medical device industry

Medical Disposables:

Current Challenges & Future Growth Potential

D L Pandya, CEO & Editor

Medical Plastics Data Service

mediSOURCEasia.com

Medtech India 2013

October 3, 2013

Presentation Overview

• Regulatory Scenario

• About Medical Devices

• Fundamental Differences between Drugs And Medical Devices

• Industry Scenario: Global, Asia & India- Overview

• Indian Medical Device Industry: SWOT Analysis

• Challenges Facing Indian Medical Device Industry

• Roadmap For Future Growth

Regulatory Framework, Innovations and R&D, Creating Affordability,

Collaborating With Healthcare Service Providers, Industry - Academic

Institute Linkages, Manufacturing Landscape, Exports, Medical Device

Clusters, Skill Development, Pricing Strategy, Reimbursement Mechanism

• Conclusion

Medical Technology: Definition

As Per The Tabled Drug & Cosmetic Bill (Amendment) 2013…

Medical devices are expected to be defined as per GHTF which defines Medical

device as any instrument, apparatus, implement, machine, appliance, implant,

reagent for in vitro use, software, material or other similar or related article which:

• is intended by the manufacturer to be used, alone or in combination, for human

beings, for one or more of the specific medical purpose(s) of diagnosis, prevention,

monitoring, treatment or alleviation of disease, supporting or sustaining life,

providing information by means of in vitro examination of specimens derived from

the human body.

• does not achieve its primary intended action in or on the human body by

pharmacological, immunological or metabolic means, but which may be assisted in

its intended function by such means.

Huge Range of Products

• About 1.5 million different devices

• Consist of 900 product groups

– covering 50 clinical specializations

• Broadly classified as

– Diagnostic devices:

• MEDICAL INSTRUMENTATION

• Testing kits and reagents

– Therapeutic devices:

• Implantables

• Disposables & Re-usables

Fundamental Differences Between

Drugs And Medical Devices

Pharmaceutical Product

INDUSTRY

• Industry with long historical background Industry is comprised primarily of multinationals

Medical Technologies and Devices

INDUSTRY

• Relatively young, very diverse industry

• Industry is made up of a few large companies and a large number of small and medium-sized companies.




PRODUCTS

• Generally based on mechanical, electrical and materials engineering

• Designed to perform certain functions based on quality, safety and performance


PRODUCTS

• Based on pharmacology and chemistry. Now encompassing biotechnology, genetic engineering, etc.

• Product development by trial and selection on basis of quality, safety and efficacy




PRODUCTS

• Generally act by physical means

• Continuous innovation and iterative improvements based on new science, technology and available materials


PRODUCTS

• Biologically active: effective when absorbed into the human body

• Continuous innovation and some improvements based on new science and technology




PRODUCTS

• Short product life cycle and investment recovery period (typically 18 months on the market)

• The majority of new products typically bring added functions and clinical value based on incremental improvements


PRODUCTS

• Extensive product life cycle and long investment recovery period

• Long investment recovery period



Medical Technologies and

Devices

PRODUCTS

• High distribution and training

education costs and

requirement to provide service

and maintenance (for high tech

devices)

• Often integral to clinical

procedures, so user training

and education are essential for

safe and effective use


PRODUCTS

• Low distribution cost, and, in most cases, no service or maintenance

• Training required for use much less intensive than for high tech devices

Medical Device Markets - The Growth

set to Accelerate Global v/s India

• The healthcare delivery system is under tremendous

pressure to identify and commercialize simple medical

solutions quickly to lower costs, control infections, reduce

liability and eliminate preventable errors. The trend toward

more user-friendly home health care products will also spur

the demand for innovative medical devices.

• With the convergence of scientific, electronic and digital

technologies; new breakthroughs in medical devices will play

a critical role in solving the problems in healthcare and

enhancing the human condition. Innovation is the life-blood of

the industry.

Medical Device Markets - The Growth


• “It is likely that by 2015, the medical devices industry in

APAC will be looking at a growth rate almost double that of

the rest of the world, signifying exciting times ahead indeed

for Asia Pacific.”

• "Some of the market restraints that APAC will have to

address include regulatory and reimbursement hurdles, lack

of sufficient distribution networks and inadequate

training/certification for allied staff.”

Outsourcing of Medical

Products to Asia

• In turn, many citizens are demanding higher healthcare

standards and services.

• Most Asian governments are striving to improve their

healthcare in order to meet these domestic demands.

• They are also placing greater importance on international

standards and regulations to improve the quality of their

medical device market.


Products to Asia

About outsourcing

• Asian countries such as China and India are constantly striving to raise their medical device standards and regulations in order to attract more foreign companies.

• In April 2005, India and the United States even signed an open skies agreement, deregulating flight restrictions and allowing for increased air travel between the two countries. As long as Asian countries continue to offer advantages-whether by improving production efficiency or by reducing costs - U.S. medical companies will continue to outsource to Asia.


Products to Asia

About outsourcing

• To take advantage of lower costs and specialized manufacturing capabilities, more and more medical device companies will eventually follow this trend, too.

• The truth is that once one company in an industry begins taking advantage of global outsourcing, other companies must follow suit—if only to stay competitive. After all, if Company A is experiencing strong benefits from outsourcing, it is likely that Company B will as well.


Products to Asia

About outsourcing

• Outsourcing manufacturing has raised strong political

concerns about the loss of American jobs.

• However, in a global economy, it is generally advantageous

for companies to perform different tasks in different locations.

• For instance, in the automobile industry today, various parts

are made at different factories and then assembled at one or

more locations.

Medical Device Markets :

Indian Scenario

• Healthcare visionary, Jerome H. Grossman, has noted that

“Given the fundamental forces for change in health care, we

have reached a tipping point in medical services delivery.

Rapid change is inevitable.

• It is an opportune time to seek and commercialize

innovation from the medical profession and bring it to the

gatekeepers in medical supply to solve the problems more

rapid.”

Healthcare Market In India : Overview

• In spite of global downturn, growth far better than its

other industrial counterparts

• Regarded as one of the fastest growing sectors in India

• Driven largely by :

increasing penetration of healthcare across the country,

A growing lifestyle disease burden, and

Continued leveraging of India as a cost effective

manufacturing base

Large scale Imports

Healthcare Market In India : An Overview

Share of different categories:

Medical, Dental & Surgical equipments : 40%

Plastic Disposables : 25-30%

Implants : 20-25%

Growing awareness about health, new technological

innovations in the areas of diagnosis and Treatment,

increasing old age population, changing disease patterns

(blood pressure, hyper tension etc) towards the ones

requiring long term treatment etc are some of the factors

leading to growth of the industry.

GHTF Classification – 4 Classes

CLASS RISK LEVEL DEVICE EXAMPLES LEVEL OF

REGULATION

A Low Risk Surgical instruments /

diagnostic kits Minimal to NIL

B Low moderate

Risk

Hypodermic Needles / suction

equipment, instrumentation

Manufacturing QS

to Verification of

safety

C Moderate-high

Risk

Lung ventilator / Orthopaedic

implants, blood bags

Verification to

Premarket

Approval

D High Risk Heart valves / Implantable

defibrillator / Shunts

Premarket

approvals

Indian Medical Devices Industry

Revenues by Major Market Segments

Total Medical Devices Industry: Percent of Revenues by Segment (India)

Segment Revenues (%)

Diagnostic Imaging 17

General Surgery 47

Clinical Instrumentation 09

Critical Care 05

Self-Care 05

Cardiac Surgery 04

Ophthalmology 04

Urology 02

Others 08

Overview To Healthcare Market In India

Healthcare Market Segmentation(CII-Grant Thornton

Report, September 26, 2013)

• Healthcare Delivery:

Estimated size: USD 32 Billion

Includes Government and Private Hospitals

• Pharma and Biotech:

Estimated size: USD 20 Billion

Includes the manufacture, extraction, processing,

purification and packaging of chemical and biological

materials to be used medication for humans or animals

Overview To Healthcare Market In India

• Medical Insurance Services

Estimated size: USD 3.7 Billion

Includes health insurance and covers an individual's

hospitalization expenses and medical reimbursement

facilities

• Medical Technology

Estimated size: USD 4.4 Billion

Includes companies engaged in manufacturing medical

devices, equipment, electronics and consumables

Medical Device Markets – The Growth


Indian Medical Device Industry:


Medical Equipments Segment

The major import of medical equipments include : specialized body scanners, ultrasound scanners, specialized portable and non-portable X-ray machines, implantable pacemakers, radiography and radiotherapy equipment.

The major promising sub-sectors include :

Medical Imaging Equipment

Cardiology Equipment

Laboratory Instruments/Supplies

Cancer Diagnostics & Treatment Equipment


Medical Disposables Segment

• Used by practically all hospitals and private nursing homes in the country, including diagnostic and pathological laboratories. In hospitals, disposables are used, both in the ward as well as the OPD.

• Still significant numbr of devices and disposables are being imported at international prices.

• Only few low end products are being manufactured indigenously, such as fluid administration sets, blood bags, and products such as condoms and copper – T. majority of the low end devices and disposables are manufactured in the an organized sectors.


FOUR LEVELS OF THE DISPOSABLE MARKET

Market Share Growth

Level 1 Syringes, Scalp Vein Sets,

Needles, Urine Bags

60% 15%

Level 2 Stopcocks, Nebulising

Chambers, IV Cannulas

Extension tubes

15% 37%

Level 3 Blood bags, Endotracheal

tubes, arterial catheters

15% 35%

Level 4 Heart Valves, Dialysers 10% 20%


Medical disposables : The major products manufactured in

India

I. V. Sets and Tubes

I. V. Catheters or Canulaes

Disposable Catheters

Disposables Syringes and Needles

Blood Bags

Disposable Hand Gloves

Disposable Non-Woven Fabric Products

SWOT Analysis

STRENGTHS

• Entrepreneurial nature of the people.

• Excellent social structure.

• Cheap and abundant low and medium skill manpower.

• Stable Governments.

• Established base of Pharmaceuticals , Biotechnology,

Petrochemical and chemical as well as Pharma and Plastics

Processing Machineries industry in the state.

• Huge latent domestic market.

• Some of the units of the industry have International Quality

Certifications like “CE” , ISO 13485 , etc.

SWOT Analysis

• Indian industry is emerging as an innovative, low-cost

producer of quality Medical Devices

• Some of the units have been successfully exporting

their products for many years.

• India has already become the top 5 preferred source

status for syringes, needles, IV catheters, contraceptives,

blades, gloves, intra ocular lens..

• Lower cost of living

• Positive quality of life.

Complexity and Uncertainty in

Medical Devices

• The environment for the medical device industry is complex

and difficult to predict.

• Health Insurance norms evolving in reimbursement for

treatment.

• Continuous innovation of products and technologies is a

proven way to generate premium prices for medical

devices.

Complexity and Uncertainty in

Medical Devices

• Companies need to understand how customers will

perceive a proposed innovative solution and how quickly

they will adopt and integrate it into their routines and

processes.

• Professionals in the medical device industry need to

develop skills to deal with uncertainty and complexity.

• The medical device industry is adapting very fast to its

changing environment.

Challenges Facing Indian Medical

Device Industry

The industry today is facing an entirely new scenario - one in which

regulation is ambiguous but changing, markets are shifting,

healthcare is penetrating in Tier II cities, FDI restrictions are

increasing, customer landscapes and customer demands are

constantly evolving and generating entirely new product/ pricing

pressures.

• Infrastructure

• Regulatory Mechanism

• Manpower And Technology

• Investment / Access To Technology

• Financial Incentives

• Access To Capital / FDI inflows

• Absence Of A Comprehensive Reimbursement System

Roadmap For Future Growth

Regulatory

Framework

Safety,

Efficacy &

Affordability

Research &

Innovation

Workforce

& Training

Monitoring

Patient

Outcomes

Pricing

Strategy

Domestic

Manufacturi

ng

Reimburse

ment

Mechanism

Regulatory Framework And the Pace of Proposed Changes

• The amendment proposed to be put before Rajyasabha shortly will be called

“Drugs and Cosmetics Act and Medical Devices, 1940 Act.

• Medical devices are expected to be defined as per the Global Harmonisation Task

Force ( GHTF ).

• The bill that would replace the earlier Drugs and Cosmetic Act is expected to lay

down separate provisions for Medical Devices including a separate definition of

them, their riskbased classification for regulatory control, Clinical Trials on Medical

Devices, Conformity Assessment Procedures, Penal provisions, etc.

• This is in stark opposition to the scenario today wherein medical devices are

treated as drugs. The situation is unlike in the US and EU which have separate

pathways for medical devices and pharmaceuticals.


• Apart from the notification issued in 2005, in March last year, the Government upon the

recommendation of the DCGI and examination by the Expert Committee, has further

confirmed 11 devices such as Spinal needle, Insulin syringes, three way stop cock as

an accessory of I. V. Cannula / Catheter / Perfusion Set, Introducer sheath, Cochlear

implant, Close wound drainage set, AV fistula needle, Extension line as an accessory

of Infusion set, ANGO kit / PTCA / Cathlab kit, Measure volume set and Flow regulator

as an accessory of Infusion set as drugs.

• FICCI recommends a single regulatory authority with sufficient resources allocated to

it for effective implementation and monitoring .

• Association Of Indian Medical Device Industry ( AIMED ) also advocates sharing of

regulatory controls given the vast diversity of technologies and varying risk profile of

Medical Devices with a National Regulator for Policy, Licensing & Registration of

Manufacturers / Importers / Exporters for enabling a single window and harmonized

controls


Need For Medical Technology

Innovation in India

• Larger number of Implants and other Medical Devices

today are outsourced and imported from other parts of

world

• This makes them costlier and many people are not able to

afford them

• Medical technology innovation and development in India

is a crucial issue

• Regulatory controls are critical for the development of

Medical Device Industry


Innovation in India

•Innovation In Indian Medical Device Industry

Key enablers supporting Innovation are: Risk Funding, Framework for Public

Private Partnerships, Independent Regulatory Structure as well as special focus

on capacity building in public institutions

•Industry Partnership With R & D Institutions

The Medical Device Industry mostly consists of MSMEs and therefore R&D

capability will require partnerships with R&D institutions and laboratories. The

Government should take the lead along with CII, ASSOCHEM, FICCI, etc. to

promote such linkages between R&D institutions located in different parts of the

country. A cluster approach linking Medical Device companies located in

particular region with R&D institutions would be a good way to start. Suitable

fiscal Incentives may be provide to promote investment in R&D.


Innovation in India

• Industry Partnership With R & D Institutions

It is felt that funds for Innovation by small industries should be available.

Govt. should support. Industries also must recognize the importance of

Innovative products development and R&D.”

• Collaborating With Healthcare Service Providers Resulting In

Affordability For Masses

As per Dr Balaram Bhargava, of All India Institute Of Medical Scinces, it

is essential to have “not only partnership, but collaboration and co-

operation is required between Medical Device Companies and

Healthcare providers.


Innovation in India

•Collaborating With Healthcare Service Providers Resulting In

Affordability For Masses

It is a win-win situation for both .” Looking to the large domestic market

and the need for the Healthcare provider to be affordable for the masses,

Dr Balram feels that ,”the Medical Device Companies can collaborate to

identify the unique unmet needs from healthcare providers and develop

safe, appropriate and affordable solutions”. He also feels that the Indian

Industry will become more competitive in Device Development.

Dr. C. P. Sharma, also supports him saying that “Healthcare providers

must be involved in new product development by Medical Device

Industry”. Dr Sujoy Guha also believes that , “Health Care providers are

to be a part of the consortium.


Innovation in India

•Collaborating With Healthcare Service Providers Resulting In Affordability For

Masses

Unless this process takes root urgently, India looks down the barrel of a future ridden

wherein technology at a very high cost would be in the form of “imported” devices only,

putting severe strain on scarce healthcare resources, a situation that our nation cannot

afford.

•Opportunity For Larger Purchasing Power By Healthcare Providers

Because of such partnerships, “The Healthcare providers leverage a larger purchasing

power which can lead to lower procurement costs and these can be passed on to masses to

increase affordability. Because of such cooperations ,” New enabling technologies can be

tested and validated through Healthcare providers which can help in cost reductions at a

faster pace“.

•Clinical Research

The Indian clinical and healthcare provider community has thus far not revealed a strong

focus on outcome tracking, clinical research and publication of results. There is however, a

tremendous opportunity for collaborative work between the domestic device industry and

Indian healthcare providers.”


Innovation in India

•“Standford India Biodesign” Programme : Developing Leaders In The Medical Device

Industry.

As per Dr Balram Bhargava , “Industry has to recognize the importance of R&D for their

long-term sustainability and growth. Innovation is key component in R&D. Industry has to

make conscious effort to develop medical device design capabilities. Government has taken

several initiatives to encourage R&D in terms of subsidies, funding opportunities and

capability development.”

Dr Balram Bhargava is currently leading ‘Stanford India Biodesign’ Programme.

Introducing the Programme , he mentioned that ,” we are exposing fellows in the Medical

Device Design Innovation and best practices from Silicon Valley. We are slowly building

capabilities to acquire this knowledge and implement here to develop leaders in the medical

device industry.”

Mr Kishor Khanna believes that , “this is one area where the government is supporting not

just medical device industry but all industries to set up their R&D cell. Government is

providing tax incentives by virtue of weighted deduction if the R&D project is approved by

Department of Science and Technology.”


Innovation in India

•Industry – Academic Institute Linkages And Need For Improvements

The general opinion of the experts related to Industry – Institute Linkages is that though it

exists to a limited extent , the present level is not sufficient for a successful healthcare

delivery. The linkage needs to be stepped up to move up the Innovation through the value

chain. The increased interface Between R & D centres, Academia and Industry will lead to

bringing affordable products faster to the markets. SCTIMST , IIT's and other leading

Institutions have a great pool of talent and Industry should develop partnerships with them

to fast track Innovation and improve quality of existing devices.

“ The “Stanford India Biodesign “ program is , also creating opportunities to bring the

stakeholders (i.e. Industry-Institute) on a common platform, have an open dialogue and

collaborate! Innovate future! “ as introduced by Dr Balram Bhargava.


Innovation in India

• Innovation Clusters

As per Dr Balram Bhargava, “ Government has already initiated the Programme on

Innovation Clusters, which aims to promote collaborative R&D, so that our industry will

operate at the frontiers of knowledge. This will largely benefit the small industries, which are

economic growth engines and major source of Invention and Innovations. I think we need to

promote these initiatives on a larger scale so that more and more companies benefit from

the eco-system.”

• Medical Device Industry Supply Chain In India

A strong supply chain supports the Medical Device Industry to improve Global

Competitiveness. Industry leaders feel that a positive approach will be collaboration with the

industry and academia to develop indigenous manufacturing base of all possible materials

required by the industry. Not only input material but also the availability of high tech

machinery essential for moulding, extrusion and assembly is not at par with other countries.

A synergetic approach is required where the industry, academia and government work

towards developing the technology base in India.”


Innovation in India The Manufacturing Landscape

The Indian medical devices industry forms a very small part of the total manufacturing

industry accounting for only 0.2% of all certified facilities. The high-tech end of the medical

device market is currently led by multinationals with extensive service networks; whereas

low end equipment and disposables are led by domestic manufacturers because of their

cost effective innovations.

Collaborative trends across these two segments are visible through deals and

acquisitions, setting up of local manufacturing by large international players and other

technical alliances.

Local manufacturing impetus by foreign players over the last few years:

Nipro

Corp

Setting up a manufacturing facility at Pune to produce medical devices, especially equipment to

support haemodialysis treatment process

B Braun Besides its suture manufacturing plant in Chennai, B Braun acquired a controlling stake in Hyderabad-

based medical devices manufacturer Oyster Medisafe

Terumo

The Company has set up a strong manufacturing base in India for blood bags, seals, component

extractors, storage and transfusion sets and services blood centres across the globe


Innovation in India

The Manufacturing Landscape

•Need For Financial Support For Product Developments, Commercialization

And Productivity Improvements

In western countries almost 30-40% start up companies or newly formed entities are

funded by either Venture Capitalists or Private Equity players. This gives these companies

enabling capital to spend on R &D and step up capital expenditure to bring in products

faster to the market. Similar environment needs to be created in India with help of Financial

institutions. Financial support should be available for companies involved specially in

Product development through One time grants from Universities and Government

institutions.”

Indian manufacturers do not have the capacity or resources to make such huge

investments in R&D on their own.


Innovation in India

The Manufacturing Landscape

• Need For High Quality Components And Raw Materials

Industry feels that in order to promote starters in the Medical Device Industry , the import

duties for raw materials and components be reduced significantly. The Industry is looking

for support “in the form of suitable tariff changes to enable access to high quality

components and material.”

Innovation in the field of medical devices including orthopaedic implants is driven by the

need to improve clinical outcomes. Ideas generated out of this need require to be carefully

nurtured through the processes of design, prototyping, testing and validation which are

becoming increasingly complex due to increasing international regulatory pressures.

Government should support for high risk research and innovation to deserving and

experienced sections of the domestic industry .Setting up of crucial knowledge based

facilities focused on testing and validation of devices is another critical area where

Government driven actions will go a long way in supporting the emergence of a strong

medical device sector


Innovation in India

•Globally Competitiveness Exports

The Indian Medical Device Industry is severely disadvantaged compared to the Western

World & also other global competitors including China

It is absolutely essential for the Government, both at Centre and State levels, to have a

clear vision to develop Indian manufacturing capabilities in the Medical Device Industry. The

Industry also demand that the Government should declare Healthcare Sector as a Priority

Sector which will drive higher capital investments in Manufacturing.

• Export Incentives

In order to be competitive, the Industry badly needs support from the Government. The

Industry needs Higher Duty Draw Back as well as Increase in DEPB rates by at least 2 – 3

%. Interest subvention scheme should be extended to Medical Devices so that exporters

can get access to lower cost of funds.


Innovation in India

•Medical Device Clusters

The concept of creating and supporting Medical Device Industry Clusters in India is still at

very nascent stage. The Industry strongly feels that Both Government as well as Industry

should give priority to this activity.

The Industry believes that, “Creating of Special Medical device Technology parks and

Clusters will fuel growth of Medical Device Industry. If land is available at concessional rates

(some states in India are already giving special low rates for Land of Bio-tech Industries)

and vocational Training institutes are developed around these clusters, then there will be

easy availability of skilled Manpower which will facilitate the faster development Medical

device Industry in India. Some states like Gujarat, Tamil Nadu and Rajasthan are already

working in this direction. The State Governments definitely need to push the creation of

these clusters at a faster pace.


Innovation in India

Medical Device Clusters

Creating and supporting Medical Device Clusters will go a long way towards giving a

boost the sector in India. The availability of common sterilization facilities, tooling and

engineering workshops, testing facilities, etc. will help reduce the overhead burden on

MSMEs. Government organizations like CII, ASSOCHEM, FICCI should support and

promote such clusters.

Virtual Clusters

“Virtual Cluster” As Opposed To The “Physical Cluster”

Virtual Clusters are not restricted by geography , It is defined as a “Cluster” Of

Knowledge, Knowhow, Skills And Capabilities. Industry feels that Government should

identify existing skills and capabilities in varied areas present in various parts of the country,

either at academic institutions or Government supported laboratories. It should then tie up

these capabilities together based on some shared common objectives.

Other Critical Challenges:

• Skill Development

Building a trained workforce

Biomedical engineering training and certification programmes

• Getting the correct pricing strategy

Appropriate reimbursement mechanism

Using refurbished equipment in a regulated and safe manner

• Warehousing Requirements

Higher Volume products should be centralized so that they can be easily distributed to

various parts of the country.

Warehouses with proper storage facilities should be created in each District for storage

of products to ensure efficient distribution to smaller healthcare centres. This will ensure

shorter delivery times. Public Private Partnerships will definitely make this more

affordable.


• Reimbursement Mechanisms

The role of the government has to shift from provider to payer. Latest Five Year

Plan (2012-17) proposes an ambitious expansion programme of healthcare related

services including doubling the level of public health spending to 2.5 % of GDP and

increasing health insurance coverage from 25 % to 75 %

GOl and other stakeholders should aim to reduce out-of-pocket payment up to

40% in the coming years

Government can consider group coverage to make provision for private sector

group employees

Reduction of insurance premiums


Conclusion

•Medical technology providers and healthcare providers need to work, with patient

outcomes and cost-effective care in mind.

•The government has to play the role of a key enabler, taking care of:

-product approval framework

-safety guidelines

-FDI policy

-reimbursement mechanisms

-med-tech clusters for indigenous manufacturing

-R&D benefits

-up-skilling the workforce

•This would provide a strong platform for med-tech and healthcare operators to

collaborate on and innovate, delivering what payers need and deserve


medical device industry

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