is expected to undergo continued growth, driven by the universal challenge to improve human health and well being. However, the sector faces unprecedented changes, including shifting demographics, increasing healthcare burden, new disease pressures, digital disruption, and increasing societal expectations.

I am sure that the Conference will deliberate on all the issues relating to future of Medical Technology in India. I also extend my heartiest thanks to all the stakeholders including Department of Pharmaceutical (DoP), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR) and others for lending their support to the Conference. I would also like to thank our Knowledge Partner MRSS India for its wonderful efforts in putting up this comprehensive report on the Medical Technologies: A Roadmap for unlocking future growth opportunities for India.

I also acknowledge the efforts put in by Anuj Mathur and his team members Payal Swami, Anshul Gupta & Vipin Panthri for organizing this Conference.

I not only wish this Conference a great success but also assume that ASSOCHAM shall continue to organize such programs for larger public benefits with a great degree of excellence.

(D. S. Rawat)Secretary GeneralASSOCHAM

MESSAGE from MRSS India

It gives me great pleasure to note that ASSOCHAM is organizing conference on Future Medical Technology in India.

It is a privilege for MRSS India to engage in this symposium as a knowledge Partner.

The medical technology is expected to witness accelerated growth in the next few years to come, with adoption strategic breakthroughs in technological development. Potential R&D highlights include the development of high-performance devices such as imaging equipment, medical robots, high-value medical consumables like fully degradable vascular stents, and medical products in the wearable and telemedicine fields.

As a Knowledge Partner, MRSS India is committed to provide support in driving a higher level of consumer and market understanding to all stakeholders. This will pave the way for a healthier level of flow of investment into the sector, both from Indian and overseas strategic intent into this sector.

I am confident that this report will enable the domestic and the global Medical Technology companies to understand the emerging business opportunities and the medical technology industry in India. Further, this will help major companies to understand the Indian capabilities for making investments in this sector.

(Raj Sharma)Chairman MRSS India

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Executive Summary ...........................................................................................................................1

Chapter 1 The MedTech Industry: An Introduction .......................................................................3

1.1 Medical Technology- the future of healthcare industry ..................................................4

1.2 MedTech – creating value for patients and the economy ................................................4

1.3 New Trends in MedTech ......................................................................................................5

Chapter 2 Global MedTech Industry ...............................................................................................6

2.1 Global Market Dynamics .....................................................................................................7

2.2 Major Global Players ......................................................................................................... 10

2.3 Advancement in Medtech worldwide- Few examples .................................................. 10

Chapter 3 The Indian MedTech Industry ......................................................................................12

3.1 MedTech Industry- the sunshine sector of Indian healthcare Industry ..................... 13

3.2 The Indian MedTech Industry Segmentation ................................................................ 14

3.2.1 Instruments and Appliances ................................................................................. 14

3.2.2 Diagnostic imaging ................................................................................................ 15

3.2.3 Consumables and Implants ................................................................................... 15

3.2.4 Patient aids .............................................................................................................. 15

3.3 Indian MedTech Market Structure .................................................................................. 17

3.4 Key players in Indian Market ........................................................................................... 17

3.4.1 Indigenous players and their products ................................................................ 18

3.4.2 Global medical device players in India ............................................................... 20

3.5 Medical device cluster in India ........................................................................................ 20

Chapter 4 Indian Medical device market-opportunities & challenges ........................................22

4.1 Investment opportunities in Medical device industry .................................................. 23

4.2 Demand Side Factors ......................................................................................................... 24

4.3 Per capita consumption of medical devices .................................................................... 25

How India compares to other international markets .................................................... 25

4.4 Export potential ................................................................................................................. 25

4.4.1 Newer Market access due to India based innovation ........................................ 26

4.5 Supply Side Factors ............................................................................................................ 26

4.5.1 India as a de-risking option in the region ........................................................... 26

4.6 FDI trends ........................................................................................................................... 27

Table of ConTenTs

4.7 M&A and PE Funding trends........................................................................................... 27

4.8 Key Drivers for Healthcare and the Medtech Market ................................................... 28

4.8.1 Epidemiological Transition ................................................................................... 28

4.8.2 Emerging Trends .................................................................................................... 30

4.8.3 Increasing Population and Life Expectancy ....................................................... 32

4.8.4 Rising Income Levels Increases Affordability ..................................................... 33

4.8.5 Increasing Health Awareness Drives People to Seek Healthcare ..................... 33

4.8.6 Health Insurance Coverage ................................................................................... 33

4.8.7 Rising Medical Tourism ........................................................................................ 33

4.9 Industry challenges in India ............................................................................................. 34

Chapter 5 Regulatory and Policy Framework ...............................................................................35

5.1 Current Regulatory Regime .............................................................................................. 36

5.2 Make in India ..................................................................................................................... 36

5.3 Policy changes enabling conducive environment for innovation ................................ 37

5.3.1 Fostering Innovation ............................................................................................. 38

5.3.2 Good Funding Support ......................................................................................... 38

5.3.3 Great Push for Startups ......................................................................................... 38

5.3.4 Medical Device Manufacturing Parks ................................................................. 39

5.3.5 Other Major Steps .................................................................................................. 40

5.3.6 Opportunities in the Medical Device Sector ...................................................... 41

5.4 An opportunity lost ........................................................................................................... 41

Chapter 6 Future outlook & Key insights ......................................................................................42

6.1 Future outlook .................................................................................................................... 43

6.2 Key insights ......................................................................................................................... 50

MeDICAl TeCHnOlOgIeS: A Roadmap for Unlocking Future Growth Opportunities for India 1

executive summary

Medical technology or medtech as it is popularly known worldwide, is a boon to the mankind intended to improve the overall quality of healthcare delivered through earlier diagnosis, less

invasive treatment options and reductions in hospital stays and rehabilitation times at reduced cost. Medical technology is responsible for increasing life expectancy in many disease areas, improving quality of life and allowing people to remain integrated, economically productive and socially active members of society. MedTech encompasses a wide range of healthcare products that may broadly include medical devices, information technology, biotech, and healthcare services used to treat diseases or medical conditions affecting humans.

The global MedTech market is expected to grow from nearly USD 371 billion in 2015 to almost USD 529.8 billion in 2022, reflecting a seven-year compound annual growth rate (CAGR) of 5.2 percent. However, comparatively the Indian medical device sector is highly fragmented domestic industry. The Indian medtech sector, is at a nascent stage with most of the indigenous manufacturing restricted to medical consumables and imports constitute over 75% of the current medtech market.

Instruments and appliances represent the largest segment of the MedTech industry in India, constituting 34 percent (Rs. 8856 crore) of the total industry size in 2015-16 expected to grow at a rate of 15 percent over 2015–2020. Implants segment is expected to grow faster than the other segments in the medical device industry. Patient aids and other products is the fastest growing segment of the medical devices industry in India and constituted 16 percent (Rs. 4168 crore) of the total industry size in 2015-16.

Epidemiological transition in India from communicable to include non-communicable diseases is driving key medtech segments. There is a demand for both cutting-edge precision technologies and for affordable low technology. The Indian medtech innovation ecosystem is fast evolving and vibrant with academic research, venture capital firms, government funding and promising startups developing products specifically for the Indian market. Availability of advanced and sophisticated medical technology is creating new markets & applications, increasing the dependence by doctors on advanced medical devices. This is leading to rapid obsolescence of existing medical technology thereby creating demand for replacement & upgradation of products.

Acknowledging the immense potential of the MedTech industry, India is looking to improve self-sufficiency as a part of the “Make in India” initiative. The rapidly expanding sector presents immense opportunities to global players. India is full of opportunities for medical devices companies to explore and expand their business horizons in the ever-booming Indian healthcare market.

The regulatory framework for the medical device sector in India has been rudimentary for a long time, however the government has taken various initiatives to reach the sector’s full potential.

MeDICAl TeCHnOlOgIeS: A Roadmap for Unlocking Future Growth Opportunities for India2

The government formed a task force and initiated the process of implementing its various recommendations such as separating medical devices from the definition of ‘drugs’, and allowing 100% FDI for brownfield and greenfield investments in the sector. The Government has, over the past few years, taken measures to promote research, development and manufacturing of medical devices in India and correction of the inverted duty structure for certain medical devices.

This report aims to outline the Indian medical technology market and intends to provide the reader with a specific overview of the market opportunities, challenges, the innovation ecosystem and strategies for success.


CHAPTER 1

The MedTech IndusTry: An Introduction


1.1 Medical Technology- the future of healthcare industry

Medical technologies are medical devices, in vitro diagnostics, imaging equipment and e-health solutions used to diagnose, monitor, assess predispositions and treat patients suffering from a wide range of conditions. The products manufactured by the medical technology industry range from lenses and smartphone dongles to cardiac implants and blood-glucose monitors all the way to hospital beds and MRI scanners. As a result of the innovations the medical technology industry has made possible, many people now live healthier, longer, and more active and independent lives. Medical technology is also improving the productivity and efficiency of healthcare systems, steering them onto a sustainable path.

1.2 MedTech – creating value for patients and the economy

Medical technology is responsible for increasing life expectancy in many disease areas, improving quality of life and allowing people to remain integrated, economically productive and socially active members of society.

Medical technology has also facilitated a shift to and increased use of community care, allowing treatment to be delivered at or close to the individual’s home. Community care can bring improved quality of life and greater independence to many people and for those with chronic conditions,there are considerable benefits in not having to travel to a hospital for routine healthcare. Diagnosis and treatment can be carried out in the same facility for an increasing array of conditions thanks to point-of-care diagnostics, which bring the lab to the patient.

The industry has provided considerable advances in how chronic conditions such as cardiovascular and circulatory disease, diabetes and musculoskeletal diseases are managed and treated. In addition, individuals who undergo surgical procedures now benefit from improved techniques. There are more and better treatment options: procedures are less invasive, recovery times have been reduced, and there are fewer complications. Diagnoses are more precise, determining the most effective course of treatment with increasing accuracy.

Better monitoring tools keep patients out of hospitals, and home monitoring enables patients to manage their disease while remaining independent. Patients can go back more quickly to a productive and social life.

There are other benefits too, such as improved patient safety, thanks to medical devices designed to minimize the risk of adverse events and complications. Because of more sophisticated tools for diagnosis, the course of treatment can be determined more effectively. With the rise of personalized medicine, physicians can determine what specific treatment patients will respond to without the need for trial and error.


1.3 New Trends in MedTech

Medical technology has come a long way from obsolete and manual technologies to making everything digital and instant. It is a common sight to see the doctor noting down medical records in a tablet or iPad.

Pathology labs send blood culture reports, X-Rays etc. via emails. The same is shared instantly with the Doctor staying in the different part of the region and the entire course of medication is readjusted while on the go.

The Point of Care diagnostics technologies perform hundreds of tests in minutes which takes hours’ in labs. This helps physicians take quick decisions and start the treatment immediately.

Cancer Care - Cancer progression tends to be very unpredictable. It calls for timely analysis and faultless tracking of the progression. Sometime back, it took several days to track a patient’s progress and putting diagnosis into practice. Today medical institutions can store images electronically, and the progress can be mapped in more elaborate terms. Patient’s history can also be shared with specialists based across the globe to get expert guidance instantly.

Introduction of Technologies such as Electronic Health Record system (EHR), Hospital Information system (HIS) and Picture Archival and Communications System (PACS) have only made things simpler, easier and more accessible.

Robotic surgery - In surgery, as in many scientific and technological endeavors, precision is of paramount important and this is where robots often score over humans. Robotic surgery has come into India a few years ago, and is slowly being used in treatment of cancer of the head and neck, lung, colon and rectum apart from some gynecological lignancies. Robotic surgery offers some clear advantages over conventional surgery – reduced blood loss, faster recovery from the operation, shorter stay in hospital and less likelihood of post-surgical depression.


CHAPTER 2

GlobAl MedTech IndusTry


2.1 Global Market Dynamics

The global MedTech market is expected to grow from nearly USD 371 billion in 2015 to almost USD 529.8 billion in 2022, reflecting a seven-year compound annual growth rate (CAGR) of

5.2 percent. Established centers of this industry include the United States and Western Europe. But industry trends show that Asia and first of all China, are about to play a more prominent role in the years to come.

The major drivers of growth for this market are the growth in healthcare expenditure, increasing health awareness, and ageing population. The emerging trends, which have a direct impact on the dynamics of the medical device industry, include design and manufacturing of portable and smaller devices and increasing usage of software as a differentiator in medical devices. Growth in the medical devices industry will be driven by the rapid expansion of the emerging markets, allied with steady growth in mature markets as the effects of the economic crisis begin to fade. The expansion of the middle class income group in emerging economies will result in a larger proportion of the population being able to afford procedures and treatments that were previously deemed too expensive.

The United States remains the largest medical device market in the world with a market size of around $140 billion, and the U.S. market represented about 40 percent of the global medical device market in 2015. U.S. exports of medical devices in key product categories identified by the Department of Commerce exceeded $44 billion in 2015. The medical device industry relies upon several industries where the United States holds a competitive advantage, including microelectronics, telecommunications, and instrumentation, biotechnology, and software development. Collaborations have led to recent advances including neuro-stimulators, stent technologies, biomarkers, robotic assistance, and implantable electronic devices.

The medical technology industry continues to be one of Europe’s most diverse and innovative hightech sectors. The European medical technology industry employs more than 650,000people. Germany had the highest absolute number of people employed in the medical technology sector (195,000), while the number of medtech employees per capita is highest in Switzerland and Ireland. 95% of Europe’s 26,000 medical technology companies are small and medium-sized enterprises (SMEs). The European medical technology market in 2015 is estimated at roughly €110 billion.

The biggest medtech markets in Europe are Germany, France, the United Kingdom, Italy and Spain. The same countries form the top 5 IVD markets in Europe. The European medical technology market has been growing on average by 4,6% per annum over the past 8 years, while the European IVD market growth has been slowing down until 2013, while annual growth rates in the pre-crisis period were at around 2-4%.

Data shows that even these countries depend heavily on imports for their medical technology consumption.


In vitro diagnostics (IVD) will be the largest device area in 2022, with sales forecast to reach USD 70.8 billion, representing 13.4 percent of the industry's total sales, predicts Evaluate MedTech. Roche's sales of diagnostic tests are expected to reach USD 12.8 billion in 2022, giving the company a market share of 18.1 percent. Sysmex is the fastest growing IVD brand in the top ten with an annual growth rate of 10.2 percent between 2015 and 2022.

Cardiology takes the second spot, with annual sales increasing to USD 62.3 billion in 2022 from USD 42.1 billion in 2015-16. Medtronic retained its position as the top cardiology company in 2015-16 and is forecast to remain the world's leading heart device maker in 2022, with an expected market share of 22.6 percent.

Neurology is forecast to be the fastest-growing device area, with a CAGR of 7.6 percent between 2015 and 2022.

Diagnostic imaging is estimated to be the slowest growing device area, with its CAGR between 2015 and 2022 expected to be only 3.7 percent. The market is set to grow from a global total of USD 38.9 billion in 2015-16 to USD 50.3 billion in 2022. Siemens is expected to remain the world's leading diagnostic imaging company in 2022 with 23.6 percent of the market. GE Healthcare will follow closely with a 20.3 percent share.


2.2 Major Global Players

Top 10 medical technology companies worldwide based on revenue in 2016 (in billion U.S. dollars)

Johnson & Johnson (J&J) will remain the world's number one orthopedic company in 2022, despite substantial growth for Zimmer Biomet, which is expected to expand by 7 percent (CAGR) and hold 20.6 percent of the market in 2022.

Lens maker Essilor International will be the leading company in ophthalmic technology in 2022, with sales of USD 10.2 billion. Novartis takes second place with sales of USD 7.9 billion. J&J's upcoming acquisition of Abbott Medical Optics will allow the company to retain its third-place position in 2022, with ophthalmic sales forecast to reach USD 4.8 billion.

2.3 Advancement in Medtech worldwide- Few examples

● Computed Tomography (CT) is a medical imaging method that combines multiple X-ray projections taken from different angles to produce detailed cross-sectional images of areas inside the body. CT images allow doctors to get very precise, 3-D views of certain parts of the body, such as soft tissues, the pelvis, blood vessels, the lungs, the brain, the heart, abdomen and bones.

● World’s first bionic kidney is soon to be available for transplant into a body as a perfect


replacement for a damaged kidney. Bio-hybrid approach uses living kidney cells in tandem with a series of specialized microchips powered by the human heart to filter waste from the blood stream.

● Aortic stenosis (AS) is the obstruction of blood flow across aortic valve that allows blood to flow from heart's lower left chamber (ventricle) into aorta and to the body. Stenosis forces the heart to work harder causing pressure in the left ventricle & thickens the heart muscle

● Magnetic Resonance Imaging (MRI) uses radio waves & a magnetic field to create detailed images of organs and tissues. MRI has proven to be highly effective in diagnosing a number of conditions by showing the difference between normal & diseased soft tissues of the body.

● Checking health signs such as blood pressure, temperature & mobility usually involves multiple tests and can be time-consuming. A health check chair developed by Sharp is equipped with multiple sensors that can measure vital signs all at once.

● A technique that allows images acquired from both PET and CT devices to be taken sequentially and combined into a single superposed image. The combination has improved oncology care including active treatment decisions, disease recurrence monitoring & patient outcomes.

● When patients stay motionless for months they develop bed sores which can be deadly. Electric underpants developed by researcher Sean Dukelow of Project SMART delivers a small electrical charge to activate muscles & increases circulation and eliminate bed sores.


CHAPTER 3

The IndIAn MedTech IndusTry


3.1 MedTech Industry- the sunshine sector of Indian healthcare Industry

Healthcare has become one of India’s largest economic sectors - both in terms of revenue and employment. Indian healthcare industry has seen a 15 percent annual growth in CAGR since

2011, and is expected to reach 1,876,000 crore (USD 280 billion) by 2020. Healthcare provision remains inequitable and challenges in access to quality, affordable healthcare persist in large parts of the country.

The medtech sector, which is an indispensible part of the Indian healthcare industry, is at a nascent stage with most of the indigenous manufacturing restricted to medical consumables. In fact, imports still constitute over 75% of the current medtech market. India is looking to improve self-sufficiency in medtech as a part of the “Make in India” initiative. The rapidly expanding sector presents immense opportunities to global players. India is full of opportunities for medical devices companies to explore and expand their business horizons in the ever-booming Indian healthcare market.

India is on the cusp of epidemiological transition. There is a big shift in health burden from communicable to include non-communicable diseases, which in turn is driving key medtech segments. There is a demand for both cutting-edge precision technologies and for affordable low technology. The Indian medtech innovation ecosystem is fast evolving and vibrant with academic research, venture capital firms, government funding and promising startups developing products specifically for the Indian market.

The MedTech industry has grown considerably during this period and plays a critical role at each stage of the healthcare continuum. It has been instrumental in improving access and affordability of healthcare services, albeit a number of ecosystem constraints continue to lead to high dependence on imports for addressing domestic demand.


MedTech industry is increasingly taking on enhanced roles in sustaining health in hospitals, clinics or at homes. Amazing advances in Medical Devices offer vital and potentially life-changing options for people with disabilities. These assistive devices help them maintain an active lifestyle and enjoy a good quality of life. Advancements in medical technologies have allowed healthcare practitioners to better diagnosis and treatment of the patients. The current medical device industry is driven by innovation and new technologies. The advent of engineering innovations has led to the recent development of low cost products that are at par with existing products on quality.

Availability of advanced and sophisticated medical technology is creating new markets & applications, increasing the dependence by doctors on advanced medical devices. This is leading to rapid obsolescence of existing medical technology thereby creating demand for replacement &upgradation of products.

The Indian MedTech market grew at a 10–12 percent CAGR in the past 5 years, reaching a value of 26,048 crore in 2015-16. The Indian market is among the top twenty in the world by market size, and fourth in Asia after Japan, China & South Korea. From 2015 levels, if the industry continues on its organic growth trajectory, it is expected to reach 55,040 crore by 2020, growing at a CAGR of around 15 percent against the expected global industry growth of 4–6 percent.

3.2 The Indian MedTechIndustry Segmentation

Four industry segments have been considered within the MedTech industry as follows:

I. instruments and appliances;

II. diagnostic imaging;

III. consumables and implants; and

IV. Patient aids and others.

3.2.1 Instruments and Appliances

Instruments and appliances represent the largest segment of the MedTech industry in India, constituting 34 percent (8856 crore) of the total industry size in 2015-16. It is expected to grow at a rate of

15 percent over 2015–2020. Growing at a compounded annual growth rate (CAGR) of 19 percent, therapeutic appliances are expected to lead the growth for this segment.

Key products in this segment include MRI machines, CT scanners, ultrasound machines, dental drills, dental


chairs, dental X-ray machines etc. Key players include GE Healthcare, Philips Healthcare, Schiller Healthcare, Danaher Corporation, Mectron India, Roche Diagnostics, Accurex Bio- medical, Narang Medical etc. There is great potential in low-end and mid-range systems purchased by small hospitals and facilities in rural areas.

3.2.2 Diagnostic imaging

Diagnostic imaging represents the second-largest segment of the medical devices industry in India, constituting 31 percent (8075 crore) of the industry in 2015-16. It is expected to grow at a rate of 13 percent over 2015–2020. Building on the existing installed base of electro-diagnostic and radiation apparatus, imaging parts and accessories are expected to lead this segment, growing at a CAGR of 15 percent over the next few years.

3.2.3 Consumables and Implants

Syringes, Needles and catheters form major part of consumables and disposables. Consumables and Disposables are the only trade surplus segment of the medical device sector with domestic players having a larger market share. Key players include Hindustan Syringes, Lotus Surgicals, Sutures India, B Braun, Beckton Dickinson. Most of the requirements are met through domestic manufacturing.Consumables and implants constituted

19 percent (4949 crore) of the industry in 2015-16. It is expected to grow at a rate of 14 percent over 2015–2020.

Implants segment is expected to grow faster than the other segments in the medical device industry. Few domestic companies in the implants segment are offering customized designs for the Indian population gaining competitive advantage.

Key products include Knee and hip implants, artificial joints and dental fixtures. Key players include Smith & Nephew, Narang Medical, Zimmer Holdings, J&J. Domestic players are experimenting with proprietary technologies and technology tie-ups. Products customized for the Indian market may gain a competitive advantage.

3.2.4 Patient aids

Patient aids and other products is the fastest growing segment of the medical devices industry in India and constituted 16 percent (4168 crore) of the total industry size in 2015-16. It is expected to grow


at a rate of 19 percent over 2015–2020.Hearing aids and Pacemakers form major part of the Patients Aids segments and constitute 70% of the market collectively.

Patient aids segment is basically an import driven segment with most products primarily sourced from Ireland, USA, Australia, Singapore, China and South Korea. Key Players include St Jude Medical, Shree

Pacetronics, Medisafe International, Medtronics. A majority of this growth is attributed to the growing adoption of various healthcare solutions by healthcare providers in order to meet the heightened regulatory requirements for patient care and safety, increasing need to curtail the soaring healthcare costs, and growing need to improve the quality of healthcare while maintaining the operational efficiency of healthcare organizations.


3.3 Indian MedTechMarket Structure

The Indian medical device sector is highly fragmented domestic industry. Presently, low technology products are mostly manufactured in India but high technology devices are imported due to lack of manufacturing infrastructure and regulatory framework in India.

Basic customs duty ranges from 5-7.5% with up to 4% special additional duty for finished goods and 2.5% basic customs duty on raw materials and accessories used to manufacture medical devices. High-tech equipment like MRI, CT Scanners etc constitute a big bulk of the medical devices imported into the country.

3.4 Key players in Indian Market

Currently there are 800 medical device manufacturers in India of which close to 65 percent of companies have turnover of over Rs 10 crore ($1.5 million) and 2 per cent companies with a turnover of more than Rs 500 crore ($73 million). With upcoming changes in the regulatory and policy


framework and inherent growth potential of the industry, this sector is expected to undergo a phase of consolidation.

Some key domestic players include: ● Trivitron Diagnostics (www.

trivitron.com)

● Forus Health (www.forushealth.com)

● NidhiMeditech Systems (www.nidhimeditech.com)

● Hindustan Syringes & Medical Devices (www.hmdhealthcare.com)

● Opto Circuits (www.optoindia.com)

● BPL Healthcare (www.bplmedicaltechnologies.com)

● TTK Healthcare (ttkhealthcare.com)

● Appasamy Associates (www.appasamy.com)

● Wipro GE Healthcare (www3.gehealthcare.in; wipro.com/industries/medical-devices)

● Siemens AG (w3.siemens.co.in)

● Philips India (www.philips.co.in/healthcare/solutions/)

3.4.1 Indigenous players and their products

Medical device players are also creating customized products for Indian market other than the general product line as illustrated in the table below:

Company Case in point Product descriptionGE Healthcare Compact CT Scanners

which consume less power

GE Healthcare developed a CT scan system that uses 40% less power, produces less radiation and is 40% cheaper than imported equivalents. It has a substantially smaller size (can fit in smaller clinics and hospitals) and a higher throughput (scan time is 28% faster).

Skanray Technologies

Affordable X-ray imaging systems

Skanray created a high frequency digital x-ray machine that can cater to the needs of both large hospitals as well as small clinics. The cost of the device is a fraction of that of the imported machines. This wireless device is extremely light-weight and can be easily maneuvered in congested hospital settings.


Philips Healthcare

Accessible and affordable cardiac care in tier II & tier III cities

Phillips Intuits, an advanced entry-level catheterization lab, is helping provide affordable cardiac care in smaller cities and towns in India. It has a live image guidance technology which can help vascular specialists to decide, guide and confirm the right therapy for their patients in real time.

Cura Healthcare

Affordable digital radiology systems for all resource settings

Cura manufactures direct digital radiology systems that can be floor-mounted, ceiling-suspended, or retrofitted and are suitable for both small hospitals and large healthcare institutions. Moreover, it is powered by just 15 amp and can take up to 50 images without power.

Poly Medicure Innovative ‘single use’ medical devices

Poly Medicure produces over 125 different types of medical devices at 5 manufacturing plants in India. It is the largest exporter of single use medical devices in India. In addition to manufacturing, it also invests heavily in designing in India and holds more than 140 patents in various countries and has around 350 pending patent applications.

Meril Life cardiovascular devices Meril has developed new concepts in engineering employing novel designs, drug delivery technologies and catheter-based systems that effectively bridge the gap between countries with ailing populations and struggling health care needs.

Transasia Bio-medicals

In-Vitro Diagnostic (IVD) for India

TransasiaBiomedicals Ltd is India’s biggest IVD company. Since 1991, it had adopted the ‘Make-in-India’ concept with indigenous manufacturing of sophisticated, state of the art blood analyzers and reagents.

Sahajanand Medical Technologies (SMT)

coronary stents SMT, India’s biggest stent manufacturer, has been successful in manufacturing stents . It has successfully introduced new technologies , highly sought after products in India as well as globally.


3.4.2 Global medical device players in India

Many global medical device players have also set up large R&D facilities in India which are driving innovation as illustrated in the table below:

Company Manufacturing / R&D facility(Abbott) Alere Inspired by Make in India, Alere, in 2016 had set up a world class manufacturing

facility spread over 80,000 square feet in manesar, Haryana to manufacture diagnostics kits. The facility produces rapid tests for infectious diseases, including Malaria, Dengue and HIV and export them across Asia Pacific, a region heavily impacted by these diseases. The facility produces more than 150 million rapid diagnostic test kits per year and has the capacity to expand to 300 million tests over time.

Boston Scientific Boston Scientific has set up a 100,000 square feet R&D, training and commercial centre in India to develop products suitable for Indian and Asian markets and to train physicians to use them effectively. The focus of the facility is to create market appropriate products for unmet clinical needs.

Medtronic Medtronic has set up a captive engineering research and development centre in Hyderabad providing support to global business units for improving procedural outcomes and developing future products. This 90,000 sq. ft. lab has 230 highly qualified engineers and is equipped with state-of-the-art technology.

Covidien Covidien has set up a 40,000 sq. ft. R&D centre in Hyderabad, India with an aim to tailor products to local market needs, increase speed-to-market and develop breakthrough platforms

Stryker Stryker has set up a global R&D centre in Gurgaon for developing next generation technologies and high-end medical devices. The centre also operates as a global talent hub, where Indian surgeons and engineers are trained on latest technologies.

3.5 Medical device cluster in India

Over the years various medical device clusters have emerged across India. States have drawn strength from the availability of skilled/unskilled labour and accordingly developed state-level policies.

The northern part of India is largely concentrated with low –end consumable manufacturers due to the availability of low cost labour and policy incentives whereas most companies in the southern region manufacture high –end devices or develop technology for the same due to the availability of skilled labour. The following figure highlights the strengths of the top states with medical device clusters.


Major Medical devices manufacturing clusters in India

Region City/ State Product Segment

North Chandigarh, Faridabad, Ballabhgarh, Manesar

Medical Consumables

East Baruipur in South Bengal Surgical Equipments

WestMumbai, Ahmedabad, Vapi industrial corridor in Gujarat

Pharmaceutical machineries

South Irungattukottai, ChennaiInternational medical electronics manufacturers

Diverse Bangaluru, Hyderabad, Pune Medical electronics


CHAPTER 4

IndIAn MedIcAl devIce MArkeT- opporTunITIes & chAllenGes


4.1 Investment opportunities in Medical device industry

The Indian medical technology industry is highly competitive and fragmented, with domestic firms primarily manufacturing low technology products such as disposables/ medical supplies,

and MNCs primarily importing high end medical equipment. India relies on imports to supply its healthcare system with medical technology. The medical tourism and luxury healthcare markets are among India's fastest-growing industries, which create significant demand for specialized, high-tech medical equipment. There is consistent demand for surgical instruments, cancer diagnostics, orthopedic and prosthetic equipment, imaging, orthodontic and dental implants, and electro medical equipment.

As India continues to innovate and develop new technologies, global demand and potential in the near and medium term provide India with an opportunity to become a major participant in the global supply chain of medical devices. With success stories from domestic manufacturers, India is steadily developing capabilities in manufacturing medical devices. Indian players have developed expertise in manufacturing products in consumables and implants segment. In the near term, the focus needs to be on manufacturing of low- and mid-tech products, with a gradual shift toward developing capabilities for designing and manufacturing of high-tech products.

Demand and supply-side dynamics provide an unprecedented opportunity for manufacture of medical devices in India


4.2 Demand Side Factors

Increase in per capita consumption of medical devices

Indian medical devices market is expected to grow at a rapid rate of 15% in the next decade, fueled by government plans to achieve universal health insurance cover, initiatives like Make in India, and expansion by private healthcare firms. Despite a double digit growth rate of the medical devices market at 10% in the past decade, the Indian per capita consumption of medical devices remains significantly low at ~USD 3.0. It is much lower than the global average per capita consumption of USD 47 as well as the per capita consumption of developed nations like USA and Germany (USD 415 and USD 313 respectively, in 2015).

One of the primary causes for low per capita consumption is challenges of affordability for high-end technology devices among large portions of the Indian population. Consequently, and like many other segments of the Indian manufacturing industry, medical devices manufacturing is primarily focusing on frugal engineering to develop India-specific low cost products, aimed at lower and middle income segments. The potential of this segment is expected to be unlocked as the demand increases and per capita consumption of medical devices improves.


4.3 Per capita consumption of medical devices

● According to the international monetary Fund, per capita income in India is estimated to rise to USD 2672 by 2020 from USD 1508 in 2013 adding to the already expanding middle – income group.

● India’s population above 60 years was estimated at 104 million in the 2011 census and is expected to increase to 200 million by 2025 and to 300 million by 2050

● Currently the government’s per capita healthcare spend is 1.04% of GDP and is proposed to be raised to 2.5% of GDP by 2020.

How India compares to other international markets

INDIA UNITED STATES CHINAPopulation 1,251,695,584 321,368,864 1,367,485,388Total healthcare spending

$93 billion $3 trillion $574 billion

Healthcare expenditures total (% of GDP)

4.7% 17.1% 5.5%

Healthcare expenditures per capita

$75 (USD) $9403 (USD) $420 (USD)

Expenditures on healthcare

Government: 30%Private: 70%



Size of medical device market (USD)

$3.5 billion (USD) $147.7 billion (USD) $8.7 billion (USD)

Number of hospital beds

0.7 per 1000 people 2.9 per 1000 people 3.8 per 1000 people

Age distribution 0-14 years: 28%15-64 years: 66%65 years and over: 6% (2015 est.)

0-14 years: 19%15-64 years: 66%65 years and over: 15% (2015 est.)

0-14 years: 17%15-64 years: 73%65 years and over: 10% (2015 est.)

Life expectancy at birth

Male: 67 yearsFemale: 69 years



4.4 Export potential

India has steadily widened the ambit of markets and now exports its medical devices to more than 150 countries. There is growing awareness about sunrise sector and the Government of India extends


full support in promoting exports of the sector. The Indian medical device industry is currently the fourth largest in Asia. The brand campaign for medical devices sector has been initiated as part of the Brand India Engineering campaign. Launched by Ministry of commerce and Industry, Government of India, the brand campaign aims to create true brand value in international markets for Indian medical devices. It is expected to catapult India’s status in manufacturing capabilities, by highlighting India’s competitiveness, credibility and service commitments in the medical devices sector.

4.4.1 Newer Market access due to India based innovation

Even though manufacturing remains limited to producing low technology products, a few domestic companies and MNCs with manufacturing facilities in India have successfully developed low cost products that are on par in terms of quality with existing products that require complex technical know-how to manufacture. Consequently, these products have developed a niche market in many regions globally. A few such successful products and markets include Indigenous Product Newly developed exports markets like:

Indigenous Product Newly developed exports marketsHeart Valve Thailand, Kenya, MyanmarLow cost ACT Scanner South East AsiaUltrasound and Color Doppler JapanIntraocular Lens African countriesLow cost tech. products and services Middle East, SE Asia, and Africa

With such success stories, it is not surprising that medical devices exports have recorded strong growth over the past decade. The Consumables and Implants segment has contributed significantly to exports from India, at USD 1.17 billion (2014). The top three export destinations from India in terms of value are USA (USD171 million), Singapore (USD 81 million) and China(USD 72 million).

4.5 Supply Side Factors

Shortening of lead-time and better serviceability

With a potential for strong domestic demand and other supporting factors, India is set to emerge as an ideal destination for setting up manufacturing facilities, especially for global companies looking to align their global manufacturing footprint with shifting consumption patterns. A shorter lead-time as well as the opportunity to significantly enhance service levels acts well for increasing healthcare penetration in India.

4.5.1 India as a de-risking option in the region

For MNC players, India presents a good opportunity to simultaneously de-risk their business from regional/global risks and the growing domestic market. India is set to become a major consumption


location, with high potential to become an export oriented country. While China is an example of a location that provides huge domestic demand as well as low cost manufacturing, countries like Ireland, Singapore and Puerto Rico are successful examples of markets that have become major export hubs (where exports are significantly higher than domestic sales). Capitalizing on these factors, India can move up the technology ladder and focus on manufacturing of low and mid-tech products in the near term.

4.6 FDI trends

Recent changes in the foreign exchange regulations with respect to the medical device sector has allowed 100% FDI in both greenfield and brownfield projects.

This provides a great opportunity for foreign players to enter the highly attractive Indian market. USA, Europe and Japan are the key source countries for FDI in medical devices.

However, there has been a dip in FDI in Medical devices Sector, which is due to Government’s enforcing of price control on few devices and unpredictable policy environment.

4.7 M&A and PE Funding trends

The sector, with its tremendous growth potential, has attracted significant private equity capital in the last five years. 2017 proved to be a year of innovation as MedTech players rushed to implement new technologies that enhance the patient experience, while many of the challenges persist. Since 2010,


the sector saw several M&A transactions though the average deal size has been below USD 10 million. Equipment & Instruments and consumables are the two segments attracting most foreign investments.

Companies such as Trivitron, Sutures India and Perfint Healthcare have received several rounds of investments from investors, reflecting continued faith in the sector. Equipment & Instruments and consumables segment attracted the majority of M&A and PE investments.

4.8 Key Drivers for Healthcare and the Medtech Market

Epidemiological transition and changes in demographic profile in parallel are causing a swift transition in health status. Aside from changes in disease profile and age demographics, rising incomes, increased health awareness, penetration of health insurance and increasing demands from medical tourism will push the demand for better healthcare and medtech. Factors expected to drive growth of the industry are described below:

4.8.1 Epidemiological Transition

The health burden of India has shifted from communicable to include non-communicable diseases. India’s current health status is characterized by high morbidity (incidence of disease), low mortality (incidence of death) and dual burden of communicable and non-communicable diseases (NCDs). NCDs include asthma, acute bronchitis, problems of joints/ bones, hypertension, cardiovascular diseases (CVDs), diabetes, cancer, etc. There is a pattern of increasing morbidity with age. Chronic NCDs have increased over five-fold in prevalence in ageing populations especially those over 60 years. Rise in NCDs has not replaced communicable diseases either.

a. Non-Communicable Diseases: A Snapshot

The rise in non-communicable diseases like diabetes, stroke, cancer and cardiovascular diseases has reached alarming rates within the Indian population. According to the World Health Organization, one in four Indians will die from a non-communicable disease before the age of 70. There is an increased life expectancy (age > 60 years). However, older people are experiencing poorer health due to chronic diseases. Demographically, urban females are the most vulnerable. Cardiovascular diseases and accompanying risk factors like obesity, diabetes, hypertension and elevated lipids are more prevalent in high socioeconomic groups.


● Cardiovascular Diseases: Cardiovascular diseases (CVDs) will be the largest cause of death and disability by 2020 in India. The World Congress of Cardiology estimates that 40 % of deaths in India will be from heart disease. By the year 2020, 2.6 m Indians are predicted to die due to coronary heart disease which constitutes 54.1 % of all CVD deaths. Nearly half of these deaths are likely to occur in young and middle aged individuals (30-69 years). Currently Indians experience CVD deaths at least a decade earlier than their counterparts in countries with established market economies. Heart disease has reached epidemic proportions with 30 m patients and 200,000 surgeries being performed. One of the key reasons for the grim statistics is late diagnosis of cardiovascular issues. This is more often than not due to limited access to diagnostic equipment, qualified cardiologists and preventive care especially in the rural areas of the country.

● Diabetes: India has the dubious distinction of being both the cardiovascular disease and the diabetes capital of the world. There were 69.1 m reported cases of diabetes in 2015. Studies have also shown that the disease sets in at a younger age in the Indian population. The average age of a diabetic is 40 in India, 10 years younger than in developed countries. In the rural areas where there is limited access to monitoring equipment, affordable care and trained medical personnel, the disease takes a toll on entire families. The alarming number of diabetics in the country has led to a scurry of activity in the local medtech market to manufacture cost effective, easy to use diabetes monitoring devices and service delivery innovations for early diagnosis. The innovative products such as Abbott’s Libre Pro Continuous Glucose Monitoring System has revolutionized diabetes management for patients.

● Chronic Respiratory Diseases: 30 m patients in India are estimated to have chronic respiratory disease. Smoking behaviour, the most important risk factor, contributes to maximum cases. Unconventional forms of smoking (e.g. bidi and chillum) are more common but increase the incidence of respiratory disease by 6 times. Biomass fuel, used in 90% of rural and 32% of urban households for cooking in poorly ventilated kitchens is yet another major risk factor. Rising incidence has put nebulizers on a fast growth track at 25.8% CAGR. Technologies are required to generate awareness of the disease for patient monitoring and communication.

b. Communicable Diseases: A Snapshot

Within communicable diseases, Tuberculosis, Diarrhoea, acute respiratory infections, Malaria, HIV/AIDS, maternal and child conditions account for about 50% of India’s disease burden.

● Bacterial Diseases: Tuberculosis causes around 1000 deaths each day and accounts for a loss of over 11 m disability adjusted life years (DALYs). Bacterial resistance is a growing threat due to indiscriminate use of broad spectrum antibiotics. It is estimated that 40% of the Indian population has active or latent tuberculosis. Emergence of immune compromising HIV/AIDS and diabetes could increase the prevalence. Newer diagnostic methods to ascertain for antibiotic resistance at


the onset and equipment to improve biosafety laboratory infrastructure are required. Outbreak of typhoid, an acute condition caused by poor sanitation is a reason for high mortality. The central ministry of health indicates a morbidity rate from 1 to 22 per 1000 people due to typhoid in different parts of India. Equipment to improve cold-chain to improve immunisation is needed. Cold chain is also a requirement for polio, diphtheria pertussis tetanus vaccines and diluents among others.

● Diarrhoeal Diseases: 1 out of 242 children in India dies from diarrhoea before turning 5 years of age. The incidence is highest in children below 1 year. 15% of pediatric beds in India treat gastroenteritis. Ways to improve vitamin supplementation, safe water and improved sanitation are unmet needs.

● Parasitic Diseases: Endemic diseases like Kala-azar and Malaria are major public health problems in the states of Bihar, West Bengal and Uttar Pradesh. The diseases affect the poorest people and is linked with a weak immune system, poor sanitation and living conditions. In 2013, 882,000 cases of malaria were reported. Though malarial cases have almost been halved from 2 m in 2000, emergence of chloroquine resistance and vector resistance to insecticides has hampered malaria control. India’s National Vector Borne Disease Control aims to eradicate malaria by 2030 by expanding community based diagnostic testing and treatment.

● Viral Diseases: India accounts for over 2.1 m HIV/AIDS cases with 75,948 new cases in 2015. Though HIV/AIDS rates have dropped from 24% to 0.26% between the periods 2007-2015, incidences have been increasing in several states in north and north-east India - Assam, Tripura, Sikkim. There is a need for quick diagnosis and interventions in medicine delivery across hostile terrain.

4.8.2 Emerging Trends

Digital technology adoption is already gaining prominence in Indian healthcare industry, with efforts from both the public and private sectors. The government has launched several initiatives such as Digital India, Smart Cities, Aadhaar, and Telemedicine centers, in some cases with support from the private sector. These initiatives have been largely influenced by a rising number of digital health start-ups. Some of the most widely discussed digital technologies that are being used to create healthcare solutions in India include:

● mHealth is probably one of the largest sectors within digital healthcare in India, with an estimated market size of 2.1 crore in 2015-16, which is set to rise to 5.2 crore by 2020. Acceptance of mHealth is increasing simultaneously. A study showed that 68 percent of doctors in emerging markets recommend mHealth and 59 percent of patients are already using it. Mobile apps, especially those connecting doctors to patients and enabling remote consultations, are a major segment within m-Health.


● Remote diagnosis:

Low-cost portable innovations are being developed in India to cater to the needs of its vast rural population. India's remote healthcare delivery market is expected to grow at a CAGR of 20 percent. These products help increase access to healthcare for remote and rural populations by providing point-of-care diagnostics, teleconsultation, and e-prescription capabilities.

Telemedicine is the use of technology for remote diagnosis, monitoring, and education. While telemedicine is usually categorized under remote diagnosis, the size of its market in India allows us to consider it as an independent segment.

India's telemedicine market is expected to grow by over four times by the end of 2016. Telemedicine has helped bring down provider and patient costs as well as provide care in the most remote areas. India is ahead of the curve on the global scale.

Social connectivity is an upcoming trend. Social media is prominent in India, with an average person spending 25 percent of time on social networking sites, courtesy improved telecom infrastructure. In healthcare specially, this has been in the form of patient support communities and knowledge portals on the patient side. On the provider side, this has prompted the emergence of digital chat platforms where medical professionals share knowledge and ask for help. There are also communication technologies that help connect doctors around the world for both a second opinion and training.

The Indian government, for instance, via the National Optical Fiber Network is connecting 250,000 gram panchayats in the country to the Internet, which will aid the expansion of e-health.


● Wearables

Initially, wearables in healthcare were devices that could track diet and fitness activity and were known to improve diet and exercise outcomes. Now, wearables are being increasingly used to measure basic health parameters such as heart rate. The overall healthcare wearables market in India is currently valued at 30 crore and is expected to increase in value as wearable technology is beginning to expand. For example, there is a wristwatch that acts as a personal emergency response system and relays medical and GPS data to a remote server.

● Big data

Big Data is slowly entering the Indian healthcare landscape. Different healthcare players are now realizing the value of combining consumer insights and internal company data to inform and optimize their product offerings, and are accordingly increasing investments in the necessary tools. In this way, the healthcare system can pull consumers toward them and share these insights to work with other players in the space.

● Smart Cities

Smart cities have begun to use technology to enhance the use of resources within the existing infrastructure.

● Electronic medical records (EMRs)

EMRs are beginning to be adopted by healthcare providers. This digitization has paved the way for advanced IT systems, such as health information systems and cloud computing to increase remote and ubiquitous accessibility to patient data. This should help reduce medical errors and improve health outcomes.

The world is rapidly becoming more digital, and any business not realizing and incorporating this trend will fall behind. India has the potential for digital growth, given its current technology penetration, advancing economy, growing population, and accelerating healthcare industry. The rise of digital technology is pushing India to achieve health for all, putting the country at the forefront for foreign investment. With these opportunities, India is emerging as the global leader in digital health.

4.8.3 Increasing Population and Life Expectancy

From 1.2 bn in 2011, India’s population is set to grow to 1.4 bn by 2025. Declining infant mortality and increasing life expectancy will augment the demand for healthcare. Even though the Indian population is currently young – with a median of 26 years – the population distribution is slowly changing. Indian population over 60 years will contribute to 12.5% of total population by 2025, which


means, a whopping 175 m will be elderly. Estimates by the UN Population Fund show that 66% or 115 m of the elderly are likely to suffer from at least one NCD ailment.

4.8.4 Rising Income Levels Increases Affordability

Access to affordable healthcare is a major constraint for 59% of households with an annual income of <USD 3000 per year. Households in the income bracket of USD 3000-7500 are expected to increase to 37.5% by 2018. This increasing population group, who are willing to pay for better healthcare services, will be favourable for the industry.

4.8.5 Increasing Health Awareness Drives People to Seek Healthcare

In January 2016, India crossed 1 bn mobile phone subscriber’s mark. The ubiquitous reach of mobile phones has made it the most effective way for last mile connects, of which 302 m had internet connections. Cheapest calling rates in the world and increasing internet penetration are of consequence for tele, e- and mhealth. This translates to an increased market opportunity for medtech in this segment. Connected devices are currently one of the top 5 fast-growing segments in medtech in India.

4.8.6 Health Insurance Coverage

In 2014 only 17% of the Indian population had a health insurance. So the ability of lower income groups to access quality healthcare still remains an impediment. Government sponsored schemes account for around 80% of the health insurance coverage provided. The low penetration is set to change as the commercial health insurance policies have been increasing at 10% CAGR. Health checkups which are mandatory for health insurance would also rise requiring quality medtech to service the demand.

4.8.7 Rising Medical Tourism

India is currently one of the top three destinations for medical tourism in the world. The medical tourism industry in India is expected to grow to USD 10.3 bn by the year 2020 from USD 2.8 bn in 2015. Investments in luxury healthcare are growing because of the strong demand for high quality below-international prices of healthcare. For e.g. ABV is investing USD 78 m for a luxury hospital in Mumbai, Aster Medcity has built a 575-bed hospital in Kolkata,Fortis has built a 450-bed hospital in Delhi. India hosted 240,000 medical tourists in 2013. Highly sought-after treatments in India include bone marrow transplants, cardiac bypass surgery, eye surgery and hip replacements, all of which require sophisticated and state-of-the-art medical technology.

The Medical Tourism growth in India will be dependent upon availability of latest technologies which enables healthcare facilities to perform world class procedures.


4.9 Industry challenges in India

Having evolved significantly in the last decade, the Indian medtech industry is witnessing a high growth trajectory. But due to a number of ecosystems constrains, this industry sector has not been able to achieve its full potential. The medical device sector has witnessed consistent growth over the last six years. However, factors such as inadequate regulatory systems, non-alignment with global standards and the lack of quality product testing infrastructure are issues that hinder its progress. Furthermore, insufficient attention by policymakers and a complex tax regime have also been responsible for its underdevelopment.

The recent policy changes initiated by the government to create a predictable and enabling ecosystem are expected to set the ball rolling to make India a powerhouse in manufacturing of medical devices. Medical device regulation in India only applies to certain product categories. However, India's underdeveloped regulatory framework is a significant obstacle for foreign manufacturers of regulated device types. The weak rupee makes it difficult for some medical device companies to remain profitable in this market, particularly for manufacturers competing with low-cost Chinese products. Also, foreign manufacturers will also encounter significant competition from American, European, and Japanese companies.


CHAPTER 5

reGulATory And polIcy FrAMework


5.1 Current Regulatory Regime

The existing regulatory framework for medical devices in India has been inadequate for a USD-4.9billion industry. Currently, only 15 devices are notified as medical devices and have specific

regulations. These medical devices are treated as ‘drugs’ under the Drugs & Cosmetics Act, 1940 . As a result, these medical devices have been subject to the restrictive code/laws of the pharmaceutical sector. Ambiguity in the clinical trial mechanism and the lack of specific regulatory framework to govern the manufacturing standards and quality control systems has resulted in a lag in product quality as compared to global standards. At the policy level, there is not much support for foreign exchange laws, duty structures, etc., which has resulted in an unattractive environment for investors and ultimately obstructs technological improvements and innovations.

After high endeavors from various stakeholders in the market, the government has notified the Medical Device Rules, 2017, which separates regulatory norms for manufacturing medical devices from drugs. These new rules came into effect on the 1st of January, 2018. The new Rules have been framed in conformity with Global Harmonization Task Force (GHTF) framework and conform to best international practices. The primary focus of these practices is to ease norms for obtaining a license and conducting clinical trials and also reduced manufacturer-regulator interface. Medical devices have been classified into 4 categories based on their risk type (Class A, B, C and D). Central government is directly involved in approvals and licensing the devices falling under category C & D.

5.2 Make in India

In September 2014, the Indian government launched the ‘Make in India’ campaign, with the objective of making India a global manufacturing hub; thus, bringing foreign technology and capital into the country. Medical device is one of the 25 focused sectors identified by the Indian government as a part of this campaign. Accordingly, a task force was formed to address industry issues and make recommendations on ways to assist the industry.

The regulatory framework for the medical device sector in India has been rudimentary for a long time,however the new government has taken various initiatives to reach the sector’s full potential. The government formed a task force and initiated the process of implementing its various recommendations such as separating medical devices from the definition of ‘drugs’,and allowing 100% FDI for brownfield and greenfield investments in the sector. However, since Medical Devices are regulated as drugs, this FDI facilitation has n’t progressed.

The Government has, over the past few years, taken measures to promote research, development and manufacturing of medical devices in India and correction of the inverted duty structure for certain medical devices. An inverted duty structure impacts the domestic industry adversely as inputs and raw materials are taxed at a higher rate than import duty on finished products. In addition, the


country is in the process of setting up three Med Tech Parks. These parks are expected to come up in Andhra Pradesh, Maharashtra and Gujarat. The major purpose of these Med Tech Parks will be to reduce the cost of production or manufacturing, as these parks will have in-house common manufacturing facilities and also for consolidated raw material procurement

5.3 Policy changes enabling conducive environment for innovation

Today, India offers a unique and dynamic platform for nurturing medical device innovations to transform ideas into reality. Recognising the immense growth potential of medical device sector, the Government of India has identified the medical devices industry as a sunshine sector for the ‘Make in India’ initiative. Since 2014, India has witnessed numerous fiscal initiatives and policy changes which led to the development of a robust and enabling ecosystem for this sector.

To realize the full potential of Medtech sector, the government has taken several steps and policy initiatives including initiatives to facilitate ease of doing business, tax incentives to boost domestic manufacturing, 100 per cent FDI by MNCs, predictable regulatory regime to boost confidence of investors to develop quality medical devices and setting-up exclusive infrastructure facilities, etc.

Although these policy initiatives were taken-up over a period and were functioning in silos, but as a whole, these led to creation of an incredible enabling ecosystem to boost medical technology innovation and manufacturing in the country.

India is well placed in some segments of the medical devices sector such as outsourced contract design, development and manufacturing. Manufacturers in India have significant focus on ‘design to cost’ factor owing to the price sensitivity in the Indian market. This in-turn has led Indian products to gain competitive position in majority of the global markets. India manufactures range of predominantly low value to high-end medical equipment catering to one of the most diverse set of consumers. India has steadily built capabilities in designing and development of vast range of electro-mechanical diagnostic and therapeutic devices. Besides, implantable devices and active implantable like pacemakers are also developed for most stringent quality norms. Today, all segments of medical devices are being developed in India, including high precision components, sub-assemblies, printed circuit boards assembling, implantable grade materials and sterile packaging, biodegradable implantable materials, noble metals and biomaterials like nitinol, polymers, silicones, epoxy, microelectronics, polymers, laser welding-hermetic sealing, etc.

The Indian medical devices industry is a sunrise segment in the healthcare space. With a strong focus on technology, innovation and a conducive regulatory framework, this sector is expected to attract strong investments in the coming years. Many international companies in this field are already using India as a manufacturing base by either setting up facilities of their own or by acquiring domestic manufacturers. Some examples include Alere’s (Abbott) manufacturing plant in Haryana,


3M’s manufacturing plant in Pune, Becton Dickinson’s manufacturing facility in Haryana, Hollister’s setting up manufacturing facility in India and Philips Medical Systems’ acquisition of Medtronics and Alpha X-Ray Technologies.

5.3.1 Fostering Innovation

The government through Department of Biotechnology is also investing substantially on collaborative programmes like Stanford India Biodesign programme (SIB) and School of International Biodesign to boost medical technology innovation in the country and for developing the next generation of medical technology innovators and entrepreneurs in the country. Such programmes are being implemented at AIIMS and IIT Delhi in collaboration with leading universities of the Western world such as Stanford University, universities of Australia and Japan.

These programmes are creating medical technology innovators, multiple innovative medical device technologies and start-ups which are making huge impact. Programmes like SIB are promoting startup entrepreneurship which is crucial for developing innovations, creating new jobs and introducing competitive dynamics into the business environment.

5.3.2 Good Funding Support

Funding is an essential ingredient for technology development. Today, India offers plethora of funding opportunities from government and private players for all the stages of technology development and commercialization including ideation stage, proof-of-concept, technology validation, scale-up and commercialization.

Adequate funding opportunities are available in India for supporting scientific, technical, intellectual property, business, and marketing and distribution dimensions of a successful medical device venture. SBIRI, BIG, BIPP, SPARSH, Grand Challenge India, CRS, TDB, etc., are the funding schemes which can be availed by medtech enterprises and entrepreneurs. Apart from government funding sources, international funders, VCs and angel inventors also provide funding support to path breaking, innovative technology solutions. The funding that can be availed ranges from 20 lakhs to few crores.

5.3.3 Great Push for Startups

As the startups spur and create new Intellectual Property, they need appropriate mechanisms for protecting their IP which is their key asset. To build a strong eco-system for nurturing innovation and startups in the country that will drive sustainable economic growth and generate large scale employment opportunities, the Government of India in January 2016 launched ‘Startup India’ as its flagship initiative. The government through this initiative aims to empower startups to grow through innovation and design. On January 16, 2016, the ‘Scheme for Facilitating Start Ups Intellectual Property Protection (SIPP)’ under the ‘Start-up India’ action plan, was launched by the government. The registered startups in India are now eligible for 80 per cent concession in patent application fee.


Under this scheme, the government has set-up a panel of facilitators to provide legal support and assist start-ups in filing of patents, trademarks and design applications on pro-bono basis and offer fast track processing of patent applications. Only the statutory fee has to be borne by the start-ups. This was the major step taken by the Indian government in order to encourage budding entrepreneurs to enter the market and compete as well as innovate along with the established industries. In the recent past, the start-up culture has begun to emerge in India which is now becoming home to 3,100 startups every year.

Apart from facilitating IP filing and protection of intellectual capital of the startups, institutional mechanisms in the form of bio incubators and technology entrepreneurship parks are also being set-up in a big way in the country to nurture bio-entrepreneurship. Different government departments and ministries such as DST, BIRAC, MSME, DIPP, etc. are taking various initiatives to setup such facilities across the country. Over the last two decades, DST has provided over 250 crores to set up Science and Technology Entrepreneurs Park (STEP) and Technology Business Incubators (TBIs). The STEPs and TBIs are engaged in nurturing startups and, since 2008, few of them have also been provided support to the tune of Rs 60 crores to implement the seed support system (SSS) for start-ups in Incubators.

DSIR has provided a support of over Rs 225 crores to industries for development and demonstration of innovative technologies since 1992 and a support of over Rs 25 crores to individual innovators since 1998.

Biotechnology Industry Research Assessments Council (BIRAC) under DBT has provided funding of around Rs 677 crores to entrepreneurs, startups, SMEs and translational organisations since 2012. DeiTY, under a scheme for Technology Incubation and Development of Entrepreneurs (TIDE), supports 27 TIDE centres up to March 2017 in the area of electronics and ICT to strengthen the technology incubation centres at the institutions of higher learning.

The government also supports development of national manufacturing facilities and incubators through their scheme namely ‘Support for Entrepreneurial & Managerial Development of Small & Micro Enterprises through Incubators’. Government has also recently declared that it will develop a private-public partnership model for setting up 35 new incubators and 31 innovation centres in cities including Bangaluru, Chennai, Gurgaon, Hyderabad and Mumbai, to name a few.

5.3.4 Medical Device Manufacturing Parks

Another major leap for fostering indigenous medical device manufacturing in India has been the setting-up of medical device parks in various states including Telangana, Gujarat and Andhra Pradesh. Goal of these manufacturing parks should be to become recognised manufacturing hub for medical devices, help in national agenda of Make in India and contribute to volume generated


cost reduction of medical devices for patients facilitating scientific facilities, affordable space and plug-and-play ecosystem is going to provide a major thrust to the indigenous manufacturing of cost-effective and quality medical devices for India and global markets.

5.3.5 Other Major Steps

To further create an enabling environment, various other fiscal initiatives have been taken-up by the government in the past couple of years including introduction of 100 per cent FDI policy to attract foreign investments in 2015; correction of inverted duty structure on import of raw materials for medical device manufacturing in January 2016; and notification of Medical device rules recently in February 2017.

The new rules have been framed in conformity with Global Harmonisation Task Force (GHTF) framework and conform to best international practices. Only 15 categories of medical devices are at present regulated as drugs and, to that extent, the current regulatory practices in India were not fully geared to meet the requirements of medical devices sector in the country. The new Rules seek to remove regulatory bottlenecks to Make in India, facilitate ease of doing business while ensuring availability of better medical devices for patient care and safety. These rules envisage creation of a robust ecosystem for all stake-holders including innovators, manufacturers, suppliers, consumers, buyers and regulators.

Indian medical device industry is worth over Rs 60,000 crore and country’s humungous import bill for this segment amounts to over Rs 23,000 crore (approximately $4 billion) while exports amount to only over Rs 7,000 crore ($1.1 billion). The global medical devices and technology market is expected to grow to $520 billion by 2020. The Indian market is among the top 20 in the world by market size, and fourth in Asia after Japan, China and South Korea. However, the per capita spend on medical devices in India is the lowest among the BRIC countries at $3 ($7 in China, $21 in Brazil and $42 in Russia). It is significantly behind developed economies like the US ($340). This current under–penetration of medical devices in India represents a sizeable growth opportunity.

The inflow of foreign direct investment (FDI) in medical devices was $90 million between December 2014 and August 2015, post the government permitting 100 per cent FDI under the automatic route. Several MNCs have been increasing their manufacturing footprint and locating research centres in India to serve both the Indian and global markets.

From the consumers’ perspective, it is imperative that apart from creating a favourable policy framework and support structure fostering medtech innovations in India, suitable steps also need to be taken in order to bring about a change in the mindset of all the stakeholders more particularly, the intended users of the devices.


5.3.6 Opportunities in the Medical Device Sector

Recent policy and regulatory measures undertaken by the government can bring tremendous opportunities for domestic companies as well as MNCs. The anticipated shift in the regulatory framework is expected to attract more funds and technology in coming years.

Drivers Opportunities for Domestic Players

Opportunities for MNCs

Envisioned regulatory and policy framework (bringing standardization and efficient administration)

Quality-focused domestic companies can capture market share of sub- standard players

MNCs can launch new products across segments

Conducive environment for technological innovations

Domestic players can get access to global innovations through technological collaborations

MNCs can leverage domestic players' reach and their understanding of India’s market dynamics through strategic collaborations

Focus on manufacturing and research in India

Domestic players with interna-tional-standard infrastructure can explore contract manufac-turing opportunities

MNCs can explore outsourcing opportunities to cater to the Indian as well as global markets

5.4 An opportunity lost

Though the 2017 Rules have introduced a number of business friendly provisions, one cannot help but regret that it was an opportunity lost to bring more change. The fact of the matter is that even after commencement of the 2017 Rules, medical devices will continue to be deemed to be drugs, since the definition of medical devices is tied to the definition of drugs under Act. This has repercussions under other laws, most important of which is the price control legislation – the Drugs (Price Control) Order, 2013 issued under the Essential Commodities Act, 1955. The Essential Commodity Act, 1955 has notified drugs as defined under Act as essential commodity. Due to the reference to this definition, medical devices which are deemed to be drugs are also currently subject to limited price control. Had the government separated the definition of medical devices form the definition of drug, the tragedy that inadvertent and unintended price control of medical devices is today would have been avoided.

Having said that, even the notified Medical devices now regulated under Medical Devices Rules 2017 will still be seen as drugs under the law!


CHAPTER 6

FuTure ouTlook & key InsIGhTs


6.1 Future outlook

Overall, we should set out a short- to medium-term goal of developing products in chosen categories that are affordable and targeted at specific problems. This should be done through

partnerships between industry, academia and the Government. As the ecosystem and support structures mature, we should aim to develop products that have a large-scale impact and higher value products. On a longer term, we should aim to shape and position medtech as a strategic tool and industry that would help improve Indian healthcare and serve as a global innovation engine for medtech for emerging markets.

What prevails currently is a sense of uncertainty for domestic and international players alike, indicating a need for radical and fast-paced regulatory initiatives for the sector. Preparing the eco-system for this radical change – setting up of the legal framework, enforcement (from both industry and government ends), and improving infrastructure and reimbursements are some of the steps that will help the market thrive automatically. Above all, access to safe, quality, affordable healthcare will definitely improve and the patient will benefit.

Collaboration – a key success factor

While some isolated examples of frugal innovation can be observed in the Indian medical technology industry, the challenge is to develop and implement cost effective and scalable models of delivering medical technology. However, it is practically impossible for the industry to achieve this alone. A collaborative approach towards innovation in the industry will help in overcoming this challenge and enable the medical technology industry to be the game changer in transforming the Indian healthcare scenario. A coordinated effort is required from all stakeholders, including the industry, academia, healthcare providers and the government to promote medical technology innovation in India. Each of these stakeholders must contribute towards strengthening the medical technology ecosystem, which will in turn improve healthcare delivery in the country.

The industry needs a platform to promote and celebrate innovations. Effective collaboration across the value chain is essential for managing innovation and new product introduction; managing the product portfolio; lowering development and support costs; delivering product to the marketplace faster; protecting the company’s intellectual capital; and effectively and


efficiently supporting the customer. For instance, the academic research being carried out in the country remains mostly theoretical, with little practical application for product development in the medical technology industry. Greater interaction is required between the academia, government and the industry to conduct research that is relevant. The government, on its part, needs to realize that medical technology is a critical part of the healthcare delivery value chain, and provide avenues for new product development and commercialization. Similarly, collaboration with ICT companies is essential to develop innovative business models for micro-accessibility of affordable healthcare and medical technology.

A dialogue needs to be started with insurance companies as well, in order to design products for promoting sales of medical technology and effectively expand in areas like home care. Partnership with healthcare providers is undoubtedly critical since medical technology forms an important part of the healthcare delivery value chain. Care providers can offer the backbone for implementing innovative business models of medical technology companies.

Learnings from other countriesFor India to establish a firm footing in the global market, a robust policy and regulatory framework is required. China (as aconsumption and manufacturing hub) and Ireland (as a major exports hub) provide ideal examples on how to develop a sound policy and regulatory environment for the medical devices industry.


Potential impact ofMake in India for medical devices

While the Make in India initiative is directionally right, its impact on improving access to affordable quality healthcare depends on how it is framed, developed and implemented over the next few months. A ‘step change’ is possible through collaborative transformation, with key levers being suitable policy initiatives; focus on fostering local innovation and making India a global hub for medical device manufacturing.

Role of the government

The government plays multiple roles in the sector that include being a policy maker/regulator for medical devices and the larger healthcare sector development agency/authority for conducive growth of the industry and also a buyer/user of medical devices in its health facilities. Given this, policy interventions are required from the Government for the medical devices industry,the wider medical devices ecosystem from suppliers to customers, and the macro environment to create a conducive business ecosystem.

Government as a policy maker for the medical devices industry

Policy and regulatory measures for the medical devices industry have the potential to create an enabling environment that would set the direction for large scale indigenous manufacturing of various types of medical devices. These actions are pre-requisites to communicate to the medical devices industry and the wider healthcare community on the Government’s intent and actions to develop India as an emerging hub for medical technology.


Some of the key policies and strategies that the government could implement include:

● Prevent Drugs style price control on Medical Devices: The drugs style Price control on Medical Devices does not help patients because medical devices are not consumed directly by patients like drugs. There have been several reports that price control on cardiac stents and Knee implants have not resulted in reduction of overall procedure cost to patients.

● Independent regulations for medical devices: While the Government has articulated that the industry is different from pharmaceuticals, the Drugs and Cosmetics (Amendment) Bill 2015 is pending in the Parliament of India. The bill needs to be prioritised to support the industry in having a distinct identity as it would then enable the industry have specific set of regulations

● Incentivizing medical devices manufacturing: Financial measures need to be undertaken to incentivize manufacturing in this emerging sector and specifically in the early stages of creating the manufacturing ecosystem. Some of these could include:

○ Providing CENVAT/Duty credit on raw material: Parity of duty on raw materials with finished goods should be maintained to enable the industry move from the inverted duty structure. Duty credits on import of raw materials need to be provided

○ Enabling concession duty/VAT parity with imported equipment: In line with the above, concession duty and VAT parity with imported equipment/devices to be enabled.

● Ensuring robust quality parameters : Quality parameters that are globally recognized are critical for indigenously manufactured medical devices to compete with products from other countries. This requires domestic manufacturers to align their product quality and processes to global standards. The Government can play a role in enabling medical devices manufacturers with faster access to FDA or FDA equivalent certifications in a cost effective manner. A possible option is to set-up a fast track FDA desk in India, with the Government of India subsidizing certification expenses.

● Segment specific incentives: Product segments ranging from low to medium technology and with a precedence of manufacturing in India can be focused on in the short term. These include disposables, consumables, certain imaging equipment, implants, stents, some categories of laboratory diagnostics equipment, innovative mHealth based solutions etc., which can be incentivized for indigenous manufacturing

● State specific incentives: As with some of the peers like China, states which plan to develop a medical devices manufacturing base can provide specific incentives including cheaper access to land, training subsidies etc.


● Government as a policy maker and development agency for medical devices value chain

The Government plays a critical role in developing the ecosystem (suppliers, buyers,distribution etc.) of the medical devices industry. The Government is also a large purchaser of medical devices with its network of medical colleges, secondary care hospitals and primary healthcare through PHCs and sub centres. Various other Government programs also require consumption of medical diagnostics and devices.

Given this context, there are a number of initiatives that the government needs to consider for implementation. Key initiatives could include:

● Expanding skill initiatives to high technology manufacturing: The initiatives taken under skill India can be expanded to high technology segments within medical devices. Human resource availability for both manufacturing and research, development and usage of medical devices should be improved.

● Access to cheaper/subsidized funding: Medical devices manufacturing is capital intensive. Availability of capital at cheaper rates would encourage industry specifically Indian organizations to undertake manufacturing initiatives. The Government can support the process by creating a fund that provides capital at a cheaper rate in the initial years of ecosystem creation.

● Promote research, innovation and India specific products: Innovation and manufacturing need to be aligned to generate domestic demand. Products innovated and designed for the Indian market is best manufactured in India. Creating an ecosystem with research institutions, technology parks, incubators etc. along with funding sources would drive innovation and manufacturing in India.

● Government as a policy maker for macro-economic environment for Make in India Initiative

The Government’s role as a policy maker for the macro economic environment supporting the Make in India initiative would have a significant impact on the initiative for the medical devices industry. While there are dimensions specific to the medical devices/healthcare industry the broader aspects relating to manufacturing in India are industry agnostic and need to be addressed uniformly.

Some of them could include:

● Improving ease of doing business: Aspects relating to bureaucracy, license regime,multiple layers of approvals etc. need to be addressed as to encourage both multinational companies and Indian organizations and entrepreneurs to manufacture in India. Single window clearance for setting up manufacturing plants would be welcome.


● Creating a positive image for brand India: As the Government drives the Make in India initiative across sectors, it needs to focus on creating a positive brand image for Indian manufactured goods.

● Role of the healthcare Industry

Industry needs to align with the Government initiatives to fully realize the potential of Make in India, leveraging the Government’s policy and regulatory changes. While most initiatives have to be undertaken by medical devices manufacturers (both MNC and Indian companies), other key stakeholders (healthcare providers and health insurers) have an equally important role

in facilitating the initiative. Additionally, the role of industry associations, funding agencies including PE/VC, incubators, etc. is critical in supporting the development of the manufacturing ecosystem.

● Medical devices companies

● Develop India as a manufacturing hub: India needs to be viewed as a manufacturing hub for domestic demand as well for international markets covering both developing and the developed countries. Both MNCs and Indian organizations need to leverage local production to cater to domestic demand and international markets.

● Undertake frugal innovation or India based innovation in combination with indigenous manufacturing: Collaborating across Make in India and Innovate in India, thedevelopment of India based product innovations that can be manufactured locally could create attractive solutions for both India and other emerging markets. The design and manufacture of products closer to the customer would lead to high quality and cost effective innovations

● Review and revisit India market operating model: Both MNCs and Indian companies need to revisit their operating models for India. Product / segment specific strategies need to be revisited/created, where low to medium technology products that have a precedence of manufacturing in India can be produced in large quantities to cater to under penetrated domestic markets. Partnerships with Indian companies by MNCs would improve cost efficiencies and reduce time to market. Partnerships with healthcare delivery players would enable innovative on business models. Additionally, MNCs need to view manufacturing in India as a risk diversification strategy, as ~30% of incremental demand for medical devices would come from India

● Healthcare delivery companies

● Form partnerships with manufacturers to design and use new innovations: Healthcare delivery companies need to play an integrated role with medical devices players across


multiple areas which could include:

○ Partner in formulating new innovations: Being closest to the customer, healthcare delivery companies would be a significant part of the ecosystem specifically in driving India innovation and products aligned to India requirements

○ Support the innovation and manufacturing ecosystem: Healthcare providers need to support initiatives on innovation by the medical devices companies by enabling the testing of and awareness for the products. As these innovations are typically cost effective and result in cost savings, the benefits could be shared among the stakeholder community including patients. This would also support the brand building of Made in India medical devices

○ Form partnerships to improve access and reach leveraging complimentary business models: Business model level partnerships utilizing low cost products and solutions would improve access and reach

● Health Insurance players

● Cover diagnostics and screening products outside the IPD settings (including home care etc.) – wider coverage to increase demand: Health insurance coverage in India typically does not include OPD settings. Coverage for screening, diagnostics and monitoring products outside the IPD setting would increase demand for medical devices and also promote prevention and early detection. Health insurance players need to explore possibilities of covering such diagnostics and home care devices, including wearable medical devices, integrated mHealth based devices etc.

● With an increase in insurance penetration, create tiered products that encourage quality and local manufacturing. Also, bringing in quality under reimbursement net: As the penetration of insurance grows, insurance companies can bring in quality of medical devices under the reimbursement net. Indigenously manufactured devices can be provided a higher level of reimbursement under both private and Government insurance programs, thus encouraging local production. Others in the ecosystem (Incubators, accelerators, industry associations, funding agencies including PE/VC, etc.)

● Collaborate on India based products and India based innovation: Incubators focused on medical technology and devices should be encouraged to work with industry and academia to foster innovation and entrepreneurship. This would aid in the commercialization of innovative India based products


● Provide access to patient capital for India based models: Funding agencies including private equity and venture capital firms should promote access to patient capital for inclusive business models to develop India based innovations. These models would cater to underprivileged segments while also encouraging medical devices manufacturing.

● Undertake awareness and market building initiatives at the industry level: Industry associations should undertake awareness building initiatives and create platforms to exchange ideas, bring partners together, and facilitate interactions between industry players and regulators

6.2 Key insights

In 2018, the MedTech industry will begin to lay down new paths to a more connected, transparent, convenient ecosystem of care. Forging new ways of receiving, paying for, and delivering care is a hallmark of the creation of a new health economy – an industry that is more digital, nimble, responsive, and focused on consumers. As organizations master these tools and services, they will combine them in new ways, form new partnerships, and ultimately transform the industry.

A key concern for the MedTech industry today is that irrespective of the sophistication of technology, all segments/sub-segments of medical devices are being treated uniformly by regulators and other stakeholders in the ecosystem. However, going ahead, as the industry moves toward indigenization, a differential treatment for each segment/sub-segment is necessitated. A phased approach needs to be adopted for indigenization, based on how well the manufacturing ecosystem develops for each segment/sub-segment. Only when the ecosystem matures to enable indigenous manufacturing of comparable global quality standards, tariffs and barriers need to be used to protect indigenous manufacturing. This would ensure orientation of the industry toward quality, thereby making indigenous manufacturing globally competitive.

Partnerships between industry, academia and government are required to boost research in neglected areas. In Medical technology imported products account for about 70 per cent. The domestic industry mostly focuses on consumables, test kits and lower-value equipment. As a result, most local medtech companies are medium and small enterprises; only a few have an annual revenue of over 100 crore. The opportunity for indigenous solutions and domestic medtech production is huge. The market can grow into an estimated over 1 lakh crore in seven to 10 years. But it needs efforts on multiple fronts to realize the potential. Right products, models and partnerships can do the job.

The low-cost model

Economies of scale, and volume-price dynamics that has made the low-cost manufacturing model successful in India’s growth in vaccines and generic drugs, leading to global leadership, is absent in medtech.


Here, the cost of manufacturing is typically 15-35 per cent of the selling price. A large part of this is components (typically imported), with a small share of that being domestic components, assembly, packaging, etc. For a typical hospital equipment, the domestic manufacturing value added would not be more than 5-10 per cent of the final value of the product. As a result, pure-play ‘low cost manufacturing’ alone cannot give impetus to indigenous medtech development, given India’s weak manufacturing ecosystem for technology-driven hardware. Other key factors that existing medtech products are not tailored for are limited availability of trained and skilled personnel, space, infrastructure and operational constraints in hospitals and clinics, maintenance and servicing burden of equipment, travel distance and time for patient and caretaker, paying capacity of patients and families, are some of the contextual elements that today’s imported medtech products do not cater to. This is an untapped opportunity and requires innovation and R&D driven product development.

Managing the Time factor

While, medtech doesn’t have the scale and homogeneous nature of vaccines and drugs, it has an advantage that makes it more amenable for R&D, innovation and entrepreneurship in a practical and affordable manner. Compared to larger investments required in drugs and vaccines to support discovery based research that need extensive clinical trials, majority of medtech products take a problem-solving R&D approach using engineering techniques.

Development budget and time of a mid-value medtech equipment at a price point of, say, INR 5 lakh, with a potential market of around 1,000 pieces annually, is typically less than three years and INR 5 crore. To fill in the funding gap, government agencies such as BIRAC are supporting startups in this area at various stages towards commercial products.

The long gestation period in medtech projects, from concept to market success, is often cited as a barrier for developing new products. While it is indeed true that medtech product development takes five to seven steps, from concept to manufacturing, including animal and human trials in certain cases, this technical complexity of medtech product development is still much lower (and less expensive) than drug or vaccine development. Market success and scale takes longer than developed markets, and is a function of product fit with market needs, access to early adopters and thought-leaders, and a viable business model involving hospitals and doctors to encourage uptake of the product.

To mitigate these gaps, R&D and product development should be done through partnerships with as many stakeholders as possible. These partnerships should include collaborations with R&D institutions, hospitals, government health agencies, component vendors, OEMs, and, even other medtech companies.

With the current ecosystem, one could target such products at a 3-5-year time frame in hospital instruments, diagnostic devices, health monitors, and surgical equipment. R&D, engineering and


manufacturing for such products is possible as established companies and startups in this area have demonstrated in recent years, albeit in small number. More complex platforms and products such as active implants, minimally invasive surgery systems, high-end equipment need long-term R&D at the level of 5-7 years. Development of such complex technologies should be led by our R&D institutions with government support, in partnership with industry with goal of market-ready products.

Create awareness

One of the weaknesses in our industry, R&D and innovation efforts is lack of deep knowledge of the healthcare process and detailed mapping of interplay between the medtech product, user, support personnel, beneficiary, revenue earner, associated processes and infrastructure. This is a crucial exercise and should be one of the core elements of product development. Medtech being only 5 per cent of overall healthcare market, industry needs to articulate its position and demonstrate value to the healthcare provider in order to create space and appetite for new products.

Quality Medical Research

Another key missing piece for strong R&D-driven medtech is lack of high quality medical research. This is constrained by the limited number of research and teaching hospitals. Current clinical workload and patient care priorities in both public and private institutions do not lend space for technology oriented medical research. Preclinical testing, animal labs, and requisite knowledge, skills, facilities to offer such services are very few in numbers. These would require longer-term efforts from the Government and will gain attention as medtech industry gains traction.

Policy reforms

The Government of India has identified the medical devices industry as a sunshine sector for the Make in India initiative. Financial incentives like tax holidays should be extended to new manufacturing plants.

Lower import duties on raw materials and inputs will boost domestic manufacturing. Government should work with domestic and experienced global stakeholders to identify positive incentives and policy measures that will attract investment and innovations. With a wholesome improvement in India’s business environment, the healthcare services can be made available at lower costs which will hugely benefit people across classes.

The business environment in India needs to be more investors friendly to bring in an adequate amount of investments and solicit robust growth in the manufacturing industry. For the ease of doing business, our regulatory policies needs to be in line with global regulatory practices so that there should be no hold back for medical device companies to invest and operate in the country.

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assoCHaMTHE KNOWLEDGE ARCHITECT OF CORPORATE INDIA

Evolution of Value Creator: ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. Having in its fold more than 400 Chambers and Trade Associations, and serving more than 4,50,000 members from all over India. It has witnessed upswings as well as upheavals of Indian Economy, and contributed significantly by playing a catalytic role in shaping up the Trade, Commerce and Industrial environment of the country.

Today, ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the technology driven cyber age of ‘Knowledge Based Economy’.

ASSOCHAM is seen as a forceful, proactive, forward looking institution equipping itself to meet the aspirations of corporate India in the new world of business. ASSOCHAM is working towards creating a conducive environment of India business to compete globally.

ASSOCHAM derives its strength from its Promoter Chambers and other Industry/Regional Chambers/Associations spread all over the country.

Vision: Empower Indian enterprise by inculcating knowledge that will be the catalyst of growth in the barrierless technology driven global market and help them upscale, align and emerge as formidable player in respective business segments.

Mission: As a representative organ of Corporate India, ASSOCHAM articulates the genuine, legitimate needs and interests of its members. Its mission is to impact the policy and legislative environment so as to foster balanced economic, industrial and social development. We believe education, IT, BT, Health, Corporate Social responsibility and environment to be the critical success factors.

Members – Our Strength: ASSOCHAM represents the interests of more than 4,50,000 direct and indirect members across the country. Through its heterogeneous membership, ASSOCHAM combines the entrepreneurial spirit and business acumen of owners with management skills and expertise of professionals to set itself apart as a Chamber with a difference.

Currently, ASSOCHAM has more than 100 National Councils covering the entire gamut of economic activities in India. It has been especially acknowledged as a significant voice of Indian industry in the field of Corporate Social Responsibility, Environment & Safety, HR & Labour Affairs, Corporate Governance, Information Technology, Biotechnology, Telecom, Banking & Finance, Company Law, Corporate Finance, Economic and International Affairs, Mergers & Acquisitions, Tourism, Civil Aviation, Infrastructure, Energy & Power, Education, Legal Reforms, Real Estate and Rural Development, Competency Building & Skill Development to mention a few.

Insight into ‘New Business Models’: ASSOCHAM has been a significant contributory factor in the emergence of new-age Indian Corporates, characterized by a new mindset and global ambition for dominating the international business. The Chamber has addressed itself to the key areas like India as Investment Destination, Achieving International Competitiveness, Promoting International Trade, Corporate Strategies for Enhancing Stakeholders Value, Government Policies in sustaining India’s Development, Infrastructure Development for enhancing India’s Competitiveness, Building Indian MNCs, Role of Financial Sector the Catalyst for India’s Transformation.

ASSOCHAM derives its strengths from the following Promoter Chambers: Bombay Chamber of Commerce & Industry, Mumbai; Cochin Chambers of Commerce & Industry, Cochin: Indian Merchant’s Chamber, Mumbai; The Madras Chamber of Commerce and Industry, Chennai; PHD Chamber of Commerce and Industry, New Delhi.

Together, we can make a significant difference to the burden that our nation carries and bring in a bright, new tomorrow for our nation.

D. S. Rawat Secretary General | [email protected]

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ASSOCHAM OVERSEAS 28 OFFICES

AssochAm’s RegionAl & oveRseAs offices

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DISCOVERYOURS!

The Associated chambers of commerce and industry of india

ASSOCHAM Corporate Office: 5, Sardar Patel Marg, Chanakyapuri, New Delhi-110 021Tel: 011-46550555 (Hunting Line) Fax: 011-23017008, 23017009 Email: [email protected] Website: www.assocham.org

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