The MedTech industry in india should embrace the path of innovation so that its products and solutions are tailor-made for the opportunities and constrains of the country
Healthcare, today, is on the cusp of a new era when medical technology (MedTech) is changing the face of clinical care. From prevention to rehabilitation, it has changed the way healthcare is delivered. Highly accurate diagnostics to more effective and targeted treatments have already moved into clinical practice with remarkable gains already and the promise of even more to come. Today healthcare has become more comfortable, less damaging, and less painful with better final outcomes to the patients as compared to the blind and lengthy procedures followed earlier.
All of these technologies have been developed over the years on account of tireless efforts of thousands of healthcare experts who have contributed for many years to bring a single product to come into practice. The common thread through all applications of MedTech is the beneficial impact on health, quality of life, and society as a whole. Across the world, numerous exciting developments are going on; those technologies hold the promise of even greater success in the complex disease environment.
MedTech is very different from the pharma sector. It is highly capital intensive with a long gestation period of development and needs continual influx of technology and continuous training of the doctors and para medical staff to adapt to the new technology. It requires continuous R&D to produce different versions and variations to match different requirements and geographies. Therefore the scalability of MedTech is much slower than that of pharma. It is also different as there are no generics available in the sector.
Can we think of a hospital without these devices and technologies? Can a surgeon perform without using these technologies and get the desired results? Will the hospitals still be called the temples of health? Can a country afford to ignore such technologies and can it deprive its citizens of getting the benefits? MedTech is miracle technology. It is the time for all stakeholders to come forward for a common purpose: improving, extending, and transforming people’s lives.
The value of the worldwide MedTech market will reach USD 521.9 billion by 2022, growing at a rate of 5.1 percent per year between 2016 and 2022, estimates Evaluate.
In vitro diagnostics is expected to remain the largest segment in 2022 with annual sales of USD 69.6 billion, well ahead of second placed cardiology. Roche will remain the leading IVD company with global sales expected to reach USD 12.8 billion in 2022. Following the acquisition of Cepheid in the final quarter of 2016, Danaher has seen its 2022 forecast rise by USD 1.4 billion, consolidating its second place in the company rankings. Abbott is currently the third largest IVD company, but this could soon change. The acquisition of Alere will add almost USD 3 billion to its IVD revenue, making it significantly larger than Danaher in 2022.
The cardiology industry is expected to grow at 5.7 percent per year to USD 62.3 billion in 2022. The main event in the cardiology market this year was the acquisition of St. Jude Medical by Abbott for USD 25 billion. Abbott is now expected to achieve sales of over USD 9.7 billion in 2022, causing it to jump three places to second in the company rankings.
The diagnostic imaging market is forecast to be one of the slowest growing areas in the medical device industry, with growth between 2016 and 2022 expected to be just 3.4 percent per year. Siemens will continue to be the number one company in the diagnostic imaging industry and is expected to generate USD 11.4 billion of sales in 2022 representing a market share of 23.8 percent. Following the acquisition of Toshiba Medical Systems at the end of last year, Canon has entered the diagnostic imaging market in fourth place, with sales forecast to be in excess of USD 4 billion in 2022. Varex Imaging is also a new entry to the market, following its spin-off from Varian Imaging, with sales of USD 1.5 billion forecast for 2022.
The orthopedics market is set to slowly grow at 4.0 percent per year to USD 44.4 billion in 2022. Johnson & Johnson will remain the world’s largest orthopedic company, with sales forecast to reach USD 10.1 billion in 2022 and compound annual growth expected to be at a rate of 2.4 percent between 2016 and 2022.
Neurology is again forecast to be the fastest-growing device area, with sales expected to rise to USD 11.6 billion in 2022, representing 7.8 percent market growth per year between 2016 and 2022.
The Indian MedTech market will continue to record healthy growth despite a hardened stance on pricing for essential devices. Currently valued at 25,426 crore, the market is expected to grow to 27,736 crore in 2017 and to 39,262 crore in 2021, predicts BMI research. Market growth will moderate over the next 6 years, reflecting an increasingly competitive operating environment and expanding market share for lower cost domestically produced products in some sectors.
The market will benefit from sustained economic growth and strong healthcare drivers. It will continue to reduce its dependence on imports, as local manufacturing expands under the Make in India initiative. The expanding private sector will remain the main growth driver.
Diagnostic imaging weakness will continue to hinder import growth, but growth rates in US dollar terms will improve due to a stabilization of the rupee against the US dollar. In the 12 months to January 2017, imports grew by 7.7 percent in local currency terms and by 3.5 percent in US dollar
terms, taking the running annual total to 18130 crore.
Despite an improved performance in 2016, headwinds to exports persist with a weak external demand outlook in key markets. In the 12 months to January 2017, exports grew by 8.7 percent in local currency terms and by 4.4 percent in US dollar terms, taking the running annual total to 7510 crore.
India will actively target investment from major medical device manufacturing nations under a memorandum of understanding signed between Invest India and the local medical device industry. The public–private collaboration will also seek to address the roadblocks hindering investment to achieve its goal of becoming a global medical device-manufacturing hub. Meanwhile, Japan will partner with India to develop an internationally harmonized medical device regulatory framework and Japanese manufacturers will support the Make in India initiative under a program of enhanced co-operation agreed in May 2017.
There are strong reasons why the MedTech industry in the country has not expanded to its full potential. These include: nondistinctive regulatory structure; price control; draft legislation pending; customs duty increases on products not import substitutable in near future; preferential market access (PMA) which failed in a contiguous sector, being reintroduced; growingly conflicting signals to foreign direct investment; inadequate public spending on healthcare; and poor insurance coverage.
Regulatory structure. At the moment, there is no fitting regulatory framework for the MedTech sector in India. The sector is governed by a number of diverse laws, administered by several regulatory authorities controlled by different ministries. In a nutshell, the many laws, which impact the medical device sector and the many departments which impinge upon it make for inter-organizational delays, interpretation issues, higher costs, and lower ease of doing business. Unlike pharmaceuticals in which there is a system of licensing and approval for manufacture as well as marketing, there is no such system for medical devices. Besides, there is no system of clinical trials, mechanism for post-marketing feedback or even reporting of adverse effects. Since 2006, there has been an ad-hoc attempt to regulate the medical devices at par with pharmaceutical products. This has presented its own challenges both to the industry as well as the regulator.
Price control. MedTech is a capital-intensive industry with long gestation periods, with many years of research. Different versions of the same device have to be produced and innovations have to be made continuously. Hence, this sector needs a nuanced approach, rather than a one size fits all kind of regulatory policy. A step in the positive direction is the setting up of the Medical Technology Advisory Board (MTAB) in 2016 under the aegis of the Department of Health Research (the new name for the ICMR). This would help to establish the system of Health Technology Assessment (HTA), which examines the real value of a technology or device in terms of the health outcome, which the technology brings about. Pricing based on HTA therefore makes much more sense than that based on input costs.
Draft legislation pending. In 2015 the central government came out with draft legislation for medical devices after nearly a decade of meetings and consultations. However, before the new laws could be guided through the legislative labyrinth, the CDSCO (Central Drug Standards Control Organization) published a new set of guidelines for marketing and selling of medical devices: The Medical Device Rules, January 2017, which have been notified and are likely to come in to effect from January 2018. While the concern of CDSCO to better regulate more of the devices is understandable, the time given to the industry to prepare for the implementation of these Rules is too short. While the industry wants a greater adjustment period, which will also help it iron out the outstanding issues, it reiterates its demand of the necessary legislation preceding the rules.
Customs duties. Import duties on medical equipment and devices were increased almost across the board by 7.3 percent in January 2016. Since, most of the items affected were falling in the 11.6 percent range, which has gone to 18.9 percent now, it means an effective duty increase of 62.7 percent. For products where the ability to import substitute is still far away, the high custom duties should be rolled back to the earlier figures. There is an urgent need to do the microanalysis of the sub-sectors to know the requirements. Care also must be taken that the duty level does not go way beyond what is there in the neighboring countries and that quality deficient manufacture does not find its way in to the market. A process of incentivization (including lowest possible tariffs on raw material and components), research and development, skill development, greater health expenditure or better insurance coverage, low regulatory costs, assurance of predictable policy, will benefit the cause of Make in India rather than custom duty increase. Through custom duty increases, which are almost all passed on to the patients; we will only tax the patients to subsidize manufacturing.
Preferential market access. With the intention of promoting local manufacture of medical devices, the government has put in place a system of PMA according to which public hospitals and healthcare institutions are expected to give preference to products manufactured in India over the imported items. Though the measure is well intended, it works to restrict healthcare access to a majority of people in the country. The spectrum of medical device is so diverse – from cannulae to cyclotrons and from syringes to sternum saws – that even countries, which have been pursuing the manufacture of medical devices for years are making only a small spectrum of what they consume locally. (They, of course, export this product mix robustly.) For these MNCs to produce a larger spectrum of these devices in India, the domestic demand must increase substantially. By merely ordering public healthcare institutions to buy indigenously manufactured products the growth of technology as well as quality may get compromised.
For long, India has struggled to provide quality affordable healthcare to all its citizens. While the challenges in achieving this are well-known, adopting the conventional route for creating adequate physical infrastructure, building a medical and paramedical resource base, and achieving high quality standards would require huge investments and timelines that a developing country like India can ill afford. The disruptive power of technology has completely transformed the landscape in various spheres of life. It has changed the ways humans communicate, travel, socialize, store, and access information and many more.
MedTech has the potential to do the same for healthcare by leapfrogging over the current infrastructural, skill based, geographical, and affordability constraints. MedTech can bridge the distance between the care provider and the patient thereby helping patients in remote areas access specialist and specialized equipment present in large cities far away. Technological advancements in the fields of health monitoring and diagnostics can help in detecting health issues early on thereby reducing overall cost of care and enhancing wellness levels of the society. Similarly, technological interventions are rapidly increasing the precision and efficacy of treatment modalities thereby improving clinical outcomes. However, to realize this opportunity at scale rather than as isolated, fragmented initiatives, both the government and the industry will need to make concerted efforts.
The government should streamline the regulatory and business ecosystem in a manner that makes operating in India more attractive and simpler for both the medical device players as well as investors. The industry needs to customize their business models to suit Indian markets. Medical devices segments, which provide sizeable opportunities and require moderate level of technological expertise to produce, should be prioritized for manufacturing in India. For high-tech low volume segments, efforts need to be directed toward developing the necessary ecosystem and capabilities for their manufacturing in the medium- to long-term horizon.
Finally, the MedTech industry in India should embrace the path of innovation so that its products and solutions are tailor-made for the opportunities and constraints of the country. If India were able to be self-reliant in the MedTech sector and capitalize on this MedTech revolution, by ensuring all stakeholders play their respective roles, it would stand a good chance of realizing its vision of providing healthcare to all its citizens.