Indian medical device makers are in transformation mode. Homegrown device makers are eyeing a ?Made in India? brand for the global markets. Research and development is in top gear to develop devices for cardiovascular, orthopaedics, respiratory, ophthalmic, neurology, urinary, obstetric and gynaecology, renal and haemodialysis, dental and infection control markets.
Action in the $3 billion domestic medical device market is also intensifying with global device makers such as Johnson & Johnson, GE Healthcare, Siemens, Philips and Roche, gearing up to tap the healthcare market, which is expected to throw up a major demand for critical equipment like baby warmers, incubators, diagnostics, imaging, dialysis and cardiovascular devices in the times to come. The biggies in the global medical industry have already set up shop here and are effectively utilising the skilled Indian manpower to develop medical devices for their global product pipelines.
Be it the global medical device makers or their Indian counterparts, the current focus has been on ?Made in India, Made for India? products. At present, over 70% of medical equipment is imported into the country?from high-end MRI and CT scanners, to basic equipment such as patient monitors. The domestic medical device industry is expected to grow at 15% each year to reach $4.5 billion by 2012, says a recent report by Confederation of Indian Industry (CII) and Frost & Sullivan.
GE Healthcare is developing products designed, developed and manufactured after studying specific Indian requirements. For instance, there is the Mac 400 electrocardiogram (ECG). It is a battery operated portable ECG system that can interpret ECG in English and is an ideal screening tool for cardiac diseases. Among others, Tejas DRF is the first digital x-ray system to be manufactured in India. There is also a series of ultrasound systems and baby-monitoring systems designed and manufactured in India from the GE staple. Similarly, Relisys Medical Devices has developed products for angiography, cardiology, radiology, nephrology, gastroenterology and neurology.
It was in this backdrop that the recent fiscal exercise has stirred a major debate with the homegrown device makers highlighting that a lot needs to be done to reboot the business of device making in the country. At a core level, their point of view is that irrational duty structures governing several device categories have been the sore point until now. And unless some level of parity in duty structure is not brought in, their ambitious goals to make a mark at the global level might remain a distant dream.
As such, medical equipment, instruments and appliances are subjected to a very complex import duty regime based on several long lists that describe individual items. Multiple rates coupled with descriptions not aligned with tariff lines, result in disputes and at times prevent ?Made in India? equipment from getting the benefit of exemption. While duty concessions have come in the form of a uniform, basic duty of 5% and countervailing duty (CVD) of 4% with full exemption from special additional duty on all medical equipment, the concessions being doled out are inadequate, feel the medical device makers.
Similarly, the domestic medical device industry?s constant demand for an infrastructure status seems to be a distant dream. As V Raja, president and CEO, GE Healthcare South Asia, points out, rationalisation of customs duty across the board to 5% is a positive move. ?The recommendations by the 13th Finance Commission on infant mortality rates have got the attention of government and the move to incentivise state governments towards improving the infant mortality rates is a welcome sign. This is because reducing infant mortality largely depends on tackling neonatal mortality,? he says. Elaborating on his point, Raja says, ?About 25% of the world?s births occur in India every year and almost 53% of them happen unattended by skilled people or access to critical equipment like baby warmers, incubators and phototherapy systems.?
In addition, industry feels that withdrawal of some of the benefits on manufacture of medical equipment in electronic hardware technology park (EHTP) units for domestic tariff area consumption will take away the incentives for local manufacturing. Their rationale is that locally manufactured medical equipments will be at least 5% more expensive with this withdrawal. Industry?s big argument is this: It is a significant amount when people are purchasing equipment like CT scanners made locally, which cost almost Re 1 crore to the healthcare provider. Therefore, importing such equipment may become a better choice for Indian customers, thereby negating the efforts by the domestic industry to increase the footprint of local manufacturing of medical equipments in India.
Ameera Patel, executive-director, Metropolis Healthcare, says, ?The government needs to do their bit by creating policies, regulation and tax benefits to make healthcare more affordable for the common man. These taxes will probably get passed onto the patient by medical centres.?
Despite the setbacks, there are a good number of players eying significant business opportunities in the Indian healthcare segment. Gautam Khanna, executive-director at 3M Health Care feels that providing conditional cash transfers directly to pregnant women to incentivise institutional delivery under the Janani Suraksha Yojana (JSY) will help to bring about a significant improvement in the primary healthcare sector. No wonder, the company sees a growth potential in the medical devices segment. Khanna says, ?We have gathered market information through research and customer engagement programmes and undertaken feedback from healthcare professionals to get a need gap analysis of the medical devices market. Our products and technical lab in Bangalore culls out expertise, learning and knowledge base of 3M global R&D network, which will leverage its multiple technology platforms to create solutions and products that will cater to the Indian market.?
Recently, 3M India announced the launch of its second R&D lab in Bangalore to develop products for the Indian market. This lab will also develop medical devices for the Indian market. ?The uniform, concessional basic duty of 5% for all medical appliances might increase the demand for medical equipments. This would help the overall medical device sector. Besides, it will reduce the cost of procedure for hospitals in a big way,? he adds.
Broadly, the verdict is this: while government needs to do their bit by bringing in conducive fiscal and regulatory policies, it might spur growth of the fledgling domestic medical device industry as well. Only then will the dream of making affordable healthcare for the common man will be realised.