This is a best prospect industry sector for this country. Includes a market overview and trade data.
The Indian healthcare sector is experiencing rapid change and has become one of India’s largest sectors, both in terms of revenue and employment. This change has become significantly more visible over the last decade, with a renewed focus from the government and a growing market demand for healthcare services and products. The Indian population of nearly 1.4 billion 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 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.
The Indian healthcare industry reached $190 billion in 2020, and according to the India Brand Equity Foundation (IBEF), it is expected to reach $370 billion by 2024-2025, due to increased 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. However, considerable challenges exist in terms of service accessibility and patient care quality. According to the Global Burden of Disease Study (GBD), released by the Lancet Medical Journal in 2018, India ranks 145th among 195 countries on the healthcare index. India’s healthcare access and quality (HAQ) index score has improved in recent years, increasing from 44.8 (out of 100) in 2015 to 67.3 in 2020.
The COVID-19 pandemic underscores the importance of investing in the healthcare sector for any country, and industry experts believe that there will be a significant increase in healthcare spending in India over the next several years. Public spending on healthcare in India is just 1.2 percent of GDP; the government has proposed increasing this amount to 2.5 percent by 2025, with a special focus on the underprivileged. As expenditures in the Indian healthcare sector increase, there will be corresponding growth in the medical equipment market .
The Indian medical device market is estimated at $10 billion and is an attractive export sector for U.S. firms despite numerous challenges. India imports nearly 80 percent of its medical devices. India remains highly dependent on imports for many types of medical devices, particularly higher end equipment such as cancer diagnostics, medical imaging, ultrasonic scans, and PCR technologies. Imports are growing rapidly as world-class hospital groups such as Max, Hinduja Group, Fortis, and Apollo build high-end infrastructure and open India to medical tourism, which now contributes $2 billion to the Indian healthcare market.
Although healthcare-related barriers to entry are low compared to other industries, non-tariff barriers and the expansion of price controls to medical devices have constrained 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 twenty-five years, it remains difficult to navigate. India tends to be a price competitive market, and the country produces primarily lower-to mid-tech items. International competition has also been rigid, and India is often described as a “crossroads” market in the middle of many producers and trade routes. The government of India’s (GOI) newly introduced Production Linked Incentive (PLI) scheme in medical device manufacturing aims to encourage domestic manufacturing, attract significant investments, and reduce reliance on imports in this industry.
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; tertiary care hospitals are owned and managed by either the government or private companies, and the private sector’s contribution to healthcare has been growing at a faster pace than the government’s. The medical infrastructure market is growing at an estimated 15 percent annually. Both the government and the private sector are planning several new specialty and super-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 foreign direct investment (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 $130 billion by 2022-23.
Biotech is one of the fast-growing segments of the life sciences sector and represents a diverse opportunity for foreign firms. The Indian biotech industry is comprised of about 800 companies, and with a market size of $5-7 billion constitutes approximately two percent of the global biotech industry. India is also a leading destination for clinical trials, contract research, and manufacturing activities due to growth in the bio-services sector.
Though in its infancy, digital healthcare/telemedicine has expanded rapidly due to the COVID-19 pandemic. People are slowly adapting to new health technologies and intelligent solutions to reduce barriers between hospitals and patients. Telemedicine technology and artificial intelligence (AI) will provide a significant opportunity 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, has recently released official guidelines for telemedicine practices that allow registered medical practitioners to provide remote consultation under the supervision of the National Medical Commission (NMC). 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 GOI and the private sector as India adjusts to the post-COVID era.
Refurbished Medical Equipment
India is a high-cost economy for capital equipment, and Indian manufacturers and investors constantly seek to reduce their capital costs, refurbished medical laboratory instruments find a ready market in India. These instruments are used as back-up machines in top-of-the-line hospitals, and less sophisticated hospitals and district hospitals consider refurbished medical laboratory instruments as optimal due to substantially lower investment costs. Some international companies operating in India also sell used medical laboratory instrument 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.
India restricts the import of used medical equipment. Second-hand capital goods with a minimum residual life of five years can be imported by actual users of such equipment 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 (DGFT). U.S. firms should remember that valuation of used equipment is a technical area, and can result in disputes with customs. Parts, accessories, and tools up to 15 percent of the value of equipment may be imported for maintenance and operation.
Policies and Regulations
To ensure quality healthcare, the GOI 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 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 January 2020, the GOI categorized all medical devices (including instruments, implants, and software intended for medical use for humans or animals) as ‘drugs’, bringing them under the purview of Drugs & Cosmetics Act, 1940.
In July 2017, the GOI 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 including them in the National List of Essential Medicines (NLEM). Currently, 37 medical devices have been classified as drugs, and are 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 NLEM and are subject to price caps. In February 2020, GOI levied a five percent ad-valorem health cess (i.e., tax) on imports of a variety of medical, dental, surgical, and veterinary devices. Furthermore, several medical device segments (such as orthopedic knee implants) that were previously exempt from customs duties were withdrawn from the duty exemption.
Effective June 2021, the National Pharmaceutical Pricing Authority (NPPA) issued orders to bring Oxygen Concentrators (OCs) under price control in line with the Trade Margin Rationalization (TMR) approach. NPPA capped the trade margin up to 70 per cent of the Price to Distributor (PTD) level, and directed manufacturers to fix the maximum retail price of the non-scheduled drug OCs per the TMR formula. TMR is the difference between the price at which manufacturers sell to trade and the price to patients (MRP). NPPA introduced the TMR policy for medical devices and drugs in 2018 to ostensibly to protect and provide affordable and accessible healthcare to consumers.
In June 2020, the Department for Promotion of Industry and Internal Trade (DPIIT) amended its 2017 Public Procurement Order, giving priority to local companies whose products contains 50 percent or more local content. Products less than 20 percent local content are categorized as ‘non-local suppliers’, and cannot participate in government tenders.
In June 2021, The Quality Council of India (QCI) and the Association of Indian Medical Device Industry (AiMED) added new features to the Indian Certification for Medical Devices (ICMED) Scheme (2016). This new scheme, ICMED Plus, will undertake verification of the quality, safety, and benefits of medical devices and will help agencies to identify counterfeit products and falsified certifications. In addition, the new rules eliminated the need for re-approval of manufacturing and import licenses, which are now valid unless suspended, terminated, or surrendered. An approved central licensing authority must license devices for manufacture, sale, or distribution. Hospitals are also seeking quality accreditations from agencies such as Joint Commission International (JCI), National Accreditation Board for Hospitals and Healthcare providers (NABH), and International Organization for Standardization (ISO).
Imports from the United States: United States Census Bureau and Global Trade Atlas (HS 90, 3831 and 3832)
Data Sources: Statistical data include unofficial estimates from trade sources and industry. As this industry has not been well documented in the Indian context, the estimates of industry size vary significantly across different sources.
The most promising sub-sectors in the healthcare and medical equipment sector are:
1) Medical Infrastructure
2) Medical and Surgical Instruments
3) Medical Imaging
4) Electro Medical Equipment
5) Orthopedic and Prosthetic Appliances
6) Cancer Diagnostics
7) Ophthalmic Instruments and Appliances
8) Orthodontic Equipment and Dental Implants
9) Point of Care Testing (POCT) Diagnostic Devices
10) Digital Healthcare, Health IT, and Telemedicine
The growing demand for quality healthcare and the absence of matching delivery mechanisms pose both a challenge and an opportunity. The construction, equipping, managing, and financing of super-specialty hospitals in India is a future growth area.
Supplying equipment and medical consumables will provide significant opportunities for U.S. companies, and several leading U.S. manufacturers of hospital equipment and supplies have opened Indian offices to serve this growing market. 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 is another area of opportunity for U.S. companies, including introducing and maintaining industry standards and classifying and certifying healthcare centers.
Other growth areas include diagnostic kits, reagents, hand-held diagnostic equipment, and operating room simulations. Imports of these products constitute about 50 percent of the market. Hand-held/portable diagnostic equipment (e.g., 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.
For more information about opportunities in this sector contact: Commercial Specialist Ruma Chatterjee.