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Medical Device

Industry in India
The Evolving Landscape,
Opportunities and Challenges

September 2017

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Foreword
The Indian government’s 2017 National Health Policy deals A new national medical device policy in currently being
with progressive universal healthcare for citizens, envisioning developed and the Indian government is actively engaged
equitable health and well-being for all sections of society. The in discussions and consultations with various stakeholders.
policy seeks to increase access and adoption, improve quality, Policymakers working collaboratively with stakeholders
and lower healthcare delivery costs in the country. The in the healthcare eco-system are attempting to laydown a
government has recognized the changing disease patterns roadmap that provides consistency and predictability. The
in the country, the need to address the significant growing path to realizing healthcare goals is complex, and various
burden of non-communicable diseases, and the emergence fundamental issues and challenges need to be addressed and
of a robust and successful private healthcare industry. solved holistically. Long-term plans need periodic policy and
The bulk of government spending will be directed towards regulatory interventions to ensure fair conduct within the
reviving and strengthening primary healthcare systems, industry while providing the support needed for profitable
focusing on rural and lower tier urban areas that lag behind and sustainable growth. These activities will enable the
in quality and access. The government is likely to take on the medical device industry to accelerate rapidly and play a key
role of a payer rather than a provider, resulting in improved role in making India healthier and stronger.
outcomes and better utilization of healthcare expenditure in
AdvaMed has partnered with SKP to publish this paper
the country.
entitled - Medical Device Industry in India - The evolving
The global medical device industry is highly innovative landscape, opportunities and challenges. The paper also
and technology driven, changing the face of healthcare examines various policies and regulations impacting the
worldwide. Globally, it is a rapidly advancing industry industry and attempts to make recommendations on the
impacting and improving aspects such as diagnosis, way forward from the perspective of different stakeholders.
treatment, and delivery, but in India, it is still very nascent Extensive research, both primary and secondary with
with low levels of penetration and adoption. This presents deliberations and discussions with several stakeholders
an exciting opportunity to develop this industry and to play a across the healthcare chain have served as inputs for this
larger role in the transformation of Indian healthcare. A good paper.
understanding of the nature of this industry will help ensure
AdvaMed and SKP would like to thank everyone for their
that the country is poised to capitalize on opportunities
insights and valuable contributions towards this paper.
provided by medical technology to improve national
healthcare. We hope that this paves the way for further deliberations and
helps in shaping the industry in a positive manner.

Guljit Singh Abby Pratt


Executive Chairman Vice President - Global Strategy and Analysis
SKP Business Consulting AdvaMed
Table of Contents

01
03
An overview of 07
Make and Heal 05
Medical Device Case Studies
in India Market 2020
Industry p15 p35 p43
p01

Executive 02 04 06
Summary Regulatory and Price Control Survey
Business Policy – Impact Findings
Environment and Implications p39
p09 p23
Abbreviations

AIIMS All India Institute of Medical Sciences JV Joint Venture


AIMED Association of Indian Medical Device Industry MDC Medical Disposables and Consumables

AP Andhra Pradesh MEA Ministry of External Affairs

AYUSH Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy MDP Medical Device Park

BMS Bare Metal Stents MII Make in India

BRICS Brazil, Russia, India, China and South Africa MSDE Ministry for Skill Development & Entrepreneurship
CAD Coronary Artery Disease MNC Multinational Company

CAGR Compounded Annual Growth Rate MoHFW Ministry of Health and Family Welfare

CBU Central Buying Unit MRI Magnetic Resonance Imaging

CDSCO Central Drugs Standard Control Organization MRP Maximum Retail Price

CE Conformité Européene MTAB Medical Technology Assessment Board


CLAA Central or State License Approval Authority NABCB National Accreditation Board for Certification Bodies

CPAP Continuous Positive Airway Pressure NABH National Accreditation Board for Hospitals & Healthcare Providers

CRS Chronic Rhinosinusitis NCR National Capital Region (Delhi area)

CT Computed Tomography NHP National Health Policy

CVD Cardiovascular Disease NMDP National Medical Devices Policy


DCA Drugs and Cosmetics Act 1940 NCD Non-Communicable Disease

DES Drug Eluting Stents NCMD National Centre for Medical Devices

DCGI Drug Controller General of India NIC National Intervention Council

DoC Department of Commerce NICU Neonatal Intensive Care Unit

DoP Department of Pharmaceuticals NITI National Institution for Transforming India


DRG Diagnosis Related Groups NLEM National List of Essential Medicines

ECB External Commercial Borrowing NMD New Medical Device

eHC eHealth Center NPPA National Pharmaceutical Pricing Authority

EKG Electrocardiogram PCI Percutaneous Coronary Intervention 

EOU Export Oriented Unit PE Permanent Establishment


EU European Union PED Product Engineering & Development

FDI Foreign Direct Investment PPP Public Private Partnership

GDP Gross Domestic Product PTD Price to Distributor

GHTF Global Harmonization Task Force PTH Price to Hospital

GMP Good Manufacturing Practices QCI Quality Council of India


HSIDC Haryana State and Industrial Development Corporation R&D Research and Development

HSSC Healthcare Sector Skill Council RDS Respiratory Distress Syndrome

HTA Healthcare Technology Assessment SHI Statutory Health Insurance

ICMED Indian Certification of Medical Devices SEZ Special Economic Zone

IMF International Monetary Fund TRIPS Trade Related Aspects of Intellectual Property
IOA Indian Orthopedic Association USD United States Dollar

INR Indian Rupee US FDA US Food and Drug Administration

IPR Intellectual Property Rights VAP Ventilator Associated Pneumonia

IT Informational Technology WHO World Health Organization

JCI Joint Commission International WTO World Trade Organization


Executive Summary
The healthcare industry in India in this sector. Government initiatives control regulation and the new Public
has made rapid progress in the last around opening up FDI and Procurement Policy with preferential
decade, but significantly lags behind infrastructure development are Market Access do not fully reflect
other nations in availability and quality welcome initiatives that will enhance this and has alarmed many industry
of equitable medical care and services the ecosystem for investment. The participants. A clear long term vision
for citizens. This in turn presents Indian medical device industry and roadmap for the industry and
an enormous opportunity given the appreciates government’s efforts to predictability of policy would excite
large population, growing economic remove bureaucratic hurdles and the industry. The government needs
prosperity, and the disease burden. improve the ease of doing business, to provide policy support for both
Major issues such as availability of but believes that additional steps can the supply and demand side of the
adequate infrastructure, trained be taken to strengthen its approach. medical device industry to successfully
human resources, geographic spread, accelerate growth. Industry and
Our discussions with the industry
rapidly changing disease burden, and government need to work together
leaders indicate that given the
high/often catastrophic out of pocket to improve awareness, access,
lack of scale in many products, the
expenditures are challenges that the adoption, and affordability for medical
government should prioritize certain
government is keen to address. The devices in India. The government has
products for manufacturing in
Indian government is committed to indicated that in the new healthcare
India. High volume, low-tech, labor
raising public expenditure on health policy that they will focus strongly on
intensive manufacturing sectors
to 2.5% of the GDP. Public and private preventive and primary healthcare
should be the initial target. Very
sectors need to play equally important and in facilitating build-up of the
rapid import substitution may not
but different roles in bringing rapid required medical, paramedical, and
be practical or desirable. It is also
change to the healthcare scenario in allied health human resources in
felt that the government should
the coming decade. the country. Leaving secondary and
position and promote India as a global
tertiary healthcare delivery largely in
The medical devices industry in India manufacturing hub or destination,
the hands of the private sector will
is currently valued at approximately rather than focus on just the domestic
result in significant improvement in
USD 6 billion and has expanded at a market. Frugal innovation is a
efficiency of spends. The private sector
significant double digit growth rate significant strength that India can offer
also plays a very significant role in
over the past few years. The industry the world. Innovation to develop
training medical and allied resources
is still at a nascent stage with sub- new products for emerging markets
in the latest technology, innovations,
optimal penetration and usage of should be encouraged, and this will
and procedures and in bringing in
medical devices. Currently, India also ensure manufacturing volumes
global standards in delivery and
comprises only 1.7% of the world needed for profitable operations.
care. The government has indicated
market, the industry is significantly This approach will help India attract
that they will take on an increasing
import dependent, and current the right technology, upgrade
role as a payer, facilitate widening
demand does not offer scale in various manufacturing processes and quality,
insurance coverage significantly, and
product categories. This will transform and build local R&D capability.
use resources to purchase services
as demand significantly escalates to
The Indian medical device industry from the private sector for the
realize potential.
believes inclusive policy making by underprivileged through cost effective
The Make in India initiative is the government, and understanding modalities, including public-private
intended to attract both Foreign and addressing legitimate concerns partnerships.
Direct Investment (FDI) and domestic will greatly benefit the healthcare
investment industry as a whole. The recent pricing
Healthcare industry participants determining devices to price regulate. Industry participants also strongly feel
including medical device players suffer Issues like high trade margins can that the government should broaden
from poor public perception regarding be tackled with conversations with its vision from Make in India to include
their conduct and practices. It is crucial all stake holders. Bulk purchasing both Innovate in India and Heal in
for the government and the industry of specific devices at low prices to India. With attractive healthcare costs,
to work together to improve this image support government schemes that a well-trained and qualified medical
and perception. There is a need to serve the underprivileged and using and technical work force, and a vibrant
assess the information asymmetry the insurance industry to determine private sector, such a strategy has the
that exists, and bring in transparency reimbursement prices and co-pay potential to be very rewarding for the
in areas such as pricing and cost at the levels could also ensure value in the country. A faster- growing healthcare
product and services/procedures level. usage of devices and delivery. delivery sector will boost demand
While guarding against profiteering, for medical devices and also lead to
The government has moved in the
regulators need to ensure that the significant employment generation in
right direction by separating out
healthcare industry is profitable and services. Additionally, this focus will
medical devices from drugs from
can grow and upgrade to bring in all help India innovate, establish global
a policy/ regulations perspective,
required technological advancement. standards in products and services,
but more work is still required.
Data suggests that healthcare costs and improve the balance of trade
Improved understanding of important
in India are among the lowest in favorably especially with medical
differences between the two sub
the world even when adjusted for tourism growth. Such a strategy could
sectors will continue to help shape
purchasing power. Analysis of a also help cross-subsidize healthcare
appropriate policy. Key to this is
available financial statements do not for the under privileged segments to a
an appreciation of the industry’s
indicate profiteering either in the degree, again boosting demand at the
technology and innovation lifecycle,
medical device or healthcare delivery lower end.
and a willingness to reward technology
sector.
and continuing innovation. The The healthcare and medical device
The industry feels that the recently industry believes that a full separation industries are at a critical threshold
announced price control policy, while of drugs and devices via a separate where growth can be significantly
intended to improve affordability, medical devices act and regulatory accelerated to ensure that India
needs reconsideration and change body and expanding the coverage embraces the benefits of advancing
before roll-out to other categories. As and scope of the medical device rules medical technology to uplift
formulated and implemented today, to cover most if not all devices, will standards of healthcare sharply
the policy will have limited impact on ensure that devices marketed in India in the next decade. A vibrant and
patient cost and could also deprive meet global standards of quality and profitable private sector is critical
India of new technology in the future, safety. This combined with a drive to for success. By proactively listening
besides stifling sectors like medical ensure accreditation by NABH will to and understanding each other
tourism. The government needs to strengthen the quality of care and better, government and industry can
consider options that include more improve outcomes. It is important for collaborate effectively to realize the
tiers in pricing and give new technology the government to build the capability vision of the 2017 National Health
the benefit of being spared from price to conduct robust Healthcare Policy.
control for a certain number of years. Technology Assessment (HTA) in the
The industry believes that trade margin country. Establishing a functioning
regulation should be approached by Medical Technology Assessment Board Deepti Ahuja
first looking at essential products (MTAB) will help the evaluation of the Vice President, Business Advisory
based on burden of disease and differentiation and value of various SKP Business Consulting LLP

recommends the government medical devices. Ravi Menon


review essentiality of devices when Senior Business Advisor
SKP Business Consulting LLP
Section 1

An overview of Medical
Device Industry

• Healthcare Indicators
• Medical Devices in India
• Structure of the Industry
• Segments
• Existing Clusters
• Growth Drivers
• Challenges
Medical Device Industry in India 2

Healthcare Indicators
The healthcare industry in India has A more focused approach from the • India is the only country out of the
registered a compound growth rate government, with increased public major world economies where out-
of 20% over the past few years and expenditure on health, greater utilization of-pocket expenses are increasing,
is expected to reach USD 175 billion of technology, vibrant private sector despite a concurrent increase in
by 2020. Factors such as changing participation, and continued innovation public spending. This effectively
demographics, rising life expectancy, can transform the sector and move India means that more people are availing
growing incomes and public awareness closer to its goal of providing quality private healthcare services due to
have contributed to a higher demand for universal healthcare. rising incomes, or are forced to spend
medical care. due to inadequate public expenditure.
Some of the key issues faced by the
However, the Indian healthcare system Indian healthcare industry are evident in • With India’s disease burden shifting
continues to lag behind both developed the tables below. from acute to chronic diseases, large
and other developing countries in terms numbers of the population continue
• Medical service providers are not only to not have access to basic healthcare
awareness, availability, affordability, inadequate but are also unevenly
and access to quality health services. services. Public health infrastructure
distributed across rural and urban is poorly equipped to deal with this
While the government and value chain areas. This shortfall occurs despite
participants are undertaking several shift toward NCDs. It is essential
an increase in the number of medical that healthcare professionals are
steps to address these issues, they have colleges from 23 in 1947 to 398 in
been executed in silos. appropriately trained and adequate in
2014. The quality and availability of numbers.
healthcare deteriorates as one moves
away from large urban centers to
lower-tier towns and rural areas.

Countries Beds Per 10000 Physicians per 10000 Government Out of Pocket Total Healthcare
population Population Expenditure of Expenditure Expenditure as a %
Total Healthcare of GDP
Expenditure
Global 27 14 58.80% 49.70% 9.10%

India 7 7 30.00% 62.40% 4.70%

Brazil 23 19 46.00% 25.50% 8.30%

China 38 15 55.80% 32.00% 5.50%


Germany 82 38 77.00% 13.20% 11.30%

Japan 137 23 83.60% 13.90% 10.20%

USA 29 25 48.30% 11.00% 17.10%

Source: SKP Analysis, OECD

(Figures USD per capita)


Country Healthcare Expenditure Medical Devices Income - 2016/2017 Income 2020
(2016) Expenditure (2015)

USA 9892 415 52195 54800

China 420 178 6895 8330

France 4600 232 42013 43100

India 75 3 1862 3500

Brazil 1318 28 10826 11730

Germany 5267 313 45552 47200

Japan 4519 221 47608 46200

Global Average 948 47

Source: World Bank, WHO


3 Medical Device Industry in India

Medical Device Industry in India


The Indian healthcare industry was of an independent industry in 2014 The medical device sector today is clearly
valued at over USD 100 billion in 2016 when it was included as one of the focus small and indicates low penetration in
and is expected to reach more than USD sectors of the ‘Make in India’ program the country. However, it has the potential
175 billion by 2020, resulting in a CAGR reflecting of the government’s intention to grow at double-digit rates in the years
of 20%. The medical device industry to support growth and development in to come given the growing demand from
is valued at USD 6 billion. The medical this sector. India’s large population.
device industry was accorded the status

Indian Healthcare Market Indian Medical Device Market


3%
6%

8.85%
Stents
14%
Hospitals 53.75% 8.20%

Implants
Pharmaceuticals
Patient Aid
13.20%
Medical Devices Consumables and
Disposables
Diagnostics
Equipment and
16.00% Instruments
77%

Source: World Bank, WHO

Structure of the Industry


The Indian medical device industry is on a mix of technologies such as
highly fragmented. Currently, this sector engineering, electronics, material
is dominated by MNCs with 70–75% of sciences and information technology.
the demand being met through imports. Innovation, capital and technology
Approximately 30% of the domestically drive the industry. However, India
manufactured devices are exported, in has not been able to bridge the
which the consumables and disposables gap between investments, skilled
segment has the largest share. resources and innovation to fully
capitalize on these opportunities.
Numerous factors underlie the
prevalence of higher imports in the • There is no clear comparative
country. Some of these are: cost advantage in comparison to
other emerging markets and policy
• Lack of favorable policy and regulatory issues like inverted duty structure
framework. do not help in creating a positive
• Medical devices, unlike environment.
pharmaceuticals, are dependent

Import and Export of Medical Devices in India from Various Countries

Source: SKP Research and Analysis


Medical Device Industry in India 4

International medical device companies Indigenous Sales vs Imports


looking to explore the Indian market
initially acquire/need a distributor
to market their products. Whereas,
companies that intend to expand their
global footprint and export to other
neighboring countries may set up/
acquire a manufacturing plant in India.

Source: SKP Research Indigenous Sales Imports

Currently, there are approximately 800 The growing focus of the government
medical device manufacturers in India, and better availability of capital has led
10% of which have a turnover of more medical device companies to upgrade
than USD 8 million. their technology, manufacturing facilities
and product portfolio customization
to compete with the international
companies.

Fragmentation of Players (Figures in USD million)

Source: Recommendations of the Task Force on the medical devices sector in India – 2015, DoP,
Ministry of Chemicals and Fertilizers
5 Medical Device Industry in India

Segments

Patient Aid
Hearing aids and pacemakers form a
major part of the patient aid segment and
constitute 70% of the segment collectively.
Most of the products are sourced from
Ireland, USA, Australia, Singapore, China,
and South Korea. Some of the key players in
this segment are Abbot Healthcare, Shree
Pacetronics, Medisafe International, and
Medtronic.

Consumables and Disposables


The medical disposable and consumables
sector consists of products such as
disposable plastic syringes, blood bags, IV Implants
fluid sets and many others. This segment The Indian implants segment has witnessed
is dominated by domestic players in India an encouraging growth rate of CAGR
due to its low technology requirements. 25%. With a healthy mix of both domestic
Needles and syringes constitute majority companies and MNCs, this segment has
of the sales. However, wound management witnessed intense competition between
products and medical apparels are the players due to strong pricing pressure. The
fastest growing products in this segment. domestic players have realized the market
potential which demands customization and
differentiated product quality.

Equipment and Instruments


This segment is the largest segment of the Stents
medical device industry constituting nearly Drug-eluting stents and bare metal stents
54% of the segment and is dependent form a major part of the stents segment
on imports. MRI machines, CT scanners, and constitute more than 70% of the
ultrasound machines, dental drills, dental segment collectively. Most products are
chairs, dental x-ray machines. are some sourced from the USA and Europe. While
of the key products of this segment. It is domestic companies are manufacturing
dominated by MNCs like GE Healthcare, cost competitive products, they still face
Philips Healthcare, Schiller Healthcare, competition from international players on
Danaher Corporation, and Roche account of quality. Abbott Vascular, Boston
Diagnostics. Scientific, Medtronic, Meril Lifesciences
Sahajanand and are some of the prominent
This segment is growing due to advanced players in this segment.
technology being increasingly applied in
medical procedures.
Medical Device Industry in India 6

Existing Clusters
The Indian medical device manufacturing sector is fragmented, both in its scale
and geography. Currently, there are five device manufacturing clusters in the
country. These clusters along with the upcoming medical device parks and MedTech
parks developing around them, have the potential to create a large ecosystem of
manufacturers, suppliers, and developers. It will also create manufacturing capability,
encourage R&D, improve quality, and reduce dependence on imports.

Haryana
Consumables, Dental Equipment
Becton Dickinson, Hollister, Poly Medicure

Gujarat (Surat) Delhi


Stent Manufacturing Medtech Innovators
Envision Scientific, Invent Stanford-India Bio design program, Bill
Bio-Med, Sahjanand Medical and Melinda Gates Foundation, Michael
Technologies and Susan Dell foundation

Upcoming Medical Device Parks

Karnataka
Insulin Pens, Medical IT, Cardiac Tamil Nadu
Stents and implants, PCR machines Diagnostics, Critical life support
Biocon, GE Medical, Skanray, systems, Ophthalmology
Bigtec Labs Trivitron Healthcare, Opto Circuits,
B. Braun, Perfint Healthcare
7 Medical Device Industry in India

Growth Drivers
Key factors that will help drive growth • The increase in insurance coverage
in the Indian medical devices sector are has led to better affordability and
listed below. accessibility.

• The disease burden has shifted from • There is an increase in healthcare


acute to chronic diseases due to spending both by public and private
lifestyle changes and ageing. India’s players. Currently, the government’s
population above the age of 60 was healthcare spend is 1.04% of the
estimated at 104 million in the 2011 GDP and is proposed to be raised
census, and is expected to increase to to 2.5% of GDP by 2020. These will
200 million by 2025 and to 300 million drive improvements in healthcare
by 2050. infrastructure and access.

• According to the World Bank, per • Medical devices were classified as one
capita income in India is estimated to of the priority sectors in the Make in
rise to USD 3,500 by 2020 from USD India campaign.
1,862 in 2016, thus adding significant • There has been an increase in medical
numbers to the already expanding tourism due to affordable treatment.
middle-income group. • An increase in adoption because of
• Awareness levels are increasing technological upgradation and more
with the increased media reach skilled healthcare professionals has
and coverage. There has been an taken place.
increase in diagnosis and treatment as
people are becoming more aware of
advancements in medical technology.

Challenges
The growth in the healthcare industry • Real estate prices and high capital
has been attractive. However, much costs limit the growth of delivery
more needs to be done. Despite the infrastructure.
advent of private players and better • Insufficient attention by
government spending, most Indians can policymakers and a complex tax
only afford and/or have access to basic regime are also responsible for the
healthcare. Hence, the path to universal sector’s underdevelopment.
healthcare coverage is challenging. Some
of the obstacles faced are listed below. • The lack of a comprehensive policy
and focus to develop the healthcare
• Low Penetration - The per capita eco-system.
medical device spending of USD 3,
compared to USD 7 in China and • The limited attractiveness of India
USD 42 in Russia is significantly low. as a destination for medical devices
due to uncertain regulations and
• Lack of Accessibility - The Indian pricing environment, unavailability
healthcare system is inadequate, of skilled resources, and ease of
inefficient, and unevenly distributed. doing business compared to other
69% of the Indian population lives comparable destinations in Asia.
in rural areas, while 73% of qualified
consulting doctors reside in urban • Lack of innovation and
areas. Eight percent of qualified customization resulting in fewer
doctors are in rural areas, and the options available to the patients.
remaining 19% are in semi-rural
areas.
• Inadequate regulatory systems:
Non-alignment with global
standards and the lack of quality
product testing infrastructure are
issues that hinder sectoral progress.
Medical Device Industry in India
Section 2

Regulatory and Business


Environment

INSIDE

• Regulatory Regime
• New Medical Device Rules – Key Highlights
• Business Environment
• Proposed Government Initiatives to Help Create a
Favorable Environment
• The Shift in the Medical Device Sector Post Regulatory
Changes
Medical Device Industry in India 10

Regulatory Regime
The existing regulatory framework for However, medical devices still continue It is anticipated that as the Indian
medical devices in India is inadequate for to be defined as drugs under the market and manufacturers mature, the
a USD 6 billion industry. Medical devices DCA and going forward ideally the perception of devices manufactured in
were unregulated in India until recently. government should pursue a full India will also improve and these rules
At present, 22 medical devices have been separation of medical devices and drugs will help quality improvement.
notified by the MoHFW and are treated with each having distinct and separate
as ‘drugs’ under the Drugs & Cosmetics regulations.
Act (DCA), 1940 & Rules.
The Rules generally adhere to the
The MoHFW released the first draft of framework laid down by the Global
The Medical Device Rules in July 2016 Harmonization Task Force (GHTF) on
and after consulting the industry and medical devices and are on similar lines
stakeholders, released the second draft with global standards.
in October 2016. In January 2017, the
MoHFW notified the Medical Devices The Rules further address procedural
Rules, 2017 and announced that they issues such as the need for constant
would be effective from 1 January re-approval of manufacturing licenses,
2018, thereby giving the industry time while eliminating the need to apply for a
to adapt to the new Rules. The Rules registration as well as an import license.
clearly separate medical devices as The process of tracking applications
being distinct from drugs, clearing some for licenses is made easier with online
hurdles for the industry. systems. While the new Rules attempt to
plug various loopholes within the existing
framework, it has caused ambiguity
amongst medical device companies.

OCT 2014 APR 2015 JAN 2017


Formation of Task Force Medical Device Parks Medical Devices Rules
The DoP constitutes a task Introduced, in four major The MoHFW notified the first
force to identify issues relating states, to create an ecosystem ever Medical Devices Rules
to the promotion of domestic for high-end medical device for the country and laid down
production of high-end manufacturing, to reduce a risk-based classification of
medical devices imports and eventually export the medical devices.

SEP 2014 DEC 2014 JAN 2016


Make in India 100% FDI Allowed Duty Structure
Prime Minister Medical device sector Recommended increase in
announced the Make in was carved out from import duty and removal
India campaign with focus pharmaceutical sector of additional customs duty
on 25 sectors, including thereby allowing 100% exemptions for certain
medical devices FDI under the automatic medical devices to promote
route, for brownfield as domestic manufacturing
well as greenfield set-ups
11 Medical Device Industry in India

New Medical Device Rules – Key Highlights


Increased Number of Notified Medical Devices Classification of Medical Devices under
Schedule M-III
• Regulation: Notified in the official gazette by the central
government • Regulation: The new rules classify products based on the
risk these devices may pose
• Authority: Drug Controller General of India (DCGI)
• Authority: Drug Controller General of India (DCGI)
• Impact: Process for seeking registration and license of
device for intended use in India based on regulated/not • Impact: Device with lowest risk – Class A, devices with
regulated product moderate risk – Class B, devices with moderate-high risk –
Class C, devices with high risk – Class D

Clinical Investigation Quality Certification


• Regulation: Separate provisions for clinical trials of medical • Authority: Certifying bodies have to be accredited by the
devices to assess safety, performance or effectiveness National Accreditation Board for Certification Bodies
(NABCB)
• Authority: Central Drugs Standard Control Organization
(CDSCO) • Impact: Third party assessment and certify quality
management systems of Class A and B medical device
• Impact: The provisions have eliminated the four-phase
manufacturers
stringent trial norms of pharmaceuticals and introduced a
two-phase trial

Registration and Licensing Post-Market Surveillance


• Regulation: Conformity assessment to ensure compliance to • Regulation: Process to collect and analyze information,
safety and quality standards and grant of sale in the Indian after its launch in the market, on compliance, safety,
market performance and adaptability of the device

• Authority: Central or State License Approval Authority • Authority: CLAA-appointed notified bodies
(CLAA)
• Impact: Imported or manufactured devices bearing license
• The new Rules have eliminated the need for constant may be subject to warnings and recalls
re-approval of manufacturing licenses and these licenses
have now been made valid unless the license is suspended,
terminated or surrendered. The entire process has been
made online for easy tracking

Source: MoHFW, CDSCO, Medical Device Rules 2017, EAC

The Medical Device Rules 2017 are a good step in the right
direction. There still exist significant gaps and ambiguity and
the industry is hopeful that these will be addressed soon. A
full separation of ‘drug’ and ‘device’ regulation will facilitate
formulation of medical device regulations that are appropriate
for this category and also aligned with global best practices.
This will also facilitate better focus on standards, quality and
compliance bringing up the industry stature.
Medical Device Industry in India 12

Business Environment
In past few years, the Indian government Government is taking steps to use could eventually address affordability
has taken several measures to improve technology to increase transparency and accessibility issues. There are several
the business environment for foreign and ease procedural load such as online start-ups such as Innaccel’s SinuCare,
investors in India. This section describes filings, single point clearances. Clearly Forus Health and Achira Lab that develop
some of these initiatives as well as some while there is a progress, investors affordable products and cater to the
of the continuing challenges that the continue to find the bureaucratic and unique needs of India’s vast underserved
industry faces. procedural hurdles for a new company population. The products are inexpensive
to be onerous and hard to navigate and and do not require skilled resources.
Foreign Direct Investment (FDI) more needs to be done. It is important In most cases, the products are priced
FDI up to 100% under the automatic to create a single point of contact with at one-third or one-fourth of their
route is permitted for manufacturing sectoral insights to drive the ease of imported competitors. This innovation
medical devices. The sector is also doing business, growth, and investments is not only being pursued by start-ups,
witnessing strong FDI inflows, which in this sector. but also by established players like
reflect the confidence of global players in Smith & Nephew, who conceptualized,
the Indian market. Medical Device Taxation designed and manufactured a product
The medical devices sector has been ReSTOR Prosthesis in India which is used
According to DIPP estimates, the medical subject to an inverted duty structure
and surgical equipment sector received a worldwide and costs half the price of the
for many years (i.e. finished goods are competing imported products.
total of approximately USD 1,452 million cheaper to import than raw materials
between 2000 and 2016. Out of this, for domestic manufacturing). This Absence of a Transparent and
about USD 600 million FDI was received structure impacted the industry’s growth, Predictable Policy Framework
in the last five years. often making imports more attractive. Some of the recent policy initiatives
Intellectual Property Rights (IPR) In the 2017 Budget, the government such as the price control in certain
To comply with WTO regulations and has tried to correct this by increasing devices and preferential procurement
specifically Trade Related Aspects duties on finished goods. While it is of local products have left the industry
of Intellectual Property (TRIPS), the important to reduce raw material costs confused and alarmed. While the need
government passed new patent laws and duties to boost manufacturing in to widen access and support care for
in 2005. Before being TRIPS-compliant India, increasing finished goods duties underprivileged segments is understood,
there was a major concern with respect may not be the right approach. In an industry believes that the goals could
to IPR for foreign medical device industry where certain technologies will have been achieved with alternate
manufacturers. need to be imported it will be important approaches that would have had less
for Government to ensure that finished damaging impact on the industry and not
Currently, India has reasonably defined goods imports are not made difficult. impacted investor sentiment.
judicial, statutory, and administrative
frameworks to protect IPR. Over the Innovative Start-ups – Creating a This could be facilitated through more
years, many international brands such as Culture for Frugal Innovation inclusive policy making, wherein industry
Whirlpool and Volvo have protected their Over the past few years, the medical concerns are heard and acknowledged
trademarks despite not being registered device industry has seen rapid innovation in the policy. Additionally a clear long
in India. to cater to a largely underserved term road map is essential to bridge the
population. This is aided by government healthcare gaps in the country, so that
Product Liability encouragement to create a culture for sudden unexpected moves by regulators
Pharmaceuticals and medical devices are frugal engineering and innovations that do not create an alarm.
in constant danger of product recalls and
the associated liabilities. Product liability FDI Inflows (In USD million)
law governs the liability of and vendors
for injury to a person or property caused
by dangerous or defective products.

The legislation, in respect of product


liability in India, was earlier construed
narrowly. However, recently, the Courts
have adopted a pro-consumer approach.

Ease of Doing Business


India is keen on improving its Ease of
Doing Business global ranking. The

Source: Department of Industrial Policy and Promotion, 2015


13 Medical Device Industry in India

Proposed Government Initiatives to Create a


Favorable Environment
Upcoming Medical Device Parks This certification is a joint initiative standards, and to meet the desired
Medical device parks are state- of the Association of Indian Medical regulatory requirements. For e.g.
level initiatives wherein states have Device Industry (AIMED), Quality NIPER Ahmedabad will initiate National
committed to set-up dedicated industrial Council of India (QCI) and the National Centre for Medical Devices (NCMD) for
parks which will facilitate efficient Accreditation Board for Certification development of skilled manpower for
domestic manufacturing at lower costs. Bodies (NABCB). NABCB is an manufacturing in the medical device
The objective is to create an ecosystem accrediting, certifying and inspecting industry.
for medical device manufacturing, body and its accreditation programs
reduce imports, and eventually export are internationally equivalent, placing Preferential Purchase Policy
domestically manufactured devices to it on-par with European and American Domestic manufacturers have been
other countries. accreditation bodies. The utility of demanding a preferential purchase
creating a separate certification body is policy for a decade. The aim is to
Since these parks will have common however, in question, since, if a domestic encourage domestic manufacturing
facilities for manufacturing and testing, company has to compete with global and give preference to domestically
the set-up and manufacturing costs are companies it is preferable to go for manufactured products in public
expected to reduce, thus resulting in International standards. procurement. Some countries provide
better quality and affordable products. preferential pricing for domestically
Many states including Andhra Pradesh Promote Skilled Talent manufactured products in government
(AP), Maharashtra, and Gujarat have The Ministry for Skill Development & procurement if all technical parameters
already announced their plan to set up Entrepreneurship (MSDE) was formed are met and the prices are competitive
dedicated medical device parks. to focus on providing relevant skills with imported products.
to the youth and increasing their
Evolving R&D and Infrastructure employability. Under the MSDE, the However, Indian Medical Device Industry
With the new indigenous quality Healthcare Sector Skill Council (HSSC) is still in its nascent stage and it takes
certification and dedicated testing labs caters to the skill development of health time to match the global quality norms.
strategically spread across the country, and medical device sub-sectors. The In most of the segments there are hardly
government intends to improve the council has identified a large unmet one or two players who can match
quality of medical devices manufactured demand for medical equipment/allied global quality standards. Hence, any
in India. Based on the recent approval health technicians - those involved in Preferential Public procurement policy
from the Department of Commerce operating, servicing and maintenance may lead to a monopolistic escalation
(DoC), two dedicated medical device (allied health). of cost with quality compromised. We
testing labs will be established at need to keep in mind the government
Vadodara in Gujarat and at Noida in Uttar The council has a mandate to create resources are limited. “Our policy
Pradesh. These are few positive first occupational skill standards and works of import substitution under high
steps, with a few more to soon follow. along with industry partners. They create protection has given rise to a group
‘Qualifications Packs’ which set validated of small firms none of which are
While critics have questioned the ability/ standards for each skill and performance competitive in the world market. In
capacity of two testing labs to manage criteria. These then enter the national contrast, a focus on the global market
approximately 14,000 products, it is qualification register. They are also can potentially result in output worth
a positive first step. The government creating training content and curricula hundreds of billions of dollars and hence
has launched dedicated funds to for the Qualification Packs. This training a large number of well-paid jobs,“ the Niti
promote innovation, R&D, and product is provided by manufacturers, hospitals Aayog said.
development within the country in the and standalone training partners. The
specified fields of electronics, nano- council also sets standards for trainers
electronics, and IT. and training infrastructure and then
ICMED Certification accredits them. Examinations are
The Indian Certification of Medical conducted on behalf of the Skill Council
Devices (ICMED) is the country’s and a certification is provided to students
first indigenously developed quality along with placement support.
assurance system for medical devices. Many skill development and training
The certification scheme being launched, programs are being carried out by
has two certification options, ICMED the government and private sector
9000 certification for low-risk medical to design and develop medical
devices and ICMED 13485 for medium devices of international quality and
and higher risk devices.
Medical Device Industry in India 14

The Shift in the Medical Device Sector


Post Regulatory Changes
The Indian Medical Device sector is Manufacturing will get more organized
undergoing significant changes for and international companies will assess
the better and will continue to do so in plans to manufacture in India in selected
the foreseeable future. From both the product segments due to harmonized
regulatory and domestic innovations global standards. The increase in testing
perspective, recent changes in this labs, clinical trials and certifications will
sector, especially with the government’s increase R&D in India and eventually
focus on the Make in India campaign, will more customized products for the Indian
cause a shift in the industry’s structure, market will emerge.
conduct, and performance.

Structure Conduct Performance

Pre-Regulatory and Policy Framework Changes

Nascent regulatory framework International players preferred to import International players focused on high-
and distribute. Selective participation end products to achieve reasonable
due to the uncertainty of rules margins

Lack of conducive environment for Domestic companies continued to focus Domestic players focused on cost
technological innovations on low-end products and refrained from competitive/high volume products
investment in R&D resulting in low margins. No efforts to
build competency in R&D
Inverted duty structure
Low investments were made in
manufacturing and R&D infrastructure

Post Regulatory and Policy Framework Changes

Robust regulatory Conducive environment for technological Companies who demonstrate quality
framework innovations standards together with cost efficiencies
to thrive

Focus on manufacturing and research in More International companies to Focus on technology and innovation to
India manufacture in India and expand their drive down cost and improve margins
presence across segments with better and differentiated products

International companies will look at Patients to benefit from competitive


domestic innovation opportunities costs and better quality products
from both domestic and international
Domestic companies to focus on raising companies
quality standards and technological
upgradation

International and domestic companies


to customize products for Indian needs

International and domestic companies


to collaborate with each other through
joint ventures or associations

Source: SKP Analysis


Section 3

Make and Heal in India

• The Make in India Campaign


• Objectives of the Government
• Critical Success Factors for Developing and
Making in India
• Heal in India – Bolstering Medical Devices and
Healthcare Growth
• Conclusion
Medical Device Industry in India 16

The Make in India


Campaign
Four pillars of the Make in India Campaign
Make in India is one of the flagship • Boost entrepreneurship
campaigns of Prime Minister (PM) • Shift in perception of the through the ease of doing
Narendra Modi and aims to bring more government from that of a business
manufacturing to India. This initiative regulator to being a facilitator
is intended to bring self-sufficiency • Reduce the complexities
through domestic supply and develop • P
osition government as a of business set up by
India as a global manufacturing hub. partner to industry in bringing streamlining the licensing
With overall costs rising in China and economic development process and appropriate
manufacturers contemplating moving to regulations
other countries, this might be the right
time for India to move in and capture
this space. As a manufacturing hub, India New
aims to create significant employment Processes
opportunities for its increasing young
population.

The Medical Technology/Device industry New Better


is one that has been targeted for this Mindset Infrastructure
campaign given the current high import
intensity. However, the response
towards the initiative has been lukewarm
for a variety of reasons discussed in this
section. New
Sectors
• Upgrade existing
• Identify 25 sectors in infrastructure to
manufacturing, service strengthen research and
activities and infrastructure to innovation activities
kick-start the initiative • D
evelop smart cities and
• Opening of foreign direct industrial corridors with
investment in key areas state-of-the-art technology

Several Reasons for Manufacturing in India

• High import intensity, and likely • Availability of skilled and qualified


prospects for substituting with technical and professional
domestic production. manpower resources.

• Long-term growth prospects with • Opportunity to design and


improving access and adoption manufacture India centric products
given current low penetration levels. at lower price points for untapped
Expected significant volume growth segment volumes.
through servicing of untapped
domestic demand

• Outsourcing of manufacturing
and R&D activities to India to take
advantage of cost arbitrage.
17 Medical Device Industry in India

Objectives of the Government


Manufacturing Cost-competitive Employment Generation
Quality Products It is estimated that India adds 12
‘Make in India’ is one of the strategies million people every year to its
the government is using to address the workforce. Manufacturing as a sector
patient affordability issue and bring has traditionally created significant
down price of healthcare. They believe employment. The government hopes to
that local production costs of certain create a total of 100 million new jobs in
high volume devices may be lower than 25 sectors by 2022 through the Make in
imported costs. India campaign.

Reduced dependency on imports and


increase exports
Net imports of medical devices are close Based on our conversations with several stakeholders, the
to USD 2.5 billion and expected to grow government’s intention to ‘Make in India’ is warranted. However,
at 10-12% CAGR - a significant portion of
trade imbalance and a cause of concern
regulators need to look at the larger idea representation - Make
for the government that needs to be and Heal in India. A limited approach to making in India may not
managed. create the required, sustainable healthcare ecosystem or meet
some of the other important objectives.
Medical Device Industry in India 18
19 Medical Device Industry in India

Critical Success Factors for Innovating and Making in India


While the government is systematically making efforts to address the challenges described above at the macro level, there are
various issues which need to be addressed for companies to consider manufacturing in India. Some of the critical success factors
for the ‘Make in India’ campaign are mentioned below.
CRITICAL SUCCESS FACTORS

Domestic manufacturing to
improve quality matching
international standards for
export sales Scalability of business

Robust investments in the


manufacturing of medical
devices

Quality manufacturing at
competitive cost vis-à-vis
countries such as Thailand and
Conducive environment for doing
Singapore
business in India

Focusing on innovation in India Capable and qualified pool of


- Manufacturers innovate and skilled doctors and nurses who
develop products specifically for will be able to utilize advance
emerging markets equipment

Collaborative efforts between


all the stakeholders to develop Improving penetration by
innovative and customize customizing products at a price
products point for the value-conscious
Indian buyer – key to trade-off
between price, quality, and
brand; thus expanding the user
base and market
Medical Device Industry in India 20

Developing and manufacturing in India has its own pros and There are several examples of companies successfully
cons, but needs active consideration by the industry. Private manufacturing medical devices in India. Some of which are
players have a big role to play inthe modernization and highlighted below.
the growth of the market through innovation, localization,
increasing awareness and training.

Smith & Nephew GE Healthcare Philips

The company’s ReSTOR Prosthesis GE Healthcare introduced an Philips India launched Mobile
was conceptualized, designed, electrocardiogram (EKG) system Diagnost Opta, a digital X-ray
and manufactured in India and is that is priced 80% lower than system, and BV Vectra, a mobile
now sold across the world. a similar imported product C-arm system dedicated to
available in India. They also orthopedic surgical procedures in
introduced a cardiac ultrasound 2015. Both of these products were
machine that is about 50% conceptualized, designed and
cheaper than its imported manufactured in India. Philips
counterparts. GE conducted also plans to increase localization
R&D for several years before of these products which varies
finalizing the design and made currently from 10-50% and
sure that a substantial amount creates an ecosystem for these
of components of the machine products. Nearly 20-25% of the
could be sourced locally. Hence, it total production at its Chakan
not only created an India specific plant is exported to 90 countries.
product but has also assisted in India has become an important
creating an ecosystem around it. region, not only for R&D but for
manufacturing as well.

Make in India, Make for India or do both?


The Make in India campaign speaks Given the attractive future potential and Make in India and Make for India feature
about cost competitive manufacturing large population size, Make in India could outcomes that could bode well for the
in India by leveraging the availability be a game changer for such companies. country. Though they differ in their
of highly skilled labor and indigenous approach, they have a common aim
resources. This is expected to boost While Make in India essentially covers of developing India. These initiatives
exports and strengthen the domestic both manufacturing for indigenous and need an underlying climate that is
production base. export markets, it’s critical for companies crucial for success. The creation of
to look at Make for India as well. Make a hybrid model is required which
Make in India will require a significant for India can help the country achieve satisfies the domestic developmental
jump in technological and professional equitable growth for its population. deficit while giving considerable policy
expertise, which remains a constraint. Inclusiveness is already a recognized space for dynamically adjusting to the
It also necessitates a dynamic priority and should be adopted through international economic climate.
infrastructure and policy environment Make for India. Make for India involves
that needs to be built. Major investments R&D and innovation that results in a
in R&D and infrastructure development product designed for India’s specific
are required to achieve these objectives. needs at appropriate price points.
21 Medical Device Industry in India

Heal in India – Bolstering


Medical Device and
Healthcare Growth
Healthcare in India is at a crossroads
and needs various interventions. The Foreign medical tourists
success of initiatives such as ‘Make in
India’ is dependent on a number of policy
initiatives described earlier. 184,000 233,000 361,000
Industry players believe that a campaign
like ‘Heal in India’ will be synergistic to 2014
the Make in India initiative. An attractive 2015
Heal in India campaign can result in a
significant expansion and upgradation of 2016
Source: Ministry of Tourism and IBEF, Healthcare, January 2017
healthcare infrastructure in the country
benefiting Indian residents and providing
value addition through medical tourism.
India emerged as an important player in India - Lowest Cost Destination for Treatment
the medical tourism space as early as the
1990s, but awareness spread only in this Hip Replacement

millennium. The country is witnessing Knee Replacement


a growth of 22-25% CAGR in medical Spiral Fusion
tourism, and healthcare providers expect
Heart Bypass
the industry to double to USD 6 billion by
2018 and grow to USD 8 billion by 2020.

Quality of care, availability of high end


technology/facilities and costs are the
key drivers. Important medical tourism
procedures are tertiary care driven such
as cardiac surgery and interventional
Source: Indraprastha Apollo Hospitals, Annual Report 2015-2016
cardiology, orthopedic surgery,
transplant surgery, oncology, bariatric
surgery, dentistry, cosmetic surgery
and in-vitro fertilization. Patients from Treatments in India are 50%- 90% lower than the US, making it
Africa and the Middle East access private one of the most affordable medical tourism destinations.
healthcare in the country due to lack
of quality facilities and trained doctors The expanding medical tourism sub-sector should also provide
in their respective countries. Medical
tourists from - developed countries use
additional impetus to the overall growth of the device industry.
India for surgeries that are not covered
by insurance, or where waiting periods
for non-life threatening procedures is
very long in government funded markets.

The expanding medical tourism sub-


sector should also provide additional
impetus to the overall growth of the
device industry .
Medical Device Industry in India 22

The Impact of Heal in India


Employment Creation Export Earnings and Balance of Trade Stakeholders should
It is estimated that every hospital bed A successful medical tourism industry collaborate and initiate a
added to the current capacity, creates can help boost export earnings
direct employment for five people and significantly. This can also support campaign to Make, Innovate
indirect employment of up to 25 people. imports of high technology assets/ and Heal in India unlocking
In 2015, the Indian healthcare sector devices without hurting the balance of India’s healthcare potential
became the fifth largest employer, in trade.
terms of direct and indirect employment. and addressing awareness,
Advanced medical procedures generally Continuous Learning and Innovation adoption, access and
have a huge multiplier effect on affordability.
employment generation. The healthcare A drive to Heal in India will increase
delivery sector will generate high-value international tie-ups and collaboration
service jobs, thus resulting in a more in both medical devices technology and
skilled and equipped India. delivery sectors. These collaborative
efforts will open up channels for
continuous learning, improved access
Compliment and Synergize Make in to technology and its use, and further
India elevate the quality and availability of
Heal in India will accelerate the healthcare.
development of the overall healthcare
ecosystem, directly impacting awareness, Enlarge the Medical Device market in
adoption and access of medical devices India and Accelerate Growth
and technology. This will provide an
additional impetus to the overall growth This initiative will lead to increased
of the device industry. This strategy will medical procedures and drive up
also ensure upgradation of technology volumes for the medical device industry.
to global standards, and ensure value Medical Tourism being at the top of
optimization of the same. All improved the pricing pyramid will also facilitate
demand will also result in scale and the adoption of the high-end products
cost economics, benefiting price and and thereby improve margins for
affordability in the long term. The the industry. This in turn will also
technology and upgradation benefits incentivize innovation among both
of medical tourism will spill over and domestic and international players and
benefit the local community equally. ensure continuous access to advanced
technology.
Section 4

Price Control Policy – Impact


and Implications

• Price Control – Economic Regulation


• Fundamental Concerns and Anomalies in the New Price Control
Regulations for Devices
• Healthcare Industry Economics – Does Profiteering Exist?
• Lessons India can learn from other countries
• Implications of Price Control Policies Introduced for Devices
• Recommendations
Medical Device Industry in India 24

Price Control – Economic


Regulation
The Government of India has been The total number of coronary interventions in 2015 amounted
consistent in communicating its intent
to make healthcare more affordable and to 375,000 with an average use of 1.3 stents per procedure. Out
accessible to all citizens, an objective of all PCIs, 60% were funded by patients and private insurance
reiterated in its 2017 National Health while 35-40% of coronary stents were provided to the public at
Policy. While pharmaceuticals (drugs)
have been under price control for the Central Government Healthcare Scheme (CGHS) price.
many decades, it is only recently that Source: National Intervention Council (NIC) Data
medical devices have fallen under the
government’s radar for price control.

In a scenario where a market fails to Price Control Mechanism – retail price for a bare metal stent
achieve the optimal and reasonable price Implemented by Regulators was approximately USD 700, while
for a trade, as the Government of India The National Pharmaceutical Pricing drug-eluding stents were priced at
believes has occurred in this instance, Authority (NPPA), an organization of the approximately USD 1900. The industry
regulators intervene and explore Government of India under the Ministry offers a large number of models priced
economic regulations such as price of Chemical and Fertilizer’s Department according to their technology and value.
capping. of Pharmaceuticals (DoP), was set up Although the average Price to Distributor
through an executive order and is (PTD) was significantly lower, MRP prices
India has been facing challenges to were high, leading to unreasonable trade
provide quality healthcare to its 1.4 therefore not a statutory body. Its aim is
to monitor, fix and/or revise the prices of margins. In light of these large margins,
billion people. NCDs such as heart in February 2017, the NPPA, fixed a
disease, diabetes and respiratory controlled bulk drugs and formulations
and to further enforce prices as well as ceiling on the price of cardiac stents and
diseases comprised of 45% of all diseases slashed their rates by nearly 75%. While
in 2010, and are expected to reach up to ensure the availability of these medicines
in the country. The NPPA usually fixes the it considered various price identification
75% by 2025. Despite a 42% increase in models based on landed costs,
the number of angioplasties performed prices of any drug after it is included in
the National List of Essential Medicines production costs and other industry
in 2015, only 2% of the patients needing submissions, the NPPA finally chose
this type of surgery were treated last (NLEM). However, it has emergency
powers to act suo motto. to classify all stents under two kinds,
year, according to a report by the namely, Bare Metal Stents (BMS) and
National Intervention Council (NIC). The first device to receive the DoP’s Drug Eluting Stents (DES). The revised
While price capping is meant to make attention has been coronary stents. prices are listed in the table below.
healthcare more affordable and Prior to the pricing control, the average
accessible to a wider population, it may
not benefit the market in the long run.
This section investigates the impact and Sr. No. Coronary Stents Ceiling Ceiling
implications of the ongoing government Price (INR) Price (USD)
interventions and examines the policy 1 Bare Metal Stents (BMS) 7,260 114
options.

2 Drug Eluting Stents (DES) including 29,600 463


metallic DES and Bioresorbable Vascular
Scaffold(BVS)/Biodegradable Stents
25 Medical Device Industry in India

The NPPA subsequently issued a Post the price capping of stents, the After capping prices for coronary stents,
notification stating that the ceiling prices NPPA published a list of 19 medical the NPPA focused its attention on
were inclusive of the eight percent trade devices that were placed on its orthopedic implants. In August 2017, it
margins for the distributor. monitoring list in May 2017. The capped the prices of knee implants used
devices which were covered under both for primary and revision surgeries
In the larger scheme of things, less this order included catheters, heart and further capped the trade margins
than 0.02% of the population opt for valves, orthopedic implants and internal for distributors/importers and hospitals.
coronary intervention procedures. This prosthetic replacements amongst others. Before capping the prices for knee
is far lower than the number of people It is believed that this step is a precursor implants, the NPPA released an analysis
affected by other healthcare diseases. to bringing additional devices under the of trade margins for the same and
However, this directive sets a precedent ambit of price control. It is important to revealed that the margins ranged from
to include price control measures on note that after the price cap notification 135% to 300%.
other medical devices as well. Given is issued, no manufacturer can withdraw
the significant slashing of prices, many the products from the market for a
manufacturers have found it extremely period of 12 months from the date of
difficult to continue selling some models. notification without the prior approval of
Hence, major stent manufacturers such the NPPA.
as Abbott Vascular and Medtronic have
submitted applications to increase the
ceiling prices for their latest generation Type of Knee Implants Old Price (INR) New Price New Price
of products and/or allow them to (INR) (USD)
withdraw the products from the market. Cobalt Chromium Knee 1,58,300 54,270 848
Implant
Titanium Oxidized Zinconium 250,000 - 450,000 76,600 1197

High Flexibility Implant 180,000 - 450,000 56,490 882

Revision Implants 275,000 - 600,000 113,950 1780

Specialized Implant 275,000 to 900,000 113,950 1780

The NPPA carried out extensive deliberations with the committee


to reach the conclusion that the margins within the healthcare
supply chain indicate a ‘failed market system’, where asymmetry
of information resulted in unethical practices.
Source: SKP analysis
Medical Device Industry in India 26

Fundamental Concerns and Anomalies in the New Price


Control Regulations for Devices
Devices vs Drugs
In India, medical devices are treated as The following table highlights the In our conversations with
drugs as they do not have a separate imperative to use different and distinct
Act that governs them. The government regulatory frameworks to govern drugs medical device manufacturers,
understands the need for separate and devices. A lack of understanding of we found that most of them
regulations for devices and has the dynamics of medical devices will lead agree with the government
accordingly introduced the Medical to inappropriate sectoral policies.
Device Rules. However, its recent on the need to make
decision to treat medical devices as devices more accessible
drugs under the price control regulations and affordable, as well as
directly contradicts these efforts.
to create more transparent
and fair trade practices. The
Differences between Drugs and Devices
industry did make numerous
Sr No Parameters Drugs Devices suggestions about potential
1 Scope Based on pharmacology, Based on mechanical, approaches and models.
chemistry, biotechnology electrical, IT, and systems
However, they feel that such
and genetic engineering engineering
a drastic price capping will
2 Outcome Dependent on patient Depends significantly on
response the surgeon’s skills and significantly distort healthcare
training economics and most medical
3 Monitoring Patients can monitor Patient training and device manufacturers
themselves education is required
question the approach used
4 Life Cycle Very long development Shorter development cycle
while appreciating the intent
cycles with extensive with thorough evaluation
phases of R&D trials during the design phase of the policy. In both the cases
5 Volume High volume, standard Low volume, variable batch of Coronary Stents and Knee
batch sizes sizes Implants, it was observed that
6 Costs Low manufacturing and Large investments in the trade margins - that is the
distribution costs as set manufacturing distribution,
difference between the Price
processes and training/education
to the Dealer and the MRP
7 Obsolescence Very slow Rapid
(maximum retail price) was
too high. Efforts are required
Source – IMS Health, 2016
to address the Trade Margin
through conversation and
proper analysis with various
For pharma companies, price is a function of the product,
stake holders. But in practice
whereas for medical devices it is a function of product and
the Price cap was decided
delivery. Medical device companies need to straddle both
based on Landing Cost/Ex-
innovation and obsolescence, due to which their products have
Factory cost reducing margins
shorter lifecycles of only a few years and smaller volumes.
of the importing company.
This will severely constrain
the ability of the importing
companies to invest in Skill
Development or introduce
New Technologies in India.
27 Medical Device Industry in India

Technology Assessment of Devices clinical conditions, including disease Linkage between Device Cost and
and the Evaluation of Clinical Benefits stage and complicating co-morbidities, Total Procedure Cost to Patients
The subcommittee and the NPPA and often display different lesion Reduction in device costs alone may not
decided to consider different stents as characteristics in their coronary vessels. significantly impact procedure costs
equivalent except for the difference Thus, it is important to understand that which is the real parameter that can
between bare metal and drug eluting all coronary artery disease (CAD) patients widen affordability and usage. In most
models. Bare-metal stents (BMS) were are not the same and different products cases, the cost of implants (Ortho and
first introduced in 1986, followed by may have significant and distinct clinical Cardiac) is less than 25% of the overall
drug-eluting stents (DES) in the early benefits. The assessing authorities cost that a patient bears and very rarely
2000s, which have since been followed should take into account the current exceeds 35-40%.
by four other generations of stents (DES). technology for factors such as the ease
Stents today not only differ in clinical of procedure, probability of restenosis, Medical service providers fee (surgeon,
outcomes but also in drug dose/elution improved recovery, shortened lengths of physicians, nurses and other consultant
kinetics, platform material/design and hospital stay and reduced readmission charges) and infrastructure costs such
polymer type/coating, thereby impacting rates. For example, the use of an older as operation theatre charges, room
their performance and long-term patient generation stent on a diabetic patient rent and diagnostics are significant
outcomes. Globally, new devices are may result in restenosis for 70-80% of components of the treatment costs.
approved for marketing after conducting patients, resulting in higher long term Contrary to popular belief, over the
efficacy studies against current products. costs to the system. last 4-5 years, the cost of implants as a
percentage of total procedure costs has
The Industry believes that pricing should Willingness to Reward Innovation and declined. The cost of stents for patients
ideally be set by market forces. In some Quality has gone down by more than six percent
economies payers/governments use in the last four years.
Health Technology Assessment (HTA) Currently, there is a striking difference in
selectively to determine pricing based on the number of clinical studies among DES
health economic value of the technology. products for different manufacturers.
HTA is considered a specialized task that Many studies support the products sold
needs to be done by qualified scientific across global markets, whereas some
organization. Some industry experts products approved only in India for the
believe that this task be given to the Indian market are supported by very few,
MTAB, a government created body, and if any, clinical studies.
that the MTAB be provided adequate With extensive regulatory requirements
resources to accomplish this task, in place for US FDA approvals and CE
including full HTA on a selective basis.. Mark, the safety of medical devices is
The MTAB will be better placed to provide ensured. Indian regulations in their
recommendations to the regulators current form appear to be inadequate According to the WHO,
on technology differentiation and if
necessary value.
to measure and ensure the safety and following in the footsteps
performance of medical devices to be
used for patients in India.
and practices of the ‘access
NPPA’s Stent Assessment Differs from to essential medicines’ may
The greater volume of clinical evidence
the Cardiologist’s Viewpoint
published for globally marketed DES
not be enough to achieve the
Cardiologists, in general, feel that there models, provides greater certainty for overall objective of improving
are important differences in the various
generations of stents from a clinical
medical practitioners, as well as patients, access. The agenda to improve
about the safety and performance of
benefit viewpoint. Patients have differing those stent models. It is important to
access to medical devices
anatomies, vascular structures and recognize this investment in R&D and requires, and deserves, its own
clinical conditions, including disease
anatomies, vascular structures and
consider it in pricing if India wants to unique modalities.
encourage development and innovation.
Medical Device Industry in India 28

Healthcare Industry Economics – Does Profiteering Exist?


Healthcare delivery in India is managed Net Margins of Manufacturers and Hospitals invest heavily in building
by two participants: the public sector Hospitals infrastructure and the return on capital
(government) (30%) and the private This paper has studied some of the in this industry is not high. Cost of land
sector (70%). It is private investment prominent stent manufacturers and and capital equipment in India is higher
and entrepreneurship that have hospital chains to obtain an analysis of than most countries and this makes
addressed the accessibility issue to a margins made in the industry. quality healthcare impossible to deliver
significant extent, especially in tertiary at very low price points. Manufacturers
care, throughout the healthcare eco- It is pertinent to note that most of too spend significant resources on R&D,
system, from manufacturer to healthcare the manufacturers and hospitals in training of medical service providers
delivery. Studies have indicated our samples have net margins (profit and these costs are not always visible to
that patients’ trust in government after tax) in the range of -5% to 10%, consumers.
hospitals has decreased because of the negating the notion that manufacturers
unavailability of skilled medical service or hospitals are profiteering and
providers, robust infrastructure and exploiting patients. Manufacturers have
medical supplies. also contributed byactivities such as
providing 30-40% of total stents in the
The Indian coronary stent market is country at a low rate of USD 370 under
dominated by MNCs with approximately the CGHS.
60% of the market share. The leading
companies in this segment are Abbott
Vascular, Medtronic and Boston
Most of the stent manufacturers and hospitals
Scientific. The Indian entity of these margins in the range of -5% to 10%
MNCs imports the devices from the
U.S. or Europe and sells them in India
through distributors after adding their
own margin on the landed costs.

While it might be true that the cost to patients is high for stents, it
might also be equally true that stakeholders are not profiteering.
Hence, the issue requires a deeper understanding of the overall
healthcare delivery mechanism in India and the various socio-
economic factors at play.
29 Medical Device Industry in India

Product Price Caps, Procedure Price Costs Distributed across the Supply Chain
Caps or Both? Limiting prices may impact all outcomes. Many of the Indian
Recently, the state of West Bengal stakeholders - medical device teaching institutions do not have the
amended its Clinical Establishment Act, manufacturers, distributors, and infrastructure to train their students
2010 by introducing the West Bengal hospitals, and may, in turn, have an on the newer technologies and
Clinical Establishments (Registration, adverse impact on their ability to invest devices and the industry plays a major
Regulation and Transparency) Act, 2017. in newer infrastructure. This could lead role here.
It aims to bring greater transparency, to to limited healthcare access growthfor • Rush orders and off-time deliveries
bring an end the harassment of patients the underserved sections of Indian resul in higher logistics cost
and check medical negligence in private society.
hospitals and nursing homes. The act • Huge investments in infrastructure –
has many patient friendly steps, from The costs incurred to make devices capital expenditure and interest cost
requiring healthcare providers to treat accessible are listed below.
There are several costs incurred by
accident victims without the advance • High Working Capital inventory the distributor in making the devices
payment of fees to outlawing the practice and a large number of days of sales available within the market. We have
of holding a deceased patient’s body outstanding in government schemes considered the example given below
until their hospital dues are paid. • High precision instruments on loaner of costs incurred for the distribution of
An important pro-patient step in the basis with highly skilled and trained stents to hospitals.
act is the capping of package rates experts to help in the selection and
for consultations, investigations, bed usage of instruments and devices
charges, intensive care, ventilation, • Cost of training the surgeons and
implants and other similar procedures. paramedics staff to ensure high-
Further, any additional treatments quality procedures and patient
or procedures will not be charged to
the patient over and above the fixed
package rates, irrespective of whether Stent Distributor Margin Analysis
any additional treatment is provided to
the patient or not. The state of Karnataka
has also introduced a similar legislation
termed the Karnataka Private Medical
Establishments (Amendment) Bill, 2017.
However, it has been kept in abeyance
given the strong protest from the medical
community.

The key aim of both these pieces of


legislation has been to curb healthcare
costs and regulate the private healthcare
sector, and they have been careful
to exclude government healthcare
institutions from their purview. The
experience in West Bengal indicates
that this legislation may not have been
well drafted. For instance, there have Source: SKP Research and Analysis
been cases of medical service providers
refusing difficult or complicated cases
The price to hospitals derived from many large hospitals directly negotiate
due to the significant liability burden
the equation given above is closer to prices with manufacturers, distributors
on them which includes fines and
the average prices prevailing in the play a critical role in facilitating
imprisonment. The package prices
industry. Accordingly, the PTD + 8% unorganized healthcare delivery. The
have not yet been introduced, but, if
margin suggested by the NPPA might role and costs incurred by distributors
done, may lead to an exodus of private
fail to make the model commercially vary for different devices. Therefore, it
investment from the state. Also, patients
attractive for distributors, who would will be more reasonable for a regulator
that are refused treatment will seek
prefer to distribute low-cost stents and to regulate the prices at Price to Hospital
treatment elsewhere.
other profitable products. Further, (PTH) levels.
various stakeholders feel that the efforts
involved in distribution require margins
in the range of 20-25%. While
Medical Device Industry in India 30

Unlike other large economies, Thus, the central and state governments
India spends a substantially lower need to come together and adopt a
amount of its GDP on healthcare. holistic and methodical approach to
Consequently, while the government’s reduce costs and increase affordability. A
intention of decreasing this burden is diligent way to achieve this might be for
understandable, capping device prices NITI Aayog first to first prepare a model
might not be the most effective way to ‘Clinical Establishment’s Bill’, which can
do this. then be introduced in Parliament and
later adopted by the majority of states.
For the healthcare industry in India to
operate effectively, it is imperative that
legislation and regulation do not put Alternatively, the regulator could have looked
them under undue stress and make it
difficult to conduct business as usual.
at only capping the total Trade Margin of
As demonstrated above, there are not specific devices, especially in a market where
enough margins in the entire value distributors service most of the hospitals.
chain to have a sustainable industry that
attracts fresh investment with price caps
However this cannot be a fixed margin across
at both procedure and product levels. all device categories, as the services provided
by distributors varies significantly for different
devices, resulting in substantial variances in
costs and investments at the trade level.
31 Medical Device Industry in India

Mapping Learnings from Other Countries with India


Developed countries, such as those hospital care costs. Inherent to this Some of the best practices taken from
mentioned below, have robust public system is transparency and predictability other countries which can be replicated
health insurance frameworks that in the provider pricing of healthcare are as follows:
account for a majority of healthcare services – one of the key elements
benefits and fund a large chunk of the missing in Indian healthcare at present.

Parameters USA France UK India

Product based Patient shared billing Case-mix system Fixed annual budgets Mostly out of pocket
reimbursement/co-payment with government and of reimbursement by local clinical expenses - Patient
insurers based on treatment commissioning group shared billing with
in public or private (CCG’s) along with government and
hospitals regional Strategic insurers
Health Authorities
(SHA’s)
Bundled/Package Rates Fixed procedure fee Fixed procedure fee Fixed procedure Procedure fees
based on diagnosis- based on French DRG fee based on DRG deviate based on
related groups (DRG) payment system payment system, hospital, quality of
payment system except few cases paid device and region
as unbundled rates
Device Pricing Covered in package List of reimbursable Manufacturer’s free Price capping for
rates products and to set prices but have stents, implants
services covers both to negotiate with
market forces drive
generic and branded CCG’s
the prices for all
products with
other products
incremental value
Price Capping Capping at healthcare Capping at healthcare Capping at healthcare Initiated capping at
provider fees provider fees and provider fees device fee
device fee

Value proposition from the Incentivize hospitals Differentiate between Controls hospital -
country to shorten surgical novel brands with budgets allowing
time and length of incremental value free competition in
stay product prices

India faces three major challenges in • Third, the Indian delivery market is Coronary stents and knee
implementing similar incentives for largely unorganized and therefore,
hospitals. price capping for healthcare provider
implants are the only products
• First, India does not fund its hospitals fees needs a much more robust currently under price control.
sufficiently to address the costs of information system. However NPPA has published
many medical products, particularly It should be recognized that every a list of 19 medical devices
imported medical device implants.
Thus, unlike the countries mentioned
stakeholder in the healthcare supply in May 2017 that as per
chain — manufacturers, providers,
above, the entire burden of pricing and payers have a responsibility to
indications could be subject to
in India is shared by private and address variation in cost and quality to price caps.
insurance agents. patients. When transparency of hospital
• Second, the infrastructure and data procedure costs and product-pricing
requirements needed to launch a DRG is absent, patients bear the burden,
payment system can be difficult due particularly those who self-pay and
to the lack of treatment guidelines and therefore have no bargaining power on
patient records. the prices they pay.
Medical Device Industry in India 32

Other Key Takeaways


• A comprehensive review on the This database would document • Provide patient with Procedure
essentiality of procedures is required the local governmental procedure Choices and Hospital Competition: the
to determine essentiality for medical payment and the ‘typical’ range of patient must be provided the regional
devices. Medical devices are just one patient charges that accompany that range of costs for the recommended
element of service delivery. procedure in the local geography procedure along with the expected
where the hospital resides. Bringing in costs at the treating hospital. This new
• It would be encouraging if new total transparency of both procedure system would require hospitals to
innovations are kept out of the prices and those of services and publish their own ‘to patient’ price for
‘essentiality purview’ until a return on supplies involved including medical the total procedure.
investment is achieved. Tiered pricing devices.
could be one of the ways to create
differentiation in products. • Bulk purchase mechanism should be
streamlined to ensure that there is an
• Creating regional databases of efficient supply chain.
overall costs and outlining the
appropriate patient-borne costs
for each procedure that is funded.

If device pricing as well as total treatment costs are transparent,


it will support greater competition among hospitals as well as all-
around budgeting, planning and parity. Premium pricing should
be based on demonstrated quality, efficiency and efficacy.

Implications of the Price Control Policies Introduced for


Devices
In a free market where information Although regulators intend to improve
symmetry exists, the market price is the affordability of these devices
‘fair’ due to the competition between for patients, their policies impact
companies as well as buyers. But when stakeholders in the healthcare ecosystem
information asymmetry exists, external in different ways. Unless certain counter
measures may be taken to bring more steps are taken to safeguard the interests
transparency in the system and ensure of each stakeholder, the economics
that procedure costs are controlled at driving the system may fail.
the provider level. While drafting policy,
some regulatory officials might look for
the easy short-term win, rather than
consider the long-term implications of
their decisions. While such regulations
seem easier to adopt, they are often
difficult to apply and may not bring the
desired benefit to the consumers. Some
of the immediate effects of the price
ceiling could be the emergence of excess
demand or a shortage of devices in the
market.
33 Medical Device Industry in India

Some of the concerns raised by industry longer sell their latest products in
To be ‘efficient’, the market must
experts on price capping are: India and their margins on other
maximize consumers’ (patients) and
products are not high enough
• A manufacturing company who brings producers’ (device manufacturer’s)
to conduct these conferences or
in state-of-the-art technology will fail surplus
sessions”.
to be justly remunerated for their
Deadweight loss is the waste of
R&D efforts and would thus end up • A sudden and severe downturn
resources and economic inefficiency
withdrawing these products from in profits for manufacturers and
the market. In the past few months, healthcare providers might lead to an The price ceiling would also increase
there have been applications by increase in the prices of products that demand, creating shortages if
multinational companies such as do not fall under price caps. resources are not available (unmet
Abbott and Medtronic to withdraw needs)
some of their latest-generation • Reduced returns would detrimentally
stents from the Indian market as the affect capital expenditure on If the government wants to address
unit economics do not make them infrastructure such as catheterization the demand, it can be done through
commercially viable. They have also labs. the government directly producing
argued that since the NPPA deems the goods or offering subsidies to
Although manufacturers might not
them equivalent to low priced encourage production
ignore India due to its sizeable market,
products, it should not be an issue for the undesirable unit economics will
the regulator. This also discourages weaken the case for introducing new
investment by the manufacturers generation of stents and implants. They
into R&D and will prevent newer will continue to sell the generic devices, Price capping may be an
generation products in this dynamic and as a result, the quality of care will easy fix from the regulator’s
and innovative industry from being suffer.
introduced in India. perspective, though this may
This makes it necessary to rethink some not have the desired impact on
• Given the lack of cutting-edge of the critical parameters that must be
technology products, older products considered while drafting appropriate transparency and in creating a
will be in the market for longer than regulations and in shaping the Indian better payment system. It has
they should be and the customers healthcare ecosystem: the potential to hamper the
who wish to use the latest technology • Is it appropriate to reclassify devices
products will be forced to compromise building of a robust healthcare
as drugs and apply similar rules?
or find newer avenues to access the ecosystem, depriving every
desired product or adopt different • Is it right in considering that newer
generations of devices have minimal stakeholder the benefit of
procedures.
value addition from the previous being part of the supply chain
• There will be a substantial impact on ones?
medical tourism as foreign patients • Are regulators focusing on generic
seeking high quality healthcare devices or quality devices for Indian
products will not travel to India for patients? Or should they focus on both
treatments and Indian patients will and allow patients to make the choice?
have to visit neighboring countries to
obtain newer generation products. • Are we depriving patients the choice
Similarly, high-income Indian of quality of medical devices and
customers who provide some cross products? Will extreme price capping
subsidy to hospitals for low-income hamper innovation?
patients may opt to obtain treatment • Are the levels of margins reported real
overseas, further straining the and carefully analyzed?
providers’ P&L. • Has price capping resulted in a
• Restricts private players’ contributions reduction of the overall treatment cost
in building a robust ecosystem. As as intended by regulators?
quoted by a renowned cardiologist,
“MNCs are not conducting training
conferences because they can no
Medical Device Industry in India 34

Recommendations
• Cap Trade Margins and not Price • There is a need to work towards • Increase government healthcare
to the dealers, should be capped bundled payment models as used in spending as a percentage of GDP.
after detailed evaluation of each many other countries to better align India lags behind the other BRICS in
Medical Device segment and the incentives for hospitals and their this regard.
role of trade. Trade margins should business models.
be fixed differentially for different • Adequate utilization of government
categories of devices, based on service • Specify certain quantities/proportions infrastructure to reduce the cost to
requirements and role of distributors. of supply of different stents at lower private players – PPP model could be
Allow the dealers to compete with prices to specified government an attractive alternative to explore.
each other and provide a fair price to agencies for use with underprivileged
the hospitals based on the terms and sections.
conditions of services and payments.
• Empower the Medical Technology
• Evaluate the model of tiered pricing Assessment Board (MTAB) to
as observed in the French healthcare identify priority medical devices and
ecosystem, wherein the NPPA cap the procedures that demonstrates the
generic products and leave the latest greatest need stemming from disease
generation products with incremental burden. MTAB along with other
value out of the ‘essentiality purview’. regulators for medical devices should
The incremental value could be on ensure that there are minimum
account of efficacy, material used, quality parameters—in terms of
ease of delivery and shortened safety, clinical efficacy, and cost-
recovery time. Various combinations effectiveness—for medical devices
are possible here such as: an increase that get used in the public and private
in the number of tiers, allowing new health system, such that long-term
introductions to be free of price costs are lowered over a patient’s
intervention for a certain number of lifespan, with need for fewer hospital
years. readmissions, lowered need for
medication, and overall better health
outcomes.
Section 5

Market 2020

• Five Structural Factors Influencing Demand


• Medical Devices Required at Each Stage of Healthcare
• Expected Growth by 2020
• Conclusion
Medical Device Industry in India 36

Five Structural Factors Influencing Demand


When the demand rises, supply will keep Increasing income
pace. Factors driving both demand and The rising middle class of India, with
supply are: its higher discretionary income, can
Rising Chronic Disease increasingly afford to demand high-
quality medical devices.
Lifestyle-related diseases, NCDs, are the
single largest reason for deaths in India.
Diabetes alone has shown 100% growth Increasing Insurance Coverage
in the last 15 years in patient numbers The health insurance industry grew at
leading to India being tagged as the about 16% in 2015, which is more than
‘Diabetes Capital of the world.’ There are twice the rate at which India’s gross
at least 45 million patients of coronary domestic product (GDP) is growing. The
heart diseases. One-fifth of the deaths in industry has seen year-on-year growth
India are from coronary heart diseases. of more than 27% in direct premium
By the year 2020, it will account for one- collections.
third of all deaths.
Increasing Awareness

Ageing Population The involvement of various stakeholders


from manufacturers to delivery
It is expected that by 2020, India providers reaching patients and creating
will have seven percent of the total awareness will be key to the increasing
population above the age of 65 years. demand. This would also require Public
The surge in this demographic would Private Partnerships to reach the mass
lead to a higher demand in healthcare rural population.
and in-turn, medical devices. The
industry believes that the higher life
expectancy rates will also spruce up the
demand for medical devices. Medical Devices Required – at Each Stage of Healthcare
As India grows economically and Medical device manufacturing is a
socially, the shift in the disease burden is technologically dynamic industry
becoming more pronounced. The public characterized by continuous innovation.
sector has been unable to keep up with While current unit volumes may be small,
the need to develop capability, skills, it is reasonable to expect significant
and infrastructure for the healthcare growth over time.
market, particularly in the tertiary care
sector. The gap is increasingly filled The 2020 and beyond opportunities for
by the private sector providing higher the Indian medical devices industry are
quality healthcare services with better very attractive despite hiccups, such
infrastructure and qualified healthcare as price controls. The industry should
medical providers. comfortably witness a double-digit
growth rate.
It is important to note that medical
devices are required at each stage of
the healthcare continuum. The role of
medical devices is not only restricted
to diagnosis and treatment, but also
required in the constant management
and monitoring of on-going health.
37 Medical Device Industry in India

Expected Growth by 2020


The Indian Medical Device industry Implants will continue to grow with
is going through a phase of scrutiny increasing awareness and the reducing
and regulatory uncertainty. This might overhang or underhang, in cases where
hamper the strong progress that was the implant is bigger/smaller than the
expected at the start of this decade. bone surface, with orthopedic surgeries.
Nonetheless, the industry still expects Until 2016, implants were one of the
the sector to grow at a respectable pace top-two fastest growing segments of
of 10-11% CAGR, taking its valuation to the sector. However, after the inclusion
USD 8.21 billion by the year 2020. of these devices under monitoring for
price control, their growth rate might be
The individual sub-segments within the effected.
sector will have varying growth rates
depending on segment-specific factors. Equipment and instruments remain
the largest segment of the industry
The 2020 scenario assumes that there with a growth rate of CAGR 10%. The
will be a significant focus on improving size of the segment has increased from
healthcare infrastructure to enable USD 3.2 billion to USD 4.34 billion, lead
the government’s goal of accessibility by ophthalmic instruments, imaging,
and availability. Patient aids will be the and radiology equipment. A positive
fastest growing segment of the industry, approach towards the sector in policy
clocking an impressive CAGR of 15%. This making should augment well for the
growth will largely be driven by devices industry.
like pacemakers, hearing aids and the
likes. Medical Device Industry in India

Medical Device Industry in India 2020

Stents

Implants

Patient Aid

Consumables and
Disposables

Equipments and
Instruments
Medical Device Industry in India 38

Conclusion
Healthcare in India is at a crossroads Indian companies, across sectors, are
and needs intervention in many ways. immensely dependent on foreign the
The success of initiatives such as Make in technology transfer. The medical devices
India is dependent on a number of policy industry is no different, the majority
initiatives as described earlier. of these 800 manufacturers produce
products which are less technology
While Make in India is a laudable dependent. The industry would require
initiative, it would be very worthwhile new investments and policies to support
for the government to combine it with its development.
as many experts are starting to call for
a Heal in India campaign. This would The manufacturing curve for India
have a multiplier benefit on the entire in medical devices is likely follow the
healthcare sector and significantly growth rate of the middle class.
increase investments in healthcare
through increased participation from
private players.

With the Make in India campaign, the government intends


to manufacture cost-competitive quality products in India,
reducing import dependency and creating employment.
However, all of these objectives may not be achieved by a
single-focus agenda. Stakeholders should collaborate to initiate
a campaign titled Make and Heal in India, unlocking India’s
healthcare potential and addressing accessibility, affordability,
awareness and adoptability.
Section 6

Survey
Findings
Medical Device Industry in India 40

To understand the larger industry view • Price Caps but it is not sufficient to kick-start
on the relevant aspects of the industry, The industry is of the view that Trade domestic manufacturing. Also, in the
a survey was conducted among broader margins should be capped. Proper age of global harmonization, creating
industry players. The responses are differentiation between different a separate standards like ICMED
summarized in this section. generations of technologies needs and make the local companies less
to be done. Financial returns and the competitive in the global market. The
• Growth Drivers and Challenges introduction of new products are the domestic companies should instead
The industry believes that insurance immediate impacts of price capping be advised to adapt to tested Global
penetration and government on devices. norms.
spending will be major growth drivers
while healthcare infrastructure and • Make in India • Sectoral Outlook: Even though the
inadequate regulations are major Commercial attractiveness of India industry remains positive on the
challenges to the industry. in comparison to other emerging sector’s outlook, issues like ease
markets and adequate demand are of doing business in India need to
• Affordability and Accessibility factors which will influence a decision be addressed more significantly as
Insurance penetration and engaging on ’Make in India’. they remain a major hurdle while
the industry through a PPP model considering any new investment in the
to increase healthcare spending • Regulatory Environment country.
are the measures that the industry The draft of the regulatory changes
believes will increase accessibility and is a step in right direction. However,
affordability. more is required to have a substantial
impact. For example, addressing the
inverted duty structure is a good step,

Indian Medical Device Industries Growth Drivers

Rank 1

Rank 2

Rank 3

Rank 4

Rank 5

Challenges in Indian Medical Device Industry

Strongly Agree+Agree

Disagree + Strongly Disagree

Neutral
41 Medical Device Industry in India

Measures to Improve Affordabilty

Rank 1

Rank 2

Rank 3

Rank 4

Rank 5

Rank 6

Immediate Impact of the Price Caps on the Medical Device Manufacturers

Financial Impact - Lower Returns Challenges to introduce new products

4%
15%

15%
37%
70%
59%

Lower or no new investment

7%

30%

63%

Strongly Agree + Agree

Disagree + Strongly Disagree

Neutral
Medical Device Industry in India 42

Factors to be considered under Make in India Projects

33%
Adequate Domestic Demand
44%
Regulatory Environment and
Incentives

Commercial attractiveness to
emerging markets

22%

Change in ease of doing business in India

6%

29%

29% Yes, definite positive change

Yes, but no significant change

No, the situation has not


improved

35% No, it is worse than before


Section 7

Case Studies

Abbott
Empowering Stakeholders and Creating Opportunities

GE Healthcare
Focus on Make in India

Global US Headquartered Medical Device Manufacturer


A Greenfield Set-up (Circa 2006-2009)

InnAccel
Driving Affordable Innovations for Emerging Markets

Narayana Health
Revolutionizing Healthcare Delivery in India
45 Medical Device Industry in India

Case Study

Abbott
Empowering Stakeholders and Creating
Opportunities

This case study details how Abbott selected the Cardio Vascular devices
as an underdeveloped market and played a critical role in developing the
market and empowering various stakeholders, thus creating accessibility
and awareness.

Cardio Vascular Market Despite such challenges, Abbott is across different stakeholders like
successfully boosting access to a physicians, nurses and patients.
in India: Challenge in wide range of healthcare services and
Skilled Talent/Resources products by working in partnership These initiatives gave an overwhelming
result whereby 2000+ interventional
Availability with numerous government agencies,
cardiologists were trained across 1000
healthcare professional societies, non-
Cardiovascular diseases (CVDs), governmental organizations and other healthcare delivery centers across the
especially coronary heart disease (CHD), key stakeholders. country.
have grown to significant proportions
worldwide wherein declaring them as an Abbott created an awareness program
epidemic will not be a stretch. Globally, Market Development at all levels and initiated several steps
which led to an increased understanding
CVD led to 17.5 million deaths in 2012 Strategy of the procedures, technology and
where 75% of the deaths occurred in
Catapulting to a Leadership Position in the remedies available for increasing
developing countries. The mortality
the Cardiovascular Device Market research and development. To put
rate from CVD in developing countries
Abbott was founded with the purpose things in perspective, an interventional
is rapidly increasing while the same is
of improving health worldwide. This procedure requires a physician to be
declining in developed countries. This
commitment has remained a critical an expert on several aspects such as
increase is driven by industrialization,
component of the company’s citizenship technical, clinical and imaging skills.
urbanization, and lifestyle changes and
approach and is integral to its core However, in medical colleges across
has led to an epidemiological transition.
business strategy in India as well. India at that time, no formal training
CHD in India has already reached
Through a combination of targeted was provided in this regard and the
epidemic levels. The Registrar General
programs, shared value initiatives, and physicians had to self-train. The industry
of India reported that CHD led to 17% of
responsible business practices, the played a crucial role and trained these
the total deaths and 26% of adult deaths
company has successfully expanded fresh medical graduates in these
in 2001-2003, which increased to 23%
access and the use of its products and lifesaving procedures. Abbott being a
of the total and 32% of adult deaths in
services among the industry. market leader in cardiac interventional
2010-2013. With the disease prevalence
high, India is highly ill-equipped to products has also taken the lead working
Abbott entered the Indian market in
provide care to all these patients. on this capability building in the manner
the early 2000’s and the coronary artery
described.
disease treatment was in its infancy
With critical shortages of trained
stage in India at the time. The numbers • Abbott has run awareness programs
professionals in modern diagnosis and
of PCI procedures carried out were in across the country for both doctors
treatment protocols besides inadequate
a few thousands which have increased and patients through various training
facilities and healthcare services, much
to over 300,000 procedures a year. The seminars and education programs.
of India lacks the required healthcare
numbers of catheterization labs were
infrastructure. In addition, healthcare • The first step in treating a disease is
also few and hence, trained physicians
practitioners in developing nations, to correctly identify the symptoms.
were also a scarce commodity. Abbott
like India, often lack access to the latest Abbott made sure that the referral
understood the ecosystem and formed
information on chronic diseases such as communities were aware of the
a holistic strategy where it focused first
diabetes, cancer and heart disease, all of symptoms and able to diagnose it on
and foremost on training medical service
which are increasingly prevalent. time.
providers around procedures. Abbott
also ran several awareness programs
Medical Device Industry in India 46

• Abbott not only provided training to Increased Adaptability: Due to constant • Under a special program, Abbott
surgeons but also provided them the sharing of information between the representatives meet 8,000 medical
opportunity to learn from the best physicians and the company there is a service providers and 10,000
interventional cardiologists in the greater comfort with new technology and retailers every month in four states -
world. This training was not limited to a better understanding of the use case of Maharashtra, Uttar Pradesh, Madhya
the basics and also included complex these products. In complex surgeries and Pradesh and Bihar. Such programs
procedures with multiple patient cases, it is imperative to have an absolute have helped the company’s products
issues. belief in the technology to do the job. reach 0.7 million people in 381
villages.
• Abbott also created learning platforms Market Growth: Abbott has been able
like the Cross Roads Academy. These to create awareness about diseases, • The company has also, at several
platforms provided both physical and procedures, and technologies, that stages, engaged in educating
virtual settings for the young fellows has led it to develop better products governments and policymakers about
and junior physicians to learn, discuss than its competition. Due to extensive healthcare challenges.
and deliberate on complex cases, outreach programs, Abbott has been
procedural steps and protocols. able to expand the overall market for its
cardiology products and also increase its
Conclusion
• Abbott ensured that its sales market share in parallel. Abbott’s approach to India’s medical
personnel were highly trained in the devices industry has been quite unique
science and technology behind the Strong Branding: Due to a strong and equally rewarding. Abbott not only
products and procedures, thereby understanding of the issues at the created awareness about the diseases,
leading to greater understanding procedural and disease level, during procedures and new technology but
of problems that can occur during the product development stage Abbott also worked with all stakeholders in the
the procedures and how to tackle addresses those issues and backs the ecosystem to expand the market, and
them with devices or otherwise. results with extensive and exhaustive build a sustainable growth.
This leads to more productive and clinical trials. The results of the trials
proactive engagement between and subsequent approvals from device
sales personnel and medical service regulators like USFDA help in establishing
providers as there was sharing of strong credentials, hence resulting in
knowledge and building of trust, thus enhanced brand position and recall.
eventually leading to better clinical
outcomes. This helped Abbott to
improve the current perception of
Continuing with similar
people about ‘unwanted sales visits’ initiatives to other under
to more ‘knowledgeable and engaging developed market
sessions.’
segments
With these initiatives, Abbott has been To empower communities and
consistently able to train more than 500+ consumers with educational programs
cardiologists on an ongoing basis. These on the prevention, diagnosis, and
trainings have a multiplier effect, thereby treatment of many diseases and health
leading to greater doctor awareness and conditions, Abbott launched:
skills.
• Thyroid awareness campaign in areas
with high prevalence but limited
Benefits to Abbott by Engaging with
access to diagnosis. The company has
Practitioners and Building their Brand
placed 100 points of care devices with
Effectively
on-site testing for clinical diagnosis
Driving Innovation: By being close to
and consultation. Such camps saw
their consumer and referrer, Abbott has
participation of 130,000 patients in
been able to understand shortcomings
2015-2016.
of various products better and can
deploy resources in the right areas for • Collaboration program with the Indian
driving innovation further. Abbott’s Orthopedic Association (IOA-OEP)
understanding of the market and human disseminates education by IOA panel
anatomy helped them bring products doctors to 500 orthopedics across the
which were more effective, reduce country.
complications, and improved clinical
outcomes.
47 Medical Device Industry in India

Case Study

GE Healthcare
Focus on Make in India

This case study details the company’s focus on strategies for an organic
growth in emerging markets through the development of customized
healthcare solutions and improving awareness and access to healthcare.

Strategize the Approach As discussed in the earlier part of the Customized Products for
paper with the Indian government’s
by Understanding Local focus on the Make in India campaign, Indian Patients Needs
Market Needs GE also initiated discussions with Rigorous Investment in
With large populations in emerging the government on making further R&D
markets having minimal or no access investments in the country to improve
to decent healthcare facilities, there its infrastructure in healthcare, among Among various products in categories
is a grave need to fill the gap in the other sectors. such as ultrasound imaging, X-ray
healthcare ecosystem. The lack systems, baby warmers and ECGs,
The company’s strategy is to develop and a classic and recent example of GE
of affordability, awareness, and capture the Indian market in a three-fold
accessibility are the three primary Healthcare’s indigenously developed
approach by: products is the Revolution ACT scanner.
reasons for this dismal state of affairs.
Only 25% of the Indian population is a. Domestic research and development The ratio of CT scanners per million
covered with health insurance, leaving on healthcare technologies and population in India is as low as 3. There
900 million people largely incapable introduction of new products for is a dire need for equipment that is
of affording most healthcare services. Indian and other relevant global affordable and operable with the limited
Even if affordability were to be solved, markets, resources at hand. The Revolution ACT
only 24% of the rural areas with 800 b. Manufacturing of products in India scanner was developed over a period of
million people have healthcare facilities. with resources increasingly sourced four years at the company’s Bengaluru
As India moves towards bridging these locally, and facility to fill this huge gap and penetrate
gaps, the market potential available for the unattended rural health centers and
c. Penetration in smaller towns and clinics. Specially tailored to address the
medical device companies can become cities largely lacking necessary
tremendous. Developing economies prevailing constraints, the scanner’s
healthcare solutions. size was reduced by half and power
are constantly seeking sustainable
and effective healthcare solutions for GE Healthcare’s strategy is already well consumption was brought down by
the masses. The low-cost equipment under way with the development of its 47%. The machine was also customized
market is expected to continue to grow affordable care portfolio. The company with a user interface simplified to
significantly with increasing awareness has designed and developed over 28 counter the lack of trained personnel
among patients and physicians. products in India that can effectively outside large cities and withstand
cater to the needs of the local population extreme Indian conditions of heat, dust,
Understanding the need of these keeping in mind the attached constraints. and humidity. 30% cheaper than its
developing markets, GE Healthcare aims It has set up various research centers imported counterparts, 500 units of the
to make affordable healthcare available through its joint ventures and other ACT scanner have been sold since its
through its Sustainable Healthcare alliances to augment GE Healthcare’s launch in 2015, and about 60 have been
Solutions (SHS) business in India, South worldwide operations. Majority of exported to other emerging economies
Asia, and Africa. With an investment the demand for these GE Healthcare in Asia and Africa. Majority of the sales
plan of over USD 300 million, the products are intended to be met through are to first time users in locations other
company’s focus lies on expanding its manufacturing operations in India. than metro and tier I city locations. The
operations in these economies through company has also partnered with various
the development of disruptive low cost, state governments to increase the reach
high-value technologies, and healthcare of the machines to each of the 631
delivery solutions. districts in India.
Medical Device Industry in India 48

Partnering with Local In addition to developing healthcare collaborated with Max Healthcare in
solutions and manufacturing its products India to conduct research on cancer
Companies for Research in India, GE Healthcare is also focused on care and technology solutions. The
and Manufacturing improving the distribution and service collaboration also intends to advance
Undertaking a predominantly organic of its equipment across the country oncology clinical skills by setting up
route, GE Healthcare’s execution of its through its subsidiary GenWorks Health. an oncology training institute. Directly
strategy in India is mainly attributed to its The company has entered several catering to the needs of the patients, GE
strategic collaborations for research and Public Private Partnerships with state Healthcare has also entered a strategic
manufacturing with local stakeholders. governments to cater to their lesser partnership with Cancer Treatment
developed regions and extend the reach Services International for the diagnosis
The company has partnered with two of its equipment to the remotely located and treatment of cancer at 25 well-
established domestic companies in health centers. equipped centers to be set up over a
majority owned joint ventures, leveraging period of five years.
their local know-how and expertise for
innovation and the advancement of
Increasing Awareness and
solutions specifically tailored for the Accessibility of Healthcare Other Initiatives
target markets. Solutions While the Integrated Development
Centre helps the company to stay close
With an aim to improve the health of to the patients and understand their
Wipro GE Medical Systems
the general populace worldwide, GE needs, the Skill India Initiative keeps
GE Healthcare Wipro Corporation Healthcare’s initiatives emphasize its the company connected to healthcare
51% 49%
three main objectives: professionals. First set up in Bangalore,
Product: Diagnostic imaging and patient
a. Continuous advancement of the IDC intends to conduct more than
monitoring equipment
healthcare technologies and solutions 1,000 scans annually as a part of clinical
b. Availability of affordable care for the trials, using GE’s diagnostic imaging
JV Partner Expertise: Information technologies. While the IDC is presently
masses
Technology solutions and engineering focused on isosmolar contrast agent
c. Competent staff enabling efficient launched by GE in 1996, its scope will be
delivery of healthcare solutions. widened to cover GE’s entire diagnostic
GE BE
The process would also help GE imaging portfolio.
GE Healthcare Bharat Electronics
Healthcare to directly stay in touch with The Skill India Initiative, GE Healthcare’s
74% 26% healthcare professionals and patients, biggest healthcare education program,
Product: X-ray tubes, high voltage tanks and thereby gaining valuable insights from aspires to train more than 100,000
detector modules for R&F and CT systems the market and increasing demand for its healthcare professionals over a period
products. of five years through institutes in every
JV Partner Expertise: Electronic equipment
for Defence and Communication sectors Cancer research and affordable cancer state in the country.
care - With over 1.2 million new cancer
The joint venture companies are cases each year, the mortality rate
responsible for the design and owing to cancer in India is very high.
manufacture of numerous products for Creating awareness and enabling timely
the global as well as domestic markets. detection as well as affordable access
The companies also provide software to cancer care are crucial to fight the
services and technological solutions for battle against cancer in the country.
GE Healthcare’s global manufacturing Availability of skilled and well-trained
activities. Products developed and healthcare professionals, makes
manufactured include ultrasound and the delivery of cancer care solutions
CT scanners, cardiology products, fetal challenging. GE Healthcare aims to
monitors, X-ray tubes, high voltage tanks, improve access to cancer care through its
detector modules for CT systems, and various partnerships with governments,
more. Facilities of the companies are clinicians, private operators and NGOs
in compliance with global safety and in areas including radiology, cardiology,
regulatory standards. critical care, fetal medicine and
leadership training.
Displaying a strong commitment to R&D,
GE’s Global Technology Operations at As part of its USD 1 billion commitment
Bangalore comprises of 650 employees for the advancement of oncology
working with GE’s teams worldwide on solutions, GE Healthcare has
software development, tables and power
components for medical systems.
49 Medical Device Industry in India

Case Study

Global US Headquartered
Medical Device Manufacturer
A Greenfield Set-up (Circa 2006-2009)

This case study discusses the Company’s strategy to expand and optimize
its global manufacturing footprint through high-quality products
manufacturing in India

Understanding the focused factory initiatives. This strategy • Availability of highly trained and
was core to its overall objective of knowledgeable professional human
manufacturer globally delivering high quality, reliable and cost- resources at competitive costs
This firm is an independent, global competitive products to its customers. • Universities and colleges producing
employee-owned US company that over 400,000 engineering graduates
develops, manufactures and markets The firm investigated various options
worldwide. A detailed study was every year
healthcare products and services
worldwide. The company’s healthcare conducted for several manufacturing • A rapidly growing product engineering
portfolio includes consumables, Ostomy regions of the world including Latin capability and a world class
Care, Continence Care, Wound Care and Central America, Eastern Europe information technology industry
and Critical Care products. Growing (now EU countries), Pacific-Rim and
from its humble beginnings in the mid- South East Asia. Some of the factors 2. Existing Eco-system for
west region of USA, the company now that formed part of their exhaustive Manufacturing
has a presence across the Americas, evaluation included the availability of • The tooling and machinery industry
Europe, Middle East and Asia Pacific, skilled labor, quality of management, which produced equipment locally at
with multiple manufacturing and ease of communication, safeguarding significantly reduced costs
distribution facilities located across the of technologies and copyrights, export
regulations, and much more. The • The construction cost was significantly
globe, including India. Presently, the less than in many other parts of the
company has direct operations in about company also undertook inflation
analysis over a long term period between world
40 countries and sells its products in over
100 countries. developed US / Europe and India. • Increasing availability of raw material
suppliers
Eventually, the company narrowed down
• Capability to build a facility that meets
Firm’s Objectives on Asia-Pacific, and within those region
both GMP and RA requirements of the
countries like India, China, Thailand,
1. Achieve World Class status in US. India had at the time the largest
and Malaysia. These were countries
manufacturing and supply chain number of US FDA approved facilities
where the firm’s markets were growing
with a competitive advantage in the outside of the US anywhere in the
at more than twice the rate as other
continence care products space. region. Contractors were available for
markets, margins were lower and had
2. To further the strategic direction of no manufacturing base. All previous building Class 100K to 1K clean rooms.
the focused factories. locations of the company were in the USA
3. Add capabilities for supporting other and Europe.
business processes closer to the
intended markets. Finalizing the Location -
The firm’s decision to set up its new
Making in India for the
manufacturing plant in an emerging World
economy was preceded by a thorough Based on its detailed study, India was
evaluation of all the pros and cons of chosen to be the location for the firm’s
entering an unfamiliar territory. This next global manufacturing plant. The
evaluation included the utilization primary reasons for its selection were:
of local professional consultants for
validation of various studies. The 1. Availability of talent pool
company’s strategy was to set-up a world • Large skilled population with an
class facility for a specific range of global average age of 29 years
products, complimenting their other
Medical Device Industry in India 50

3. Conducive environment in US and Europe to support the global 2. The company factored in the effects of
• Incentives for manufacturers to set-up demand. The facility meets the safety inflation, production of incremental
in India and regulatory standards specified by US units, and other such aspects. in
• Higher labor productivity was FDA, CE, CDSCO India and several other its projections to be as close as to
comparable to many regions of the local and international regulatory bodies, practically achievable. Although the
world and it is accredited with the latest ISO inflation rate in India was higher
certifications. Set up with strong support than developed countries, however,
• English is the primary business from the Haryana State and Industrial considering the low cost base in India,
language Development Corporation (HSIDC), the the analysis showed that the new
• Intellectual Property Rights laws that plant boasts of advanced manufacturing location would remain competitive for
conform to WTO norms technology and equipment and is the the period of evaluation and longer.
• Better cultural fit, a stable democratic greenest facility amongst the company’s
several facilities. 3. The company also outsourced most
political system of its non-core operations including
The State of Haryana, in North India In comparison with the firm’s global payroll, taxation, security, janitorial,
was finalized for location because of the operations, the firm could bring down cafeteria services and transportation,
presence of a medical devices cluster net manufacturing costs significantly. to focus completely on its core
of consumables, dental equipment and In its formative years of operation manufacturing objectives.
pharma companies. The establishment in India, the firm kept the same raw
of a strong relationship with the State material suppliers to reduce the 4. The funding of the project was
government during the investigative variables. However, over time the internally financed through a
process further promoted the company’s company was able to qualify local and combination of equity and External
decision. Since the firm’s investment, this regional suppliers for majority of its Commercial Borrowing (ECB), which
cluster has further enhanced and counts requirements including sterilization, lowered the cost of capital and aided
domestic and international companies improve manufacturing process flow, in breaking-even faster.
such as Becton Dickinson, Baxter, Abbott reduce freight costs and bring few of 5. The firm also devised a robust HR
Labs, Ranbaxy, Hindustan Syringes, its high quality products closer to the Strategy very early on to attract,
Narang Medicals, Poly Medicure, BL market place. develop, and retain human resources
Lifesciences and others within its aligning with the company’s global
boundaries.
Critical Success Factors culture, coupled with effective internal
communications worldwide. This
The firm’s success in India lies in
Thorough Planning, unlocking benefits from each variable in
was very critical for the company to
manage its operations successfully
Effective Execution a systematic and well-planned manner.
in a foreign territory. Its attrition
The company was allotted land Servicing global demand at competitive
rate remains the lowest in that
at an attractive price by the State costs without any compromise on
geographical region.
government in the vicinity of the NCR quality, often exceeding and pushed the
region (Delhi area) which is easily product margins to an acceptable level Make no mistake, the project of this
accessible from a major airport under for the company as a whole. magnitude had its share of challenges.
the Special Economic Zone (SEZ) / However, overall it was a huge success
To ensure success, the firm implemented
Export Oriented Unit (EOU) schemes and validated over time. At the macro
a systematic step by step plan that
with zoning requirements that allowed level, the company’s business case was
enabled learning and minimized
for at least 200,000 plus square feet sound. The company could realize all
mistakes and mitigated major risks, as
of manufacturing facility including the gains and more with a significant
envisioned in the business plan. Some
future modular expansions. Primarily amount of control owing to its thorough
of its critical success factors are listed
set up as an export unit, the products preparedness and effective execution
below:
manufactured at the Haryana facility of its strategy. It also provided a new
complement and support the company’s 1. They entered the new locale and platform for the firm’s growth in an
global operations. In the eight years gradually unlocked other variables earlier unchartered territory.
since it commenced manufacturing in such as the sourcing of materials and
India, the company has produced and services. This phased approach was a
exported well over hundred million major contributor to the company’s
units of urinary catheters and other successful track record in India
continence care products. as it minimized RA and FDA-QSR
qualifications all at one time, and gave
This plant has expanded considerably them time to leverage each of the
over the years and today has other variables.
approximately 500 employees on direct
payroll and generates several hundreds
of indirect jobs, not including many more
51 Medical Device Industry in India

Case Study

InnAccel
Driving Affordable Innovations for
Emerging Markets

Emerging Markets class, product by deploying InnAccel’s VapCare


proprietary Product Engineering &
Challenges Development (PED) platform in 2 – 3
It is an intelligent, automated, closed
loop, secretion management system for
Medical Devices are a key component years. InnAccel aims to capitalize on patients who are on long term ventilation
in any healthcare system and play a the aforementioned opportunity by systems in ICUs. The device is designed
central role in meeting the needs of creating a product portfolio which, while and aims to reduce the incidence of
patients and providers in delivering addressing emerging market needs, Ventilator Associated Pneumonia (VAP)
quality outcomes. Most of today’s may also have markets in developed which is one of the leading causes of
medical devices are designed and economies. InnAccel aims to launch 20 deaths in hospitals globally. There are
developed for the advanced developed transformational medical products and about six million ICU admissions per
markets and hence, are suited to those impact 25 million lives by 2025. year, and about 0.5 million patients
levels of infrastructure and economics. develop VAP. About 0.2 million deaths
Emerging markets like India and
numerous other countries in Africa and
Products are attributed to VAP. This product has
an annual market opportunity of USD
Asia have significant challenges in terms InnAccel’s (and associated companies’)
50 million in India and a global market
of available infrastructure, access, and current portfolio comprises five novel
opportunity of USD 500 million annually.
affordability in the overall healthcare products addressing a global market
The company has been granted a patent
ecosystem. Emerging markets are skill opportunity of over USD 2 billion
protecting this invention in the US and
and resource constrained, self-paying, annually and treats conditions that lead
has also filed the same patent globally.
and extremely price sensitive. Adoption to almost a million deaths each year in
of the current portfolio of medical India alone. Some of which are listed
devices and equipment’s are therefore below :- Fetal Lite
often limited in emerging markets It is a non-invasive, automated, portable,
SinuCare
because of these issues. This has resulted battery powered and f-ECG-based fetal
in a large unmet need for millions of This is a novel and affordable balloon monitor. Specifically developed for
consumers in developing countries like sinuplasty system for in-office treatment emerging markets, the product requires
India. To have an affordable and effective of Chronic Rhinosinusitis (CRS) minimal skill in usage and is aligned to
healthcare system, it would be beneficial patients in India and EMs. The market low-resource settings due to the use of
to have medical devices and equipment opportunity is promising for SinuCare as advanced sensors and algorithms. The
tailor made for these ecosystems. Hence, one in every eight people (150 million in current technology is variable, highly skill
affordability and appropriateness have total) suffer from CRS in India. 30 million dependent, bulky and, not to mention,
to be the focal points for innovation in (20-25%) of all CRS treatments fail within very expensive. Hence, Fetal Lite is the
medical technology for these markets. six months of medical therapy, hence need of the hour considering, over
It is estimated that expenditure on requiring surgery to be performed. The 300,000 perinatal deaths occur annually
medical technology is likely to reach USD Indian market opportunity is worth in India alone.
42 billion in India and USD 200 billion in about USD 150 million and the global
BRICS by 2025. market opportunity is over USD 1 billion.
The products will have a strong demand
InnAccel is India’s leading platform in other countries like Europe, Asia and
to drive MedTech innovation in South American markets as most of the
India and global emerging markets. similar products are unaffordable or
InnAccel identifies critical and unmet unavailable.
healthcare needs by using the Stanford
Biodesign process and initiates
research programs on selected clinical
needs with large global markets. The
selected needs are taken forward to
develop a regulatory-certified, world-
Medical Device Industry in India 52

Fetal Lite Partners


It is a mechanical device which is InnAccel has formed strong partnerships
used to safely and effectively remove and relationships with a number of
impacted Nasal Foreign Bodies in national and global entities. Partnerships
children and requires limited training with medical colleges and hospitals in
and skill. Foreign Bodies being found Bangalore enable teams to gain clinical
stuffed in children’s noses is soon input, conduct fieldwork and carry out
emerging as a global problem and is early testing of products. The company
frequently reported when children are has built relationships with leading
left unattended. Currently, there is no teaching hospitals in India namely AIIMS,
exclusive device to remove these bodies St.John’s, JIPMER, and CMC, as well as
from the nasal tract. NoXeno is a simple academic institutes like IIT Bombay
mechanical device that can be handled and Madras, for strong engineering and
by paramedics, nurses and general technical expertise. In addition, they also
practitioners in clinics in semi-urban have forged global partnerships with
and rural areas without any supervision. CAMTech, PATH and few others. thus
The company aims to make the device enhancing the flow of ideas, funds, and
available in all primary healthcare entrepreneurs to the medical technolgy
centers in India. It is estimated that the startup ecosystem in India.
global addressable market stands at USD
200 million.
Future Plans
Saans InnAccel has created development
platforms and teams in three core
Saans is the first purely mechanical,
clinical areas. These teams will continue
low skill and continuous positive
to develop products for needs identified
airway pressure (CPAP) solution to
through the Biodesign process in these
transport neonates with Respiratory
areas and aim to create a portfolio
Distress Syndrome (RDS) to a NICU. Its
of products in ENT, critical care, and
performance is equal to a non-portable,
maternal/child care respectively.
electronic CPAP device and can be
InnAccel is also setting up two additional
powered in multiple ways which include
teams to create two new development
a manual setting and requires minimum
platforms and initiate projects in 2018.
skill. RDS alone claims more than 400,000
InnAccel aims to launch 20 novel
deaths in India and its global addressable
products by 2025, positively impacting 25
market stands at USD 200 million.
million lives and transforming healthcare
in global emerging markets.
53 Medical Device Industry in India

Case Study

Narayana Health
Revolutionizing Healthcare Delivery in India

Process Innovation: A bypass surgery is USD1,500 (INR 90,000) graft procedure are as good as that of
compared to USD 144,000 in the US, US hospitals. The incidence of bedsores
Model that tied Quality USD 27,000 in Mexico and USD 14,800 after a cardiac surgery globally lies
with Affordability in Indian in Colombia. Interestingly, NH’s cost of anywhere between 8% and 40%. At NH, it
Healthcare cardiac surgery is significantly lower than has been close to zero for many years.
what it was in India 13 years ago. Larger
India boasts 750,000 doctors and 1.1 volumes of open-heart surgeries and
million nurses, but practitioner density is Economies of Scale
catheterization procedures every day
about one-fourth of what it is in the U.S. allowed the medical team to decrease The model conceptualized by Dr. Shetty
and less than half that of China. Hospital the cost of each surgery. At NH, each leverages economies of scale by building
beds are in short supply and many surgeon performs anything from 400 mega hospitals and attracting huge
medical facilities are dated, cramped, to 600 procedures a year, compared volumes of patients. The aim was to
and often unhygienic. In a country where with 100 to 200 by surgeons in the U.S. target well-off patients so that the quality
the nominal per capita income is around Doctors go from one operating table to of care is not compromised. But at the
USD 1,500 a year, patients typically the next with an assembly line precision same time, they aspire to serve every
have to pay 60% of their healthcare that is rare in the Indian healthcare patient irrespective of their economic
expenses from their own pockets. While system. Given the numbers, one would status, thus enabling a low-cost model.
discussed earlier, these statistics provide assume that the entire process would This model works because high volumes
a perspective on the unmet needs be chaotic. However, NH has ensured ensure that the enterprise is profitable,
of Indian patients for good medical a high-quality systematic process while although the unit economics might be
treatment. scaling up the capacity. It has ensured otherwise. As a result, NH has never been
focus on the following to enable dependent on government subsidies,
Dr. Devi Shetty founded Narayana insurances or reimbursements. NH
Hrudayalaya (later renamed Narayana quality healthcare to be provided in an
affordable manner. has also institutionalized a number of
Health or NH) in 2001 in Bangalore. His aspects of healthcare delivery, some of
mission was to successfully tie affordable which are as follows:
healthcare delivery with quality. NH, Commitment to Purpose
which started with humble beginnings • Facility use was increased through a
Commitment to purpose is the shift system wherein the operation
with a 280 -bed hospital has transformed most crucial success factor in
into an organization with 24-hospitals, theatres are occupied for long
achieving exemplary execution. A hours providing higher utilization of
seven heart centers and a center in lot of organizations state their vision
the Cayman Islands. Today, NH has a expensive hospital capital equipment.
and mission but rarely follow them
network of 5,600 operational beds that stringently. NH is steadfast in pursuing • The large numbers of patients that
offer care in 30 specialties. its vision and encourages employees to come for treatments enable doctors
work towards its purpose to do collective to focus on specific types of medical
problems. As volumes increase,
Heart Surgeries: Craft to good. Due to this single-minded
relatively rare conditions are treated
focus and commitment to execution,
Increase the Number of NH attracts the best medical service so often that doctors become world-
Procedures providers who are inclined to provide the class experts in those areas. This
best care possible, irrespective of their explains how NH has become a global
Dr. Devi Shetty believes that hands that
means. leader in pediatric open-heart surgery,
service is more sacred than lips that
attracting patients from across Asia
pray. Dr. Shetty is sometimes described
and Africa
as the Henry Ford of heart surgeries Uncompromising Quality
because his hospitals have managed
The lower costs have not come at the
to achieve economies of scale due to
expense of quality. NH’s mortality
the sheer number of procedures they
rate (1.27 %) and infection rate (one
undertake in a day. NH’s average cost of a
percent) for a coronary artery bypass
Medical Device Industry in India 54

• From the beginning, NH has focused Expansion Through Other Cross Border Expansion
on upskilling its staff. It encourages
general physicians to become Models Recently, the Directorate General of
Medical Services of the Bangladesh
specialists and specialists to become NH has looked at all kinds of Armed Forces entered into a MoU with
super-specialists. It trains nurses to collaborations, associations, and tie-ups NH to cooperate on patient care, medical
advance to the higher-skilled position to achieve the kind of scale it is looking education, research and training in
of nurse intensivist, akin to a nurse to build: exchange for healthcare professionals.
practitioner in the US. NH is also already running a tertiary care
Management Contracts
• NH encourages its doctors to be hospital in a JV with Ascension Health in
prudent in providing healthcare. It The company is taking over poorly run the Cayman Islands.
shares P&L information on a daily hospitals. For example, NH manages the
basis with doctors to make them MMI Hospital in Chhattisgarh. Since it
understand the costs, and suggests took it over, it has increased the number Conclusion
cost cutting measures to reduce of beds and upgraded the radiology, NH is revolutionizing in its own way
overall cost incidence to patients. emergency and trauma centers. It healthcare in India by bringing together
further manages the cardiac centers quality, affordability, and profitability
attached to medical college hospitals with success. They have demonstrated
Task Shifting such as SS Medical College, Davangere that the healthcare delivery sector can
Private healthcare institutions like and SDM Medical College, Dharwad, to use process innovation to improve
NH in India have taken task-shifting a name a few. quality and dramatically lower costs for
notch higher by creating new layers of patients, process improvements, better
healthcare workers that are relatively Selective and Joint Investments manpower and capital productivity,
inexpensive. NH has teams consisting thereby significantly improving patient
of a specialist, junior doctors, trainees, Working with organizations interested
affordability and access. These benefits
nurses, and paramedical staff. It restricts in partnering with them, who are willing
are further multiplied through scale.
specialists to conducting the critical to build hospitals in locations that are
part of the surgery and expects the underserved. While the organizations/
junior doctor to carry out the rest of individuals make the investment in land
the procedure, thereby freeing up the and building, NH invests in the medical
specialist to conduct more surgeries in assets.
a day. The high volume of procedures
allows NH to reduce the costs of Speciality Tie-ups with Other Private
individual procedures, thereby attracting Hospitals
more patients. Through the setting up of embedded
heart centers in other hospitals such as
Supply Chain Efficiency Chinmaya Mission, MS Ramiah Mission
High volumes of patients and procedures and St. Marthas on a revenue sharing
have enabled NH to have a stronger model, where the civil infrastructure
purchasing power for their medical is already present and the hospital
supplies. An interesting aspect of its infrastructure specific to heart and
purchasing practice was to: specific specializations need to be set up.

• Eliminate long term contracts and


negotiate at a higher frequency and eHealth Center Program
in many cases, even weekly. More NH is the healthcare partner to
frequent supplies result in lower implement, operate, and manage
inventory carrying costs. eHealth Centers (eHCs). The company
• With the cost of consumables being has helped establish 10 eHCs across the
its largest expenditure, it bought this country which have witnessed a footfall
in bulk on a weekly basis through its of 21,765 patients from December 2015
Central Buying Unit (CBU). Through to March 2017.
this move, NH has brought down its
prices by almost 35% since it started Telemedicine
procurement. NH collaborated with CISCO to integrate
• Instead of buying expensive medical and set up advanced telemedicine
equipment outright, NH pays the solutions across three centers in India.
supplier a fixed monthly rent in This digital solution will help connect
addition to the cost of the reagents patients with specialists conveniently,
that are necessary to run the tests on efficiently, and regardless of distance.
the machines.
Acknowledgements

AdvaMed and SKP would like to acknowledge the valuable contribution and participation of various industry personnel who
shared their point of view, insights and guidance.

Probir Das Dr. Alexander Thomas


Managing Director Executive Director
Terumo India Pvt. Ltd. Association of Healthcare Providers of India (AHPI)

Badhri Iyenger Dr. Manish Matto


Managing Director Associate Vice President
Smith & Nephew Healthcare Pvt. Ltd. Fortis Healthcare Ltd.

Sushoban Dasgupta Gaurav Verma


Managing Director Director – Regulatory Affairs
Johnson & Johnson Medical India Becton Dickinson India

Anand Apte Sushmita Bandopadhyay


Former Managing Director Brand Ambassador
B. Braun Medical India Pvt. Ltd. Becton Dickinson India

Tushar Sharma Ashish Jain


GM – India & South East Asia CEO
Abbott Healthcare Pvt. Ltd. Healthcare Sector Skill Council

Mohit Malhotra Prof. D. Prabhakaran


Managing Director Vice President – Research and Policy
Stryker India Pvt. Ltd. Healthcare Sector Skill Council

Rahul Agarwal Sakhtivel Selvaraj


Country Manager – India & South Asia Senior Public Health Specialist (Health Economics)
C R Bard India Pvt. Ltd. Public Health Foundation of India

Manish Malu Prof. Nirmal Kumar Ganguly


Managing Director Advisor
Edwards Lifesciences India Pvt. Ltd. Translational Health Science and Technology Institute

Nanda Kumar Jairam Arif Fahim


Chairman and Group MD Senior Manager - Therapy Development &
Columbia Asia Hospitals Pvt. Ltd. Reimbursement, South East Asia
Abbott Healthcare Pvt. Ltd.
Ashutosh Raghuvanshi
Chairman and Group MD
Columbia Asia Hospitals Pvt. Ltd.

Strategic Guidance Editorial

Guljit Singh Deepti Ahuja Ravi Menon For any questions/feedback related
Executive Chairman Vice President Senior Business Advisor to the paper, please contact
SKP Business Advisory and Global Sales Healthcare Sector
North America
SKP SKP
Nimish Shah
Nimish Shah Abby Pratt Harshal Choudhary nimish.shah@skpgroup.com
Vice President Vice President Manager
Rest of the World
North America Sales Global Strategy and Analysis Business Advisory
Ravi Menon
SKP AdvaMed SKP
ravi.menon@skpgroup.com
SKP’s Healthcare
Practice

At SKP, we partner with healthcare


companies to enable them to drive
Our Healthcare Credentials
their strategy. We help in designing
business strategies, facilitating entry to
new markets, enabling a compliance Helped set up a leading American Provided project management services
culture, embedding internal control medical device company in for post-acquisition integration across
in business and bringing efficiency record time. SKP worked as an seven geographies for a leading
through outsourcing. Our regional implementation partner and American healthcare company in the
operations across the country, decades helped strategize the entry into the Fortune 500 list.
of experiences with healthcare Indian market and also provided
multinationals, trained professionals tax (including transfer pricing) and
and our client objective-driven regulatory advisory services.
approach help us deliver better value
every time.
Streamlined the finance and Helped reduce the contract cycle time
accounting processes of an Indian of a US-based healthcare multinational
Subsidiary of a US-based healthcare by 25%.
company which resulted in timely
vendor payments, reduced risk of
Thought Leadership noncompliance and easily available
management information to take
strategic decision.
Over the last few years, the Medical
Device Industry in India has gone
through a phase of transformation. Helped highlight internal control Helped set up a shared service for a
The sector is witnessing change at weaknesses including potential Permanent Establishment (PE) backed
a policy and regulatory level from overpayments and deviations medical devices firm for its Asian
the government pushing industry from processes along with operations covering international
players to bring structural and recommendations for enhancing compliances as well as finance and
operational transformation in controls as a part of our internal audit accounting.
the industry. These changes are for a leading pharmaceutical company.
expected to usher the industry into
a new era of strong sustainable
growth.

With more investments, modern


technology and growing medical
reach, industry is expected to
evolve on (1) Affordability to cover
broader market (2) Innovation to
cater to demographic need and (3)
Reputation of compliance and high
ethical standards.

Our thought leadership initiatives


are a mode to observe and reflect
on the industry modulations
including policy efforts by
government, market actions
(mergers and acquisitions) and
business evolution as it happens.
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