A sunrise industry that needs urgent government attention

Q2 FY24 was a seasonally strong quarter for healthcare services, driving occupancy and margins across the board. Listed hospitals reported QoQ growth in both revenue and EBITDA. Network expansion, both through organic and M&A routes, is on the cards for most hospitals. Better traction in blood-related tests fueled double-digit growth in non-Covid test volumes. While valuation has remained resilient, competitive pressure in diagnostic industry is easing out as online competitors are reducing discounts to envisage profitable growth. Listed diagnostic companies remain firm on their network and lab expansion plans, and are taking slight price increase in selective tests.

Major Indian hospital chains saw a huge increase in international patient revenue in H1 FY24. The Ministry of Tourism data indicates 453,475 medical tourist arrivals in H1 FY24, from 303,526 in CY2021 and 182,945 in CY2020.

The National Medical Devices Policy 2023, a hugely welcomed effort, needs to address some glaring lacunae, without which it will not be possible to realize the ₹4-lakh crore potential by 2025 that the MedTech industry is expected to reach. These include the setting up of a law and regulatory body separate from the current Department of Pharmaceuticals and the Ministry of Chemicals and Fertilisers, which have limited expertise in dealing with the medical industry. The lack of a defined regulator magnifies challenges like the absence of clear product specifications guidance from the national regulatory agency, limited presence of organized healthcare stakeholders, and a lack of transparency and formalized health technology assessment in decision-making. There is an urgent need to scale up the domestic manufacturing capabilities through production-linked incentives, and what is required is the development of a robust local supplier base, incentivizing investments in components manufacturing, and facilitating collaboration between manufacturers and local suppliers. Strengthening the ability of domestic firms would also need an industrial policy, with support for skill development, innovation, and R&D capabilities. A clear path for technology transfer from global firms is needed to facilitate the manufacture of high-end medical devices. Many other issues as challenges arising from IPR and absence of a body as NPPA, exclusively for medical devices, remain.

The powers-that-be must intervene for this industry that is already grappling with issues as medical inflation, shortage of skilled clinicians, hesitancy of doctors to move to remote places at the service provider end; and imperative demand for innovation and latest technologies, yet affordable devices, at the manufacturer end; but is keen to move up the value chain and make India proud!