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India

Healthcare report
(Forecast closing date: February 14th 2012)
Healthcare spending, international comparison
(% of GDP) India US Japan China Germany
Source: Economist Intelligence Unit.

2007 a 4.6 16.0 6.7 4.2 10.5

2008 a 5.0 16.1 6.8 4.3 10.7

2009 a 5.0 16.3 7.0 4.6 11.6

2010 b 5.0 16.0 7.2 4.7 11.4

2011 b 5.0 16.2 7.3 4.8 11.3

2012 c 5.0 16.2 7.5 4.8 11.5

2013 c 5.0 16.2 7.7 4.8 11.6

2014 c 5.0 16.2 7.9 4.9 11.7

2015 c 5.0 16.2 7.9 5.0 11.7

2016 c 5.0 16.2 7.9 5.0 11.7

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Healthcare spending

Five-year forecast Spending on healthcare in India is estimated at 5% of GDP in 2011. This is more than in neighbouring Pakistan (where health expenditure is estimated at 2.4% of GDP in 2011) or China (4.8%), but is far less than the average for the G7 group of major developed economies of around 12%. Widespread poverty and a lack of investment have prevented a strong domestic healthcare market from taking shape in India. However, as it will start from such a low base, the outlook for growth in the market is promising. The Economist Intelligence Unit expects total annual healthcare expenditure to more than double in both local-currency and US dollar terms by 2016, to Rs10.5trn (US$228bn), from an estimated Rs4.6trn in 2011, although sustained economic growth in the forecast period will mean that spending will remain stable as a percentage of GDP. Growth in spending will average 18.2% a year in local-currency terms and 18.7% a year in US dollar terms over the five-year period. It is estimated that healthcare spending per head in India stood at just US$82 in 2011, compared with US$256 in China. Increases in personal income, government healthcare outlays and private domestic investment, combined with higher life expectancy, will push up per-head healthcare spending to US$177 in 2016, despite strong population growth in the next five years.

Income and demographics

Nominal GDP (US$ bn) Population (m) GDP per head (US$ at PPP) Private consumption per head (US$) No. of households (m)
Source: Economist Intelligence Unit.

2007 a 2008 b 2009 b 2010 b 2011 b 2012 c 2013 c 2014 c 2015 c 2016 c 1,187.3 1,261.9 a 1,364.5 a 1,717.4 a 1,959.8 2,057.3 2,440.0 2,972.6 3,518.6 4,560.0 1,129.9 1,148.0 1,166.1 1,184.1 1,202.1 1,220.0 1,237.9 1,255.8 1,274.1 1,291.7 2,850 3,013 3,270 3,544 3,796 4,073 4,439 4,834 5,268 5,750 598 641 676 829 917 959 1,094 1,278 1,463 1,842 213 217 a 220 223 227 230 234 237 241 244

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Industry Report: Healthcare February 2012

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India

Healthcare spending
(US$ m)
180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 2006 07 08 09 10 11 12 13 14 15

Sources: Espicom; Economist Intelligence Unit.

Funding sources According to the World Health Organisation (WHO), 32.8% of Indian healthcare spending came from government sources in 2009. Of the remaining private expenditure, three-quarters was categorised as out of pocket. Several public health-insurance systems exist, such as state-level employee insurance for industrial workers and the central government's healthcare scheme for civil servants, but these will continue to account for only a small proportion of government expenditure on health. Some large private firms and public-sector enterprises also operate health policies for their staff. The Indian National Congress-led government has made the provision and availability of primary healthcare to all one of its policy priorities. This is likely to lead to higher public spending on health, although the need for fiscal consolidation will militate against a significant increase in outlays on healthcare in the early years of the forecast period. Public spending on healthcare will continue to rise in nominal terms. The budget for fiscal year 2011/12 (April-March) increased the expenditure budget of the Ministry of Health and Family Welfare by 20%. As spending in 2010/11 came in below the government's target, expenditure in 2011/12 is budgeted to be 24% higher than actual expenditure in 2010/11.
Healthcare: key indicators
Life expectancy, average (years) Life expectancy, male (years) Life expectancy, female (years) Infant mortality rate (per 1,000 live births) Healthcare spending (Rs bn) Healthcare spending (% of GDP) Healthcare spending (US$ bn) Healthcare spending (US$ per head) Healthcare (consumer expenditure; US$ bn) 2007 a 65.4 64.5 66.4 54.2 2,258 4.6 54.6 48 30.5 2008 a 65.7 64.8 66.8 52.5 2,745 5.0 63.1 55 32.1 2009 a 66.1 65.1 67.2 50.8 3,303 5.0 68.2 59 34.5 b 2010 b 66.5 65.5 67.6 49.1 3,926 5.0 85.9 73 43.9 2011 b 66.8 65.8 68.0 47.6 4,568 5.0 98.0 82 50.2 2012 c 67.1 66.1 68.3 46.1 5,250 5.0 102.9 84 54.4 2013 c 67.5 66.4 68.7 44.6 6,174 5.0 122.0 99 64.0 2014 c 67.8 66.7 69.1 43.2 7,196 5.0 148.6 118 77.2 2015 c 2016 c 68.1 68.5 67.0 67.3 69.4 69.8 41.8 40.5 8,295 10,505 5.0 5.0 175.9 228.0 138 177 91.4 120.7

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Healthcare: key indicators

Doctors (per 1,000 people) Hospital beds (per 1,000 people)
Source: Economist Intelligence Unit.

2007 a 0.6 0.6

2008 a 0.6 0.7

2009 a 0.6 0.7

2010 b 0.6 0.7

2011 b 0.6 0.7

2012 c 0.6 0.7

2013 c 0.6 0.7

2014 c 0.6 0.7

2015 c 0.6 0.7

2016 c 0.6 0.7

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Healthcare spending
(Rs bn)
9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 07 08 09 10 11 12 13 14 15

Sources: Espicom; Economist Intelligence Unit.

Private health insurance According to the WHO, private prepaid plans accounted for just 1.5% of India's total healthcare spending in 2009. Only one-tenth of the population is estimated to have health insurance, although this proportion is expected to grow in the forecast period. The main participants in the private health insurance market are Tata AIG (a joint venture between an Indian conglomerate, Tata, and AIG of the US), Bajaj Allianz (a collaboration between a local company, Bajaj Auto, and a German firm, Allianz), Max New York Life (a joint venture between a domestic firm, Max Healthcare, and US-based New York Life) and another local company, Reliance. However, the market is still nascent and therefore has considerable growth potential. Healthcare provision Healthcare recruitment India is desperately short of doctors, with just 0.6 doctors per 1,000 population. We expect this ratio to remain constant in the forecast period. The problem is particularly acute in rural areas. The Association of Chambers of Commerce and Industries in India reported in 2010 that there was a shortage of 600,000 doctors and 900,000 nurses in the public healthcare system. Many locally trained physicians are tempted abroad by better pay and prospects, although rapid wage inflation for skilled workers in India will mean that the rate of such emigration slows in 2012-16.

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India

Hospital beds and doctors, international comparison, 2010

(per 1,000 population)
Hospital beds 10.0 8.0 6.0 4.0 2.0 0.0 Doctors

India

Brazil

China

Germany

India

Russia

US

Sources: Espicom; Economist Intelligence Unit.

Hospitals and clinics India has a rudimentary network of public hospitals and clinics, but most healthcare services are provided by the private sector, mainly through independent practitioners. Public hospitals are rare outside large cities, and standards are variable. The new-found prosperity of many Indian households is spurring demand for high-quality medical care, transforming the local healthcare sector into a profitable industry and spurring rapid growth in private-sector supply. Indias established private hospital chains, such as Apollo Hospitals and Wockhardt Hospitals, are embarking on ambitious expansion campaigns, and newcomers to the sector, including foreign entities, are pouring investment into private healthcare infrastructure. A continued shortage of investment in state-owned hospitals, coupled with the increasing incidence of so-called lifestyle diseases (such as heart disease, cancer and diabetes) that is accompanying rising incomes in India, will ensure that this trend intensifies in the forecast period. Apollo and Wockhardt plan to take advantage of tax incentives to build hospitals in smaller cities of up to 3m people, slashing costs for patients by a projected 50% (split equally between reduced travel costs, and lower overheads for companies that will enable them to reduce charges to users). Private hospitals will also continue to realise economies of scale by targeting specific services, such as maternity care, and by making heavy use of the sort of information technology that many Western countries are struggling to introduce in their own healthcare sectors. Private hospitals will face two significant challenges: the high cost of land in urban areas, and a shortage of nursing staff. Private providers will not be able plug the national gap in medical provision for decades, given the shortages of staff that exist. Medical tourism will continue to grow rapidly in India. Continued high levels of unemployment in developed economies, and high healthcare costs in these countries (and especially in the US), have increased the incentive to look

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for cost-saving options. Medical tourism will also receive a significant boost as health insurers in developed countries (again, particularly in the US) attempt to outsource care in order to cut costs. Pharma and biotech International comparison India's pharmaceutical industry is the world's second-largest in volume terms after that of the US. It will make an increasingly important contribution to economic growth, and the industry will continue to move rapidly up the value chain. The Ministry of Chemicals and Fertilisers estimates that the local pharmaceuticals industry accounts for around 10% of global production by volume and ranks fourth in the world in volume terms in the production of generic drugs.
Pharmaceutical sales
Pharmaceutical sales (US$ m)
Source: Economist Intelligence Unit.

2007 a 2008 a 2009 a 2010 b 2011 b 2012 c 2013 c 2014 c 2015 c 2016 c 11,454 12,323 12,145 14,270 15,608 16,081 18,360 21,762 25,227 29,171

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts.

Pharmaceutical sales
(US$ m)
30,000 25,000 20,000 15,000 10,000 5,000 0

2006

07

08

09

10

11

12

13

14

15

Sources: Espicom; Economist Intelligence Unit.

Five-year forecast As pent-up demand created by the 2008-09 global financial and economic crisis is released, we expect pharmaceutical consumption (in US dollar terms) to grow at the rapid average annual rate of 13.5% in 2012-16. Growth rates will be slightly lower in local-currency terms but will still be in double digits. Growth in domestic pharmaceutical sales will be driven by rising personal incomes, the increasing incidence of chronic diseases and the proliferation of hospitals and clinics.

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India

Pharmaceutical sales
(Rs m)
1,200,000 1,000,000 800,000 600,000 400,000 200,000 0

2006

07

08

09

10

11

12

13

14

15

Sources: Espicom; Economist Intelligence Unit.

Pricing A ready supply of locally produced generic drugs and vaccines has helped to keep pharmaceutical prices low. In the generic-drug segment, global competition is becoming intense, forcing down prices for products made by Indian companies. The National Pharmaceutical Pricing Authority monitors the price of drugs in India, mainly through the Drug (Price Control) Order of 1995. The order regulates the prices of "essential" bulk drugs, but it applies only to about onefifth of pharmaceuticals sold in India. The list of essential drugs, which originally numbered 76, has been revised several times, most recently in early 2011. There are now 348 drugs on the list. In response to the revision, the managing director in India of the world's largest drug company, Pfizer, suggested that the government should not expand the list further. In November 2011 the government unveiled a draft National Pharmaceutical Pricing Policy (NPPP), which included plans to bring 60% of the total domestic pharmaceutical market under price control. It also proposes regulation of prices of drug formulations, unlike the current practice of regulating prices of specific bulk drugs.
Item Price (US$) Aspirins, 100 tablets (supermarket) 0.87 Routine check-up at family doctor (av) 22.50 One X-ray at doctor's office or hospital (av) 6.65 Visit to dentist, one X-ray and one filling (av) 13.30 % of monthly personal disposable income 1.24 32.11 9.49 18.97 Affordability rank 24 out of 55 40 out of 55 30 out of 56 30 out of 56

Note. Affordability rank: for each country the price of an item as a percentage of monthly personal disposable income is calculated. Countries are ranked according to these percentages. The most affordable country will have the lowest percentage and be ranked first.

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Generics India's pharmaceuticals market is dominated by generic drugs, which account for around three-quarters of the market by volume. The local market, which is supplied mainly by domestic companies, is expected to continue expanding rapidly. Although domestic pharmaceutical companies were established with the primary aim of supplying the local market, they have thrived by taking advantage of their low labour and research costs to export generic drugs to developed countries, notably the US. Exports are expected to maintain strong growth in the forecast period. Opportunities in the developing world will also expand rapidly, following a 2003 World Trade Organisation agreement to improve poor countries' access to cheap patented medicines. Indian firms aim to invest in production to expand their overseas sales of existing generic drugs. Niche areas of generic-drug development (including novel drug-delivery systems for existing patented medicines, and biogenerics) have evolved and will continue to stoke growth in the sector. Leading Indian drug companies will try to build on the local industrys expertise in the reverse-engineering of chemical entities. GSK India, the local subsidiary of the largest foreign pharmaceutical firm operating in India, GlaxoSmithKline of the UK, is one of the few firms that has been successful in launching its parent company's authorised generics in India and receiving income thanks to in-licensing deals. It will continue to be one of the leading foreign-linked firms in the industry. Pharma and biotech supply dynamics The local pharmaceutical industry is highly fragmented, consisting of more than 10,000 firms, most of them small. Around 80% of Indian pharmaceutical production consists of formulations, with bulk drugs accounting for 20%. The leading Indian-based pharmaceutical companies are Cipla, the world's largest maker of antiretroviral drugs (used in treating HIV/AIDS) and Ranbaxy Laboratories, which in 2008 was acquired by Daiichi Sankyo of Japan. Ranbaxy is also the leading Indian-based generic-drug producer, and is among the top ten generic-drug companies in the world. India's other leading pharmaceutical company is Dr Reddy's. Like Ranbaxy, Dr Reddy's will continue to derive most of its revenue from international sales. Other major Indian drug firms include Lupin Pharmaceuticals, Sun Pharmaceuticals, Nicholas Piramal, Orchid, Zydus Cadila and Wockhardt. Most multinational pharmaceutical manufacturers have subsidiaries or operations in India. Local companies face a challenge as the number of drugs coming off-patent worldwide begins to slow during the next decade. Acquisitions of, and mergers with, foreign firms will become an increasingly attractive strategy for

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India

Indian drug companies to expand their product portfolios and enter new markets. India's better-financed domestic pharmaceutical firms are also attempting to develop their own drugs, with the goal of becoming innovators rather than mere copiers. In some cases tie-ups with foreign companies will facilitate this shift, as overseas companies move to take advantage of India's talent pool and low costs. In 2014-16 India's contract research and development (R&D) and manufacturing sectors are likely to benefit from outsourcing contracts with Western drug companies, which will become increasingly keen to achieve major cost savings. Some Indian pharmaceutical firms are likely to spin off their R&D divisions as independent entities concentrating on drug discovery. For foreign drug firms operating in India, the opportunities to sell patented products will remain limited. The country's weak patent regulations have made local subsidiaries apprehensive about Indian launches of the patented products of their foreign parents, and as a result they have only limited ranges of products on sale in the country. India is the most popular location in Asia for clinical trials and is likely to remain so. In addition to the country's low costs, the large patient pool, the fact that most members of the population have been exposed to relatively few drugs, and the availability of high-quality hospitals and medical staff are important factors influencing this trend. Legislative and regulatory developments in the US and Europe that signal growth in demand for biosimilar drugs ("biogenerics") will lead to a strong expansion in this segment in India. The Pharmaceuticals Export Promotion Council is keen to facilitate Indian companies' ability to tap the emerging export opportunities for biosimilars.
Market demand: health services and medicines
(nominal US$ m)
Health services 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2006 07 08 09 10 11 12 13 14 15 Drugs and medicines

Source: Economist Intelligence Unit.

Generics Disease trends

Population health Average life expectancy in India is forecast to rise to 68.5 years in 2016, from an estimated 66.8 years in 2011.

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India

The infant mortality rate will remain high, standing at 40.5 deaths per 1,000 births in 2016, although that will represent a fall from an estimated 47.6 deaths per 1,000 births in 2011 and will be significantly lower than the rate of 150 deaths per 1,000 births in the 1950s. Levels of infant and adult mortality and morbidity will continue to vary enormously between states, reflecting the differing levels of resources available to state governments and the varying efficiency of state administrations.
Life expectancy
(years)
Female 80 70 60 50 40 30 20 10 0 2006 07 08 09 10 11 12 13 14 15 Total Male

Sources: US Bureau of Census; Economist Intelligence Unit.

Demographic trends India has the second-largest population in the world after China. The population is forecast to rise to almost 1.3bn in 2016, from an estimated 1.2bn in 2011. The population will remain very young: people aged 65 years and over are expected to make up only 6.4% of the total population in 2016.
Infant mortality rate
(per 1,000 live births)
60.0 50.0 40.0 30.0 20.0 10.0 0.0

2006

07

08

09

10

11

12

13

14

15

Sources: US Bureau of Census; Economist Intelligence Unit.

Major disease trends India's growing wealth and increasing urbanisation have led to a rise in chronic diseases characteristic of rich countries. Owing partly to this, as well
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India

as genetic predisposition, the incidence of diabetes in the country is rising rapidly: there are thought to be 51m people suffering from diabetes in India at present, and the WHO expects this figure to rise to 80m by 2030. However, communicable diseases continue to be India's most serious health problem, largely because standards of sanitation are relatively low (and will rise only slowly). Rapid urbanisation will present further challenges, leading to an increase in the threat from pest-borne and infectious diseases. For example, in late 2010 the capital, New Delhi, was struck by widespread outbreaks of dengue fever and another mosquito-borne disease, chikungunya. Nevertheless, the WHO announced in January 2012 that India had completed a year without a single new case of polio, owing largely to the country's widespread vaccination programme. HIV/AIDS will remain a serious concern. Incidence varies widely between states; Andhra Pradesh, Maharashtra and Tamil Nadu have the highest HIV prevalence rates in the country. The Joint UN Programme on HIV/AIDS (UNAIDS) estimates that 2.3m people were living with HIV in India in 2008 (latest available data). This makes India second to only South Africa in the world in terms of the number of people infected with the virus, although the overall prevalence rate in India is only 0.29%, compared with above 10% in South Africa. UNAIDS estimates that only one in four people in India who need HIV treatment currently receive it. Treatment will become more expensive the forecast period as multinational pharmaceutical companies are awarded patents in India for their anti-AIDS drugs.
Old-age dependency ratio, international comparison
(%)
India 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 2006 07 08 09 10 11 12 13 14 15 Brazil China Germany India Russia US

Sources: US Bureau of Census; Economist Intelligence Unit.

Risk factors Malnourishment will remain a serious problem, despite rapid income growth. India has more malnourished children than any other country in the world, and a significant improvement in nutritional indicators is likely to take many years to achieve.

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Although alcohol consumption in India is very low, smoking rates continue to rise. The smoking rate among females is very low, at just 3.8%, but around one-third of males over the age of 15 smoke, according to the WHO. Obesity is only a problem among a small (mainly urban) minority.
Population, over-65 age group
(m)
80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2006 07 08 09 10 11 12 13 14 15

Sources: US Bureau of Census; Economist Intelligence Unit.

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