By addressing regulatory concerns, enhancing supply chains, fostering R&D, and investing in infrastructure and skills, India can emerge as a global leader in medical devices’ manufacturing. The potential for exponential growth is within our reach.
Healthcare is the primary right of each citizen. Our healthcare needs should be covered by the state. Unfortunately, India’s healthcare infrastructure is so poor, and government insurance coverage is so limited and underpenetrated, that a middle class family ends up spending a hefty amount. We all remember how Covid exposed the heath infrastructure of India and the country’s far from readiness to handle such pandemics.
India now has a population of over 1.4 billion, surpassing China, and is home to 18% of the world’s population. According to the Human Development Report 2020, out of 167 countries, India ranks 155th on bed availability per 10,000 population. India has just 5 beds per 10,000 people, compared to the WHO recommendation of 30 beds. Our government spending on healthcare is only 3% of GDP, compared to the world average of 11%. This clearly indicates that India has a huge deficit of hospitals and medical devices.
The primary drivers of the medical device industry are described below.
The current total available market (TAM) for medical devices in India is US$12 billion and is expected to grow annually at 12.5%. It is projected to reach US$40 billion in a decade’s time, which is a higher growth rate than the global average of 5% (IBEF). The exports of medical devices from India stood at US$2.9 billion in FY22 and are expected to rise to US$10 billion by 2025.
The growing per capita income of India, focus on preventive care and wellness, and the aging population will further contribute to the demand for healthcare delivery.
The world experienced the supply-chain concentration risk during the Covid pandemic, and the economies across the globe have decided to de-risk the supply-chain though ‘China+1’ policy. India stands at a sweet spot to leverage this opportunity though its unique advantages including cost-effective labour, a rich natural resource pool, conducive policy structures, and geographical suitability.
India is witnessing significant investments from global business houses in setting up semiconductor fabs, chip designing R&D, semiconductor packing, assembly lines, and after-market support systems. Apple and their EMS partners—Foxconn/Wistron/Pegatron, Hyundai, Mitsubishi, LG, among others, are gearing up their capex plans for India.
We are also seeing equal interest by big Indian business houses, including Vedanta, TATA, Ola, Ather, and Ampere, who have revealed huge capex plan for the next couple of years. The overall sentiment around manufacturing in India is very bullish, as reflected in the record listings of Dixon Technologies, SGS Syrma Technology, Avalon Technologies, etc on the stock exchanges.
These advantages in India are invigorating the electronics manufacturing ecosystem, and medical devices sector is not untouched by these stimuli. In FY20, foreign investments in the medical devices sector increased by 98% YoY to ₹21.96 billion (US$301.01 million), as against ₹11.08 billion (US$151.87 million) in FY19.
India has made significant strides in global rankings on the Ease of Doing Business Index. The government has taken a series of steps to make India the most preferred destination for manufacturing.
First, the government has introduced time-bound, single-window clearance for all regulatory clearances and licenses.
Second, India is partnering with companies to help them acquire land and provide access to all the necessary resources.
Third, the country is committed to offering the most competitive business environment through production linked incentives and research linked incentives across sectors.
Fourth, India is also committed to providing a stable policy/regulatory environment to the investors so that they rest assured about the continuity and longevity of return on investments.
Fifth, the country has announced National Medical Devices Policy 2023 to catapult the medical device production and innovation in India to position itself as a future leader in the domain.
In July 2022, the government tabled a draft for the new Drugs, Medical Devices and Cosmetics Bill 2022, to assure and offer thorough legal protection and to ensure that the medical items sold in India are reliable, efficient, and up to required standards (Source – IBEF).
To improve the quality standards of medical products and boost their global acceptance, all critical medical devices have been put under the scope of Central Drugs Standard Control Organization (CDSCO), which has established the regulatory standards on quality that all medical device manufacturers must adhere to. This step has brought the ‘Quality First’ mindset to the forefront in the industry.
To facilitate easy business existence, India has established a strong National Company Law Tribunal (NCLT) under The Insolvency and Bankruptcy Code, 2016 (IBC), which creates a consolidated framework governing insolvency and bankruptcy proceedings for companies, partnership firms, and individuals. The government of India is committed to build brands from India and not just brands of India
Amid all the tailwinds, there are a few headwinds that may decelerate the growth momentum. Let’s look at some of them.
The industry is at a very nascent stage. The implementation of Medical Device Rules 2017 has introduced new regulatory requirements, including product registration and compliance with quality standards. Navigating the regulatory landscape may be time consuming and costly. This leads to delays in go-to-market time and may hinder innovation.
Quality can never be ignored; however, a calibrated and phased implementation is the need of the hour. Policy planners should collaborate with industry advocacy groups to make the transition to a new regime seamless and devoid of business risks.
The government wants every manufacturer to take extended producer responsibility for plastics, e-waste, and batteries. These are good practices without a doubt, but at this juncture, when the industry is finding it hard to make its mark commercially in the global market, such regulations increase costs and inhibit growth.
The industry expects the government to shoulder the responsibility alongside them and share environmental and sustainability responsibilities, so that the organisations can focus more on the core functions and create greater value for the county.
The current size of the medical industry in India is US$12 billion, against a global market size of approximately US$500 billion. Therefore, India accounts for just 2.5% of the global total available market. Operating at this size makes the supply chain expensive and non-competitive.
Indian manufacturers are treated as unimportant by global suppliers. As most of the components are imported into our country, we also suffer from geopolitical risks. The state can play a significant role here by liaising with semiconductor manufacturers to ensure seamless supplies at the right price for medical products’ end use.
The end users’ market—hospitals—in India is highly fragmented, with numerous small hospitals spread across geographies, making the downstream supply chain expensive. The market is highly driven by distributors, and products change hands multiple times before reaching the end customer. Efforts to consolidate the market could make access easier and more cost effective.
Lack of R&D and IPR protections
The current manufacturing focus is more towards product assembly. This is a good trend to start with, but it should integrate backward in the value chain and put efforts into product design and development, which requires investment. As this is a fledgling sector, businesses may not be able to invest in R&D to the extent required to become market leaders.
The government should incentivise or directly invest in building R&D clusters and test labs, or collaborate with other nations on technology sharing. This strategy has been followed by countries like China, Korea, and Israel to become market disruptors. China, even today, supports R&D though its various policy measures.
India has been criticised on global forums for its deficiencies in protecting intellectual property rights. This needs immediate attention of the government to encourage global houses to bring innovation to India.
Long product development cycle
As medical devices are used on humans, the quality norms are stringent. Regulatory standards require products to pass rigorous clinical evaluations to demonstrate their efficacy in the local context. Heavy dependence on healthcare facilities, who may in some cases be disinterested in collaborating with the developers, leads to missed opportunities.
The government can play a greater role in bridging the gap between research and adoption to encourage the uptake of innovative medical technologies. Testing products to meet the global quality standards is crucial but also expensive, which inhibits small innovators. If this activity is supported by states through either policy route, or direct investment in setting up testing ecosystems, it will go a long way in invigorating the industry.
Infrastructure and workforce
The medical devices industry requires robust infrastructure and efficient manufacturing capabilities. India faces challenges in terms of inadequate infrastructure and limited access to specialised manufacturing facilities.
Developing and maintaining a skilled workforce is vital for the growth of a robust medical devices industry. However, India faces a shortage of specialised engineers, technicians, and healthcare professionals with expertise in medical device technology. Bridging this skill gap through training and educational initiatives is essential.
In conclusion, I strongly believe that India stands at a tipping point beyond which the growth will be epic, and the changes will be so dramatic that we will become leaders in the medical device manufacturing arena.
The author, Tanmay Kumar, is Head of Supply Chain Management, BPL Medical Technologies