While the outlook for medical device companies appears positive, unsustainable healthcare costs and new competitive forces threaten to alter the industry landscape.
The MedTech industry is poised for steady growth, with global annual sales forecast to rise by over 5 percent a year. This projection reflects increasing demand for innovative new devices and services, as lifestyle diseases become more prevalent, and economic development unlocks the huge potential in emerging markets. China and India are already growing at twice the pace of the overall market, driven by healthcare reform, local government incentives, and overall rising demand for healthcare.
The diverse nature of different emerging markets calls for individual entry strategies tailored to specific in-market needs. Key success factors include localizing innovation and manufacturing, adapting to country-specific distribution models and sales channels, investing in local technology infrastructure and collaborating with domestic value chain stakeholders. Medical device companies will need to be prepared to invest for the long run, adding complexity and uncertainty to their expected pay-offs – but inaction could see them missing out on potentially lucrative opportunities. While China and India are obvious choices to establish and strengthen presence, other markets should consistently be evaluated as they continue to grow over the coming decade.
The worldwide MedTech market is poised for USD 594.5 billion by 2024, growing at a rate of 5.6 percent per year between 2017 and 2024, estimates Evaluate.
In vitro diagnostics will continue to be the number one device area in 2024 with annual sales of USD 79.6 billion and a 13.4 percent share of the medical device industry. Roche will continue to hold on firmly to the top position in the IVD market, with the company estimated to have a substantial 17.8 percent market share in 2024. Following the acquisition of Alere, Abbott is set to become the second largest IVD company, with 2024 sales forecast to top USD 10 billion. Third-placed Danaher also continues to invest in the space with the acquistion of Integrated DNA Technologies for USD 2 billion earlier this year.
The cardiology industry is expected to grow at 6.4 percent per year to USD 72.6 billion in 2024. Medtronic will retain its position as the top cardiology company in 2017 and it is expected to remain the world’s leading heart device maker in 2024, with a predicted market share of 19.5 percent. Abbott Laboratories continues to make strides in the cardiology market following its acquisition of St. Jude Medical and is set to cement its top-two position in 2024 with expected sales of over USD 11 billion and a market share of 15.4 percent.
Diagnostic imaging will be one of the slowest-growing device areas, with an expected CAGR of only 3.7 percent between 2017 and 2024. Siemens Healthineers will remain the top company in diagnostic imaging with forecast sales of nearly USD 12 billion, representing 23.5 percent of the market in 2024. Following closely are Philips and GE, both of which are expected to have over 20 percent of the market in 2024. The diagnostic imaging market
is set to grow from a global total of USD 39.5 billion in 2017 to USD 51.0 billion in 2024.
Growth in the orthopedic sector is expected to remain sluggish, with a CAGR of just 3.7 percent between 2017 and 2024. With sales of USD 10.3 billion and a market share of 21.8 percent in 2024, Johnson & Johnson is set to remain the top orthopedic company in 2024. The company gained 43 orthopedic device approvals in 2017, with over half of these being for hip and knee replacement systems. The top 10 companies in the orthopedic market are expected to generate USD 41.2 billion in sales, making up over 87 percent of the total market revenue.
The lens maker Essilor International will continue to dominate the opthalmics market in 2024 with sales of USD 11.6 billion, well ahead of USD 8.3 billion for second-placed Novartis. The acquisition of Abbott Medical Optics last year by Johnson & Johnson will allow the latter to retain its third place in 2024, with its ophthalmic sales forecast to reach USD 5.9 billion. Meanwhile, Bausch Health Companies (formerly known as Valeant Pharmaceuticals) is forecast to leapfrog HOYA to become the fourth biggest ophthalmic company in 2024.
Medtech companies worldwide will spend USD 39 billion on R&D in 2024, with an expected CAGR of 4.5 percent. The R&D investment rate, as a percentage of sales, is expected to decline from 8.7 percent in 2017 to 8.1 percent in 2024. Medtronic’s R&D expenditure is forecast to reach USD 2.7 billion in 2024, growing at 2.8 percent CAGR between 2017 and 2024. Of the top 20 companies, Becton Dickinson and Edwards Lifesciences are forecast to increase their annual R&D spend the most, growing at a CAGR of 8.4 percent and 8.3 percent, respectively.
Asia is a region of stark contrasts, with approximately 4.5 billion people – some 60 percent of the world’s population – living in countries with a rich diversity of economic, political, and demographic constituents. With its 48 countries evolving (often rapidly) their political, economic, and healthcare systems, Asia can be a puzzling region to operate in, presenting a steady flow of surprises (and frequently, challenges).
Asia is on the rise in MedTech just as it is in other industries – indeed, Asia today already represents 23 percent of the global market. Within the next 5 years (by 2023), Asia will eclipse Europe to become the second-largest regional market. During that period, Asia will also be the major growth engine among global MedTech markets, contributing 35 percent of total incremental growth. Put simply, the strong fundamentals of rising healthcare demand and wealth in the region will override short-term dislocations at the country or sub-regional level, which a bound to happen. The region is also increasingly recognized as a major source of product technology innovation as well as for its innovative business models and unique healthcare ecosystem. Nevertheless, success in Asia does not come easy – on the contrary, it requires agility, innovation, and long-term commitment to stay abreast of trends in this fiercely competitive market.
McKinsey & Company in a recent report The rise and rise of MedTech in Asia surveyed 160 APAC presidents and Asian country general managers from some 30 multinational MedTech companies via a survey conducted amongst members of APACMed. As per the survey, APAC leaders are critical of market developments over the past 2 years – some 80 percent of APAC executives reported that the pricing and reimbursement environment has deteriorated or significantly deteriorated during this time (100 percent for China general managers and approximately 85 percent for India general managers). Meanwhile, the growth outlook continues to be optimistic across the region – executives across every country or region, with the exception of India, project a higher growth compared to the survey two years ago. On average, companies are expecting to grow at 15 percent in China, 13 percent in SEA, and 12 percent in India over the next 5 years.
At first glance, the widely perceived pricing pressure seems at odds with these optimistic growth projections. However, there are several factors that can help manufacturers mitigate the often headline-catching pricing measures devised by policy makers. First, it is worth pointing out that, due to the devolved and cyclical nature of the process, price cuts are generally not across the board; this is because provinces and cities conduct their own tenders approximately every 2 years, on a subset of medical product categories each time – this means that price cuts do not apply to all provinces for all products in a given year. Indeed, price cuts usually affect specific products – these are often in their mid-to-late life cycle when they appear on the radar of regulators due to high volumes and the existence of several alternatives on the market – in other words, products on the verge of commoditization. A well-balanced portfolio with innovative products launching at a healthy pace mitigates price erosion of commoditized products. Moreover, the prices (and price cuts) that people talk about usually refer to end-customer prices, that is, the price to healthcare providers or patients. In a market where distributors play a significant role, and where there are often wide margins in the value chain, such price cuts need not necessarily be absorbed by manufacturers alone. Indeed, recapturing value from distribution channels is a common theme in the region, and each price cut provides an opportunity to reset the margin structure between manufacturers and distributors. Manufacturers with robust value propositions and customer pull for their products have managed to mitigate the impact of price cuts by adjusting channel margins.
While headwinds such as pricing pressure provide certain challenges, strong growth drivers considerably outweigh them – on the demand side, overall healthcare coverage is expanding rapidly across Asia. China has reached 95 percent coverage with its basic medical insurance since 2011, now focusing on service quality upgrade and well-being; India has announced that it will roll out healthcare insurance to nearly 100 million families; Korea’s healthcare reform is pledging to grow healthcare spend; and Indonesia has covered nearly 200 million people with health insurance.
On the supply side, both in-patient volumes and outpatient volumes have mostly remained stable in developed countries, while steadily increasing in developing countries. Overall, market penetration in Asia is still very low, with large headroom for further growth.
Three hard nuts to crack for MedTech leaders
The blessing and curse of premium-oriented portfolios. MedTech companies are inherently product innovators. Cutting-edge innovation is unequivocally seen as a key success factor for multinational MedTech companies across APAC – driving business growth, brand image, and recognition with key opinion leaders. At the same time, APAC executives – especially general managers in China and India – feel their existing portfolios do not adequately meet the needs of their customers. A locally relevant portfolio targeting lower-tier customer segments is thought to be equally important to fully tap into local market opportunities. While confidence in premium innovation is high, only 30 percent of companies expressed confidence in their ability to develop locally relevant products that would allow them to scale in broad market segments. While expanding their footprint in APAC markets, multinational companies will ultimately have to provide answers to mid- and lower-tier customer needs. Failure to do so will not only constrain growth but risks companies being challenged, even in their core business, by nimble local competitors – these often start their business by filling the void in lower-tier market segments but tend to quickly close quality and capability gaps to leading MNC players. This conundrum of premium versus value segment products is not new; in fact, companies have experimented with organic and inorganic approaches for over a decade. Survey results suggest that the code for success has yet to be cracked by most companies.
Weaning off the traditional distributor-led commercial model. The growth of MedTech in Asia has been largely driven by a single commercial model – growing the sales force plus expansion and heavy reliance on distributor networks. In many of Asia’s key markets, those days are gone and the focus is rapidly shifting toward more effective selling, diversification of capabilities across the commercial, service, and clinical range of roles, and gaining back control over customers from distributors who have evolved far beyond their core distribution capabilities and effectively control most commercial activities. Policy makers in many markets are taking an interest, too, and arguably have moved faster than the industry on several fronts – for example, the role of distributors and the value they capture in the healthcare system (widely seen as disproportionately high) has led to restrictive policies in China (the so-called two-invoice policy). Decision-making is moving from clinicians toward more institutionalized processes as is the case with more mature markets. New forms of reimbursement (DRGs) and data-driven approaches are fundamentally at odds with a traditional commercial model that puts physician relationships at the center. It is therefore no surprise that industry leaders want to shift to more sophisticated commercial models. However, this task would not be without challenge – only 50 percent of APAC executives have confidence in their current sales force effectiveness, suggesting that basics of commercial excellence leave room for improvement. The vast majority, however, agree that stepping up sales force effectiveness will be more important than expanding footprint.
Finding the right response to Asia’s digital leap. The digitization of Asia’s societies is progressing at unprecedented speed. In terms of scale and the impact of digital on everyday life, Asia – led by China – has eclipsed every western market, including the United States. With digitization pervading every aspect of society, healthcare should be no exception. There is clear evidence that physicians are spending increasing time gathering information online (specifically, via mobile). Patients are turning to digital channels to gather health-related information. Asian digital behemoths, as well as specialized digital healthcare players, are already building an ecosystem of connectivity, information, and services that extends, in the example of China, to virtually every physician, consumer, and patient in the country. It is thus unsurprising that manufacturers are embracing this digital landscape in multiple ways – as a channel, as a means to educate at scale, in order to listen into customer sentiment, and so on. Indeed, pharmaceutical companies have experimented with this for a while and have developed a wide range of models that leverage digital ecosystems. In contrast to many people’s expectations, however, most MedTech companies in APAC seem to be sitting on the fence when it comes to digital – fewer than 20 percent of executives believe that they are using digital tools and technology appropriately to drive their business. Against this backdrop, MedTech’s relative inertia in the face of the digital revolution is surprising. The root causes range from fundamental skepticism (some of the APAC leaders interviewed were unconvinced of the investment returns from digital) to difficulties in prioritizing among a bewildering array of digital use cases, as well as problems sourcing the talent needed to get started on a digital transformation. For starters, leaders realize that ecosystem partnerships will be an important element of their businesses going forward – 50 percent of executives believe they will forge such partnerships over the next three years (versus only 10 percent reporting they have done so in the past).
Three no regret moves that MedTech leaders can make now
As Asia’s MedTech market continues to grow and mature, so too will the stakes for MedTech leaders. The industry will continue to grapple along the way with the challenges discussed. In this context, we should expect to see a relentless focus on data and the potential of HEOR to drive local value, while MedTech companies only have to look to the success of adjacent sectors such as pharma for examples of how partnerships can enable them to move forward with digital. While there are perhaps no cookie-cutter recipes for success for an industry as diverse as MedTech, in a region as diverse as Asia, we believe there are several no-regret moves for companies to set the stage for a successful business trajectory in Asia.
Build localized, agile organizations and over-invest in talent. While it is perhaps impossible to accurately predict every disruption – both major and minor – in Asian markets, it is entirely possible to create local organizations that are able both to react in an agile way and exhibit resilience to external and internal challenges. To do so, companies need to do two interrelated things. First, they need to build local organizations that have sufficient autonomy to shape the local business to reflect local market requirements. Decision-making that requires alignment beyond the market (or region) needs to happen at pace and with a minimal number of stakeholders involved. While this sounds obvious, the reality is a fair level of skepticism among local executives regarding their perceived autonomy and ability to make essential business decisions. Only about half of executives agree that they have the required autonomy to make the right decisions for their businesses – in China, only a quarter think they do. While this reflects subjective views of local leaders, we believe they have a point – we commonly see organizations with complex decision-making processes at a disadvantage in highly dynamic markets where customers have little patience for internal process and the red tape of their suppliers. Complex, rigid pricing approval mechanisms are one obvious example, but issues as simple as using specific local media or communication channels can create significant friction and frustration in organizations with overly rigid global processes. The fact that organizations with senior global representation in Asia experience better communication and decision-making points to the importance of smooth local-global collaboration – this is a lever to empower Asia that surprisingly few companies are using at the moment. Of course, the enabler of autonomous, trusted local organizations is talent – especially leadership that is able to empower a local organization to grow and innovate, while still being able to communicate with regional and global stakeholders effectively. This turns out to be a real bottleneck – fewer than half of APAC executives agree that they get the required talent to drive growth in their businesses, a situation largely unchanged over the past few years. The talent shortage is felt in both the sales organization (especially middle managers) and in commercial support functions such as regulatory, market access, strategic marketing, digital, and medical. To make matters worse, the shortage is even more pronounced in the countries that matter most for absolute growth – especially in China where competition for key talent has become more intense, as skilled executives increasingly choose entrepreneurship or opt to join new entrants to the healthcare ecosystem, rather than traditional MedTech companies. The response should be an over-investment in talent in Asia – systematically identifying high potential talent, succession planning, rotating future leaders from Asia into other regions early in their careers, top-notch leadership development (including extensive 360-degree feedback and coaching programs to sharpen leadership profiles), individualized retention programs for critical roles, and full use of best-practice HR tools and processes as enablers for a successful people strategy. In reality, we see room for improvement in most Asia MedTech organizations and hence, consider this an important area for investments into future business success in Asia.
Play as a partner in the healthcare ecosystem. MedTech companies are facing pressures as healthcare systems mature and payers institutionalize. Technology players are entering the healthcare space, expanding the healthcare value chain beyond diagnostics and treatment, and defining new points of value along the value chain. In this environment, a position as product vendor is risky and bound to be disrupted, particularly as innovation gathers pace. What’s more, it is evident that MedTech companies struggle to stay on top of fast-paced health systems innovation in certain areas, perhaps most notably in the digital space. Traditional MedTech product manufacturers must therefore rethink their role and the way they deliver value to the healthcare ecosystem. We believe that a big part of winning models will be the ability to partner with other players in the healthcare ecosystem. Most companies have dedicated teams and clear processes for traditional business development (for instance, M&A). By comparison, explicit partnership strategies and processes to scan ecosystems for value-added partnership scenarios, accompanied by efficient execution, seem far less common. We believe that this is a missed opportunity, especially when contrasting MedTech with the pharmaceutical industry where innovative partnerships, often involving multiple parties, are used much more often to the benefit of all partners (as well as patients and healthcare providers). Especially in times where asset valuations make traditional M&A transactions hard to underwrite, partnership strategies should be devised with equal rigor. This will offer a plethora of opportunities to increase reach and leverage in the healthcare ecosystem while closing or circumventing an organization’s capability gaps.
Data, data, data – getting ready for a value-based healthcare world in Asia. Many of Asia’s healthcare systems are doubling down on healthcare coverage and access. At the same time, they are taking more interest in the value they get for the outlay of public money. In Japan, the government has pledged to tie pricing and reimbursement more closely to outcomes. In China, the government is leading a major push from acute care towards prevention as well as towards case-based payments and DRGs as major reimbursement models. In Indonesia, the government has instituted a capitation system that pays the equivalent of USD 1 a month per person to healthcare facilities in order to provide primary care coverage for patients. Australia is among the leading systems in the world regarding health economics research and related funding models. In brief, Asia is moving towards more sophisticated ways to manage healthcare funding. On the back of digitization and rapidly improving data transparency at scale, some of these markets might soon surpass western systems in their ability to aggregate and analyze healthcare data.
Many MNCs are realizing premium prices for their products based on physicians’ and patients’ belief and experience that they offer superior quality and safety. This is bound to change – increasingly, customers and regulators will ask for conclusive evidence of clinical as well as economic outcomes to justify pricing and use of products. While it is hard to predict precisely when such approaches will become the norm in major Asian markets, the majority of executives are witnessing an expansion in related discussions and pilots. Once systems start to move, the shift could be both profound and rapid. Companies should invest now in generating evidence that demonstrates the value of their products to patients, providers, and healthcare systems. Only then will they be prepared for future moves in pricing and reimbursement. Even better, companies that invest in demonstrating value may be able to shape future policies rather than simply reacting to them.
The Indian MedTech market offers a great opportunity not only by its size, but also because of encouraging policies and regulations introduced by the government over the last couple of years.
The Indian MedTech market continues to record robust growth despite a hardened stance on pricing for essential devices. Currently valued at Rs 27,735 crore, it is expected to touch Rs 30,300 crore in 2018 and Rs 39,260 crore in 2021.
In 2017, MRI equipment market is estimated as Rs 1750 crore, with 1.5T continuing to dominate the market. The imaging centers are increasingly overcoming the previous challenges of image distortion, shadowing with the multi drive RF transmit technology with silent scans. The conventional 3T MRI systems acquired the patient data with coils and transmitted them to an electronics room through copper cables. In the digital versions, the signals are digitized in the machine room itself and then transmitted to the electronics room via broadband optical fiber cable technology, thus minimizing signal loss and improving the image quality for better diagnostic confidence. The technologically superior 3T machines overcome tissue heating by automatically customizing and delivering the optimal magnetic waves as per the size and shape of the patient, through its personalized patient management system. They offer clinical benefits across spectrum of medical specialties by using advanced applications in neuro, spine, vascular, abdomen, whole-body, breast, cardiac, musculoskeletal, and ortho and have espoused the new horizons in diagnostic capabilities, changing the course of treatment.
The Indian anesthesia equipment market in 2017 is estimated at Rs 181 crore, a 7.5 percent increase over 2016 and at 5625 units, a 10 percent increase over 5115 units in 2016 in volume terms. Competition is intense as players offer features of high-end machines in competitively priced models; and with no major technological breakthrough, the mainstay continued to be the mid-tier and value segment. Low-flow anesthesia continues to be a priority.
The Indian CT scanners market in 2017 is estimated at Rs 1150 crore, translating to 944 units in quantity terms. The portable CT scanners segment is gaining popularity at a rapid rate, which is a reflection of increasing number of device installations, lower switching costs provided by these portable products, and growing application horizons. Most of the makers are concentrating on developing portable products and increasing their geographical presence to strengthen their position in the market.
The Indian ECG market is estimated at Rs 235 crore in 2017. The market has seen a major increase, particularly in the high-end models. While the single channel, 3-channel, and 6- channel are seeing traction, it is the high-end models, which are earning the players margins. Prices remained more or less constant.
In 2017, the Indian ultrasound equipment market is estimated at Rs 1310 crore, an 8 percent increase over Rs 1212 crore clocked in 2016. While the premium, very expensive machines saw a decline in market share, all the other segments including high-end, mid-end, entry level, and portable machines gained market share. The B/W are gradually losing share, and are only procured by small clinics, which do the preliminary test and then if required refer the patient to a nearby diagnostic center for further investigation. Customer preference is shifting toward high-end technology and high-quality imaging for better clinical diagnosis. The market for intraoperative ultrasound (IOUS) is rapidly growing and these ultrasound machines are preferred for various clinical scenarios like robotic surgeries, oncology, surgical gastro applications etc. Hospitals prefer dedicated IOUS machines that are compatible with common disinfectant methods, for safe use in the operating room. The market for high-end portable ultrasound too is seeing rapid growth because of preferences for high technology machines with superior image quality and easy workflow features like touch screen display monitors and high-end probes.
The Indian ventilators market in 2017 is estimated at 8075 units, valued at Rs 420 crore. The ambulatory and transport models are seeing a gradual increase in demand. In India, contrary to general perception, refurbished and indigenous ventilators, continue to cater to a niche, regional segment, albeit support as warranty, after sales service, and spare parts availability are now the differentiators among these brands.
The Indian X-ray equipment market in 2017 is estimated at 12140 units, valued at Rs 698 crore. Analog continues to be in demand as procurement increases in Tier II and III cities, while the Tier I cities transition to their digital counterparts. Fluoroscopy, part of DR, is finding increased application in the Indian facilities. 3D mammography is also being sought by the discerning customer.
The Indian cath labs market is estimated at Rs 745 crore, at 414 units in 2017, a 12 percent increase in volume terms and a 17 percent in value terms over 2016. 2017 saw more of government buying, while the private sector in the backdrop of price control on stents and challenges in some cases on obtaining funding somewhat held back. The MNC vendors are also being asked to quote prices in Indian rupees. Indigenous systems are being offered by leading brands. Metros and Tier-I cities are more or less saturated, and the players are moving into smaller cities and semi urban areas, which are price sensitive. With satellite centers becoming popular, the mobile version is gradually becoming a preferred form of cardiac care in Tier II and Tier III cities as it decreases procedural costs, thus increasing feasibility. There has also been a significant growth in the demand for mobile flat-panel cath labs, as they operate on a single phase, thus reducing heavy electricity bills, improving image quality significantly, and lowering dosage. The premium systems are focusing on obtaining clearer images and low dose radiation. When it comes to diagnosing disease, image is everything. It is difficult to treat what you cannot see. That is especially true in the cardiac cath lab where cardiologists performing procedures ranging from simple diagnostic tests to more complex interventional maneuvers rely on imaging technology to guide their course. To ensure patients get the best treatment possible — and to remain competitive — cardiologists more and more are demanding state-of-art equipment in the cath lab.
The Indian defibrillators market in 2017 was Rs 133 crore, estimated at 9430 units. The government was not a major buyer in 2017. The government has indicated its plans to procure fully loaded biphasic defibrillators. The AED defibrillator market grew by 20 percent in 2017 over 2016. With increasing awareness, they are being installed in public places like airports, malls, hotel lobbies, schools, and reception areas of large corporate offices all over the country. However, one of the factors restraining demand is their disposable nature as electrode pads cost Rs 2000 and have to be changed with every usage.
The Indian endoscopy equipment in 2017 is estimated at Rs 943 crore. Flexible endoscopy is expected to maintain its lead due to its high precision, sensitivity, specificity, and safety as compared to others at economical cost. The scope of flexible endoscopy has increased too. Fueled by the demand for less invasive treatment options, and by improvements in instrument design and manufacturing, it is now possible to avoid open surgery in some cases. Flexible endoscopic surgical components are becoming smaller and more complex every day, and surgeons are now able, with the right tools, to see internal tissues clearly, remove samples for biopsies, make incisions, and create sutures. The concept of submucosal endoscopy with a mucosal flap safety valve has enabled endoscopists to securely use the submucosal space, or third space. In stomach cancer cases, the endoscopic procedures help screen high-risk patients and diagnose this disease earlier; and endoscopic mucosal resection, a less invasive alternative to surgery for removing abnormal tissues from the lining of the digestive tract, is recommended to remove certain early-stage cancers or precancerous growth.
The Indian market for patient monitoring equipment in 2017 is estimated at Rs 462 crore, and 62,900 units. The government hospitals were large buyers in 2017. HLL invited bids in 2017, and then again in 2018. It is gearing up to equip the MCH hospitals planned by the government. 2019 is expected to see this trend continue, as the government has decided that private sector companies can provide healthcare services in district hospitals to those who suffer from non-communicable diseases, and there is a visible growth in demand for these services after the launch of Ayushman Bharat-National Health Protection Mission (NHPM). NITI Aayog has presented guidelines and a model concession agreement that will enable private companies to start operating in district hospitals, which were exclusively government-run earlier.
In 2017, the Indian OT tables market is estimated at Rs 230.75 crore with sales at 4550 units. A polarization has been observed in the last one year in the Indian market for surgical tables. The leading MNC brands are now also offering Chinese models at extremely competitive prices. And the indigenous manufacturers have improved the quality and features of the surgery tables. Features such as patient-centered transfer system, extreme-positioning possibilities, lifting range from 535 to 1235 mm, patient weight capability up to 250kg, and carbon fiber tabletops are not uncommon.
In 2017, the Indian OT lights market is estimated at Rs 208.5 crore, with 5200 units. The year 2017 was when halogen lights showed a complete exit, with the result that the replacement market almost no longer exists. A handful of government hospitals might still be in the process of transitioning from halogen to LED lights, with double dome being the preferred category.
In 2017, the Indian hospital beds market is estimated at Rs 730 crore with sales at 112,000 units. With a current population of 1.6 million beds, in keeping with the new healthcare policy of two beds per 1000 people, at least 2.6 million beds will need to be provided over the next decade. The WHO standard is a minimum of 3 beds per 1000. Demand for new beds will be met by capital investments, changing status of non-functional beds to functional, public private collaboration, new business models, and focus on preventive healthcare. With a mere count of a total of 634,879 beds in the government hospitals in 2017, and advanced features such as being AC-powered, hydraulic adjustability, and powered patient rotation beds available in hospital beds, this segment is expected to grow over the next few years.
The government overhauled the regulatory framework for medical devices in 2017 and introduced the concept of ‘risk-based’ regulation and brought it at par with international norms. The regulatory licenses issued for import, manufacture, or sale of medical devices have been made perpetual in nature and cut down on unnecessary and time-consuming paperwork, increasing ease of doing business in India. Foreign direct investment in medical device manufacturing sector is permitted without any prior approval from the government, allowing business to quickly scale-up existing operations, infuse capital, and engage in time-sensitive strategic acquisitions. Tweaking of rules for grant of patent and trademark has strengthened the already robust intellectual property rights regime in India further. Various fiscal measures to promote research, development, manufacturing, and import of medical devices have been launched. For instance, providing weighted deduction for the expense incurred on that front has incentivized scientific research and development. There is minimal or no import duty on certain medical devices.
However, like any other country, challenges in doing business of medical devices in India remain. One major challenge is price control. The government controls prices of certain medical devices by either fixing a price at which they may be sold under a formula or by restricting the ability of the marketer of the medical device to increase its price by more than a prescribed percentage at any given time. The presence of multiple regulators, which may make simple tasks (such as rectification of erroneous declaration on the label) quite a tumultuous affair, remains a challenge. The third challenge is presence of archaic laws that do not permit manufacturers and importers of medical device to promote their product directly to the customer as cures for certain prescribed conditions and illnesses.
Having said that, there is no denying that despite the odds, the medical devices industry in India continues to offer unprecedented opportunities to present and potential investors and stakeholders, now more than ever before.