Overview
The Indian healthcare sector has become one of India’s largest sectors, both in terms of revenue and employment. It has experienced rapid change in recent years and has become significantly more visible over the last decade, with a renewed focus from the government and growing market demand for healthcare services and products. The Indian population is growing at a rate of 1.6 percent per year and has an elderly population of over 100 million. Rapid economic growth, rising middle class incomes, and increased market penetration of health insurance providers are fueling growth in the industry. In addition, changing demographics and a shift from chronic to lifestyle diseases has led to a boom in healthcare spending across the country.
The Indian healthcare industry reached $190 billion in 2020, and, according to the India Brand Equity Foundation, it is expected to reach $370 billion by 2024-2025. This increase is due to growing demand for specialized and higher quality healthcare facilities. The products and services driving this growth include hospitals, medical devices, clinical trials, telemedicine, medical tourism, health insurance, and medical equipment. The industry’s rapid development is fueled by large investments from existing corporate hospital chains and new entrants backed by private equity investors.
Nonetheless, considerable challenges exist in terms of service accessibility and patient care quality. According to the Lancet Medical Journal’s Global Burden of Disease Study, India ranks 145th among 195 countries surveyed. However, India’s healthcare access and quality index score has improved in recent years, increasing from 44.8 (out of 100) in 2015 to 67.3 in 2020.
The impact of the COVID-19 pandemic on India underscores the importance of investing in the healthcare sector. Industry experts believe there will be a significant increase in healthcare spending in India over the next several years, partially spurred by lessons learned from the pandemic. Public spending on healthcare in India stands at just 1.2 percent of GDP, but the Indian government has proposed increasing this to 2.5 percent by 2025, with a special focus on underprivileged populations. As expenditures in the Indian healthcare sector increase, corresponding growth in the medical equipment sector is anticipated.
Although healthcare-related barriers to entry are low compared to other industries, non-tariff barriers and the expansion of price controls on medical devices and the pharmaceutical industry constrain market prospects. Additionally, weak intellectual property protection and enforcement hinder the biopharmaceutical industry’s exports to India. While India’s market has undergone significant economic growth over the last 25 years, it remains difficult to navigate. India tends to be a price competitive market, and the country produces primarily low- to mid-tech products. International competition has also been rigid, and India is often described as a “crossroads” market in the middle of many production and trade routes.
Policy and Regulatory Environment
To ensure quality healthcare, the Indian government increased the list of medical devices covered under the Drugs and Cosmetics Act of 1940, bringing several categories of implantable devices under the provision of the Medical Device Rules (MDR) 2017. Medical devices in India are classified according to the risk to patient health. The current risk classifications are Class A: devices with the lowest risk (e.g., surgical dressings and alcohol swabs); Class B: devices with low to moderate risk (e.g., needle kits and cervical drains); Class C: devices with moderate to high risk (e.g., bone cement, bifurcation stents and catheters); and Class D: devices with high risk (e.g., coronary stents and cardiac catheterization kits).
In July 2017, the Indian government introduced price controls on cardiac stents, capping the selling price up to 70 percent lower than the prevalent market rate. That order was followed by a similar cap on knee implants later in the year. The devices were price capped after inclusion in the National List of Essential Medicines. In January 2020, the Indian government categorized all medical devices (including instruments, implants, and software intended for human or animal medical use) as “drugs,” bringing them under the purview of the Drugs & Cosmetics Act, 1940.
Currently, 37 medical devices are classified as drugs and regulated under the Drugs and Cosmetics Act. Of these, cardiac stents, drug-eluting stents, knee implants, condoms, and intra-uterine devices are included in the National List of Essential Medicines and are subject to price caps. In February 2020, the Indian government levied a five percent ad-valorem health tax on imports of a variety of medical, dental, surgical, and veterinary devices. Several medical device segments (such as orthopedic knee implants) that were previously exempt from customs duties were withdrawn from the duty exemption.
In June 2020, the Department for Promotion of Industry and Internal Trade amended its 2017 Public Procurement Order, giving priority to Indian companies whose products contain 50 percent or more local content. Products with less than 20 percent local content are categorized as “non-local suppliers” and cannot participate in government tenders.
Effective June 2021, the National Pharmaceutical Pricing Authority issued orders to impose price controls on oxygen concentrators in line with the Trade Margin Rationalization (TMR) approach, which is the difference between the price at which manufacturers sell to the trade and the price to patients. National Pharmaceutical Pricing Authority had initially introduced the Trade Margin Rationalization policy for medical devices and drugs in 2018 to help improve patient access to affordable and accessible healthcare.
In June 2021, the Quality Council of India and the Association of Indian Medical Device Industry added new features to the Indian Certification for Medical Devices Scheme of 2016. This new scheme, called Indian Certification for Medical Devices Plus (2021), was designed to verify the quality, safety, and benefits of medical devices and help government agencies identify counterfeit products and falsified certifications. In addition, the new rules eliminated the need for re-approval of manufacturing and import licenses.
In January 2022, the Indian government issued a notification requiring all medical device companies to register their devices with the Central Drugs Standard Control Organization in compliance with a mandatory ISO 13485 certification. This requirement is designed to ensure the safe production and control of medical devices and in-vitro diagnostic products. Previously, medical devices were subject to a voluntary registration scheme. Starting in October 2021, Class A and B medical devices were subject to mandatory registration, and from September 2022, Class C and D medical devices will be subject to mandatory registration. When the mandatory registration period expires in September 2023, the medical device classes will transition to a licensing regime.
In February 2022, the Department of Pharmaceuticals amended the list of medical devices exempted from India’s Procurement Order 2017 to ensure patient access to critical medical technologies not currently produced in India.
|
|
2019 |
2020 |
2021 |
|---|---|---|---|
|
Total Market Size |
8,975 |
10,360 |
11,914 |
|
Total Local Production |
2,390 |
4,474 |
3,792 |
|
Total Exports |
3,477 |
3,211 |
4,094 |
|
Total Imports |
10,062 |
9,097 |
12,216 |
|
Imports from the U.S. |
1,694 |
1,418 |
1,887 |
Total Market Size = (Total Local Production + Total Imports) – (Total Exports)
Imports from the United States: U.S. Census Bureau and Global Trade Atlas (HS 90, 3821 and 3822)
Data Sources: Statistical data includes unofficial estimates from trade sources and industry
Leading Subsectors
Medical Devices
The Indian medical device market is estimated at $10 billion and is an attractive export sector for U.S. firms, despite numerous market challenges. Importing nearly 80 percent of its medical devices, India remains highly dependent on foreign suppliers, particularly with respect to higher end equipment such as cancer diagnostics, medical imaging, ultrasonic scans, and polymerase chain reaction technologies. Imports are growing rapidly as world-class hospital groups such as Max, Hinduja Group, Fortis, and Apollo build high-end infrastructure and spur on India’s medical tourism sector, which now contributes $2 billion to the Indian healthcare market.
The Indian government’s newly introduced PLI scheme in medical device manufacturing aims to encourage domestic manufacturing, attract significant investments, and reduce reliance on imports in this industry. Opportunities for U.S. suppliers exist for a range of devices, including Medical and Surgical Instruments; Medical Imaging Equipment; Electro-Medical Equipment; Orthopedic and Prosthetic Appliances; Cancer Diagnostic Solutions; Ophthalmic Instruments and Appliances; Orthodontic Equipment and Dental Implants; Point of Care Testing (POCT) Diagnostic Devices; Digital Healthcare, Health IT, and Telemedicine Services.
Health Insurance
Medical care in India is provided at-cost for immediate payment. Health insurance is gaining momentum, with 15 percent of the population covered by government insurance and two percent by private insurance. Several private insurance companies have entered the market and have petitioned hospitals to provide cashless treatment to subscribers of insurance companies.
Hospital and Medical Infrastructure
Healthcare is provided through primary, secondary, and tertiary care hospitals in India. The former two categories are fully managed by the government, while tertiary care hospitals are owned and managed by either the government or private companies. The private sector’s contribution to healthcare has been growing at a faster pace than that of the government. The medical infrastructure market is growing at an estimated 15 percent annually. Both the government and the private sector are planning several new specialty hospitals, as well as modernization of existing hospitals. India faces a chronic shortage of healthcare infrastructure, especially in second and third tier cities and rural areas. Current estimates are that India will require up to 1.75 million more hospital beds by the end of 2025, which creates an opportunity for foreign companies to set up hospitals in India through FDI. According to industry sources, India’s hospital industry is growing at a compound annual growth rate of 16 to 17 percent and is expected to reach $132 billion by 2023.
Biotech and Biopharma: Biotech and Biopharma are two of the fast-growing segments of the Indian life sciences sector and represent diverse opportunities for U.S. companies. The Indian biotech industry is comprised of about 800 companies, and has a market size of $5-7 billion, constituting approximately two percent of the global biotech industry. India is also a leading destination for clinical trials, contract research, and manufacturing activities in this sector.
Digital Healthcare: Though in its infancy, digital healthcare and telemedicine has expanded rapidly since the onset of the COVID-19 pandemic. People are adapting to new health technologies and intelligent solutions to reduce barriers between hospitals and patients. Telemedicine technology and artificial intelligence will provide significant opportunities for U.S. firms in the coming years. Several major players such as Apollo, AIIMS, and Narayana Hrudayalaya have adopted telemedicine services. The Ministry of Health and Family Welfare, along with NITI Aayog, have recently released official guidelines for telemedicine practices that allow registered medical practitioners to provide remote consultation under the supervision of the National Medical Commission, formerly the Medical Council of India. Healthcare services in rural India are not readily available, with the average rural Indian traveling over 62 miles to receive affordable healthcare at the nearest facility. Rural Indians will benefit from the increased focus on digital healthcare technologies by the Indian government and the private sector as India adjusts to this new service sector in the post-pandemic era.
Refurbished Medical Equipment
India is a high-cost economy for capital equipment, creating significant opportunities for suppliers of refurbished medical and laboratory instruments. These instruments are used as back-up equipment in higher end hospitals, while less sophisticated hospitals and district hospitals consider refurbished medical and laboratory equipment to be optimal due to the lower cost. Some international companies operating in India sell used medical laboratory instruments to their Indian customers. Because Indian hospitals and agents demand continuous service support and spare parts for refurbished instruments and equipment, U.S. companies operating in this area should consider establishing offices in India.
However, there are restrictions on the importation of used medical equipment. Second-hand capital goods with a minimum residual life of five years can be imported by actual users without a license, and importers are required to furnish a self-declaration specifying the residual life of the goods. Refurbished equipment cannot be transferred, sold, or otherwise disposed of within a period of five years from the date of import, except with permission of the Director General of Foreign Trade. Parts, accessories, and tools up to 15 percent of the value of equipment may be imported for maintenance and operation. U.S. firms should remember that valuation of used equipment can result in disputes with Indian customs authorities.
Opportunities
The growing demand for quality healthcare and the absence of matching delivery mechanisms pose both a challenge and an opportunity in the Indian market. The need for equipment and medical consumables is a significant opportunity for U.S. companies, and several leading U.S. manufacturers of hospital equipment and medical supplies have already opened offices in India to serve this growing market.
Growth areas include diagnostic kits, reagents, hand-held diagnostic equipment, and operating room simulations since 50 percent of these products are imported into India. Hand-held, portable diagnostic equipment, including devices for blood sugar and blood pressure testing, is also a fast-growing segment as India has around 45 million diabetics, a number expected to swell to 70 million by 2025.
India has become one of the leading destinations for high-end diagnostic services, with tremendous capital investment for advanced diagnostic facilities. Health insurance and hospital administration are other areas of opportunity for U.S. companies, including the introduction and maintenance of industry standards and the certification of healthcare centers. Construction, financing, and management of specialty hospitals to meet growing demand in India is also a burgeoning opportunity.
For more information about opportunities in this sector, contact Commercial Specialist Ruma Chatterjee.