By Dr. Rajendra Pratap Gupta
Recently, Global PE Major acquired a majority stake in Amar Ujala’s Hospital chain which was aiming to serve the tier II towns. It is well known that the Indian healthcare is poised for phenomenal growth, and India is the world’s most populous country and is an ageing nation; the healthcare industry will grow in double digits and reach over USD 300 bn by 2023-24, and the interest by the cash-rich foreign investors is going to increase to invest in India across the value chain. Understanding the trend and what it means for the government and the patients is important.
India has seen an investment of more than USD 33 billion between April 2000 and 2023, and this investment has been the highest in drugs and pharmaceuticals -USD 21.46 Bn, Hospitals and Diagnostic centres – USD 8.75 Bn and Medical and Surgical Supplies – USD 2.8 Bn ( Ref. Statista).
In the past two years, Indian healthcare investments have increased to over Rs.27000 crore, and the leading hospitals like Manipal Hospitals, Care Hospitals, Sahyadri and ASG Eye Hospital, and Maxivision Eye Hospitals have received foreign investments. Besides, Blackstone recently invested USD 1 Bn to own 75% of Care Hospitals, and the game does not end here; Care Hospitals will buy a majority stake in KIMSHealth, giving it access to 23 hospitals with over 4,000 beds across 11 Indian cities. All major hospital players, like Aster DM, Columbia Asia, Apollo Hospitals, Max Healthcare, Medanta, Narayana Health, Vasan, Seven Hills, Global Health Pvt. Ltd and Rainbow, have received foreign investment.
Hong Kong-based Baring Private Equity Asia is acquiring a 60% stake in the Indian Fertility space, Indira IVD, for about USD 650 Mn, bringing the spotlight to IVF services, and the primary care service provider Wellsprings Healthcare has received funding from investors, so, anywhere the PE firms eye returns they will invest.
These investors prefer acquisition or owning a majority holding in these healthcare providers/manufacturers, merging them, or divesting to a bigger player to maximize their returns.
If we look at the pharmaceutical companies, the amendment of the Patents Act in 2005 led to the takeover of many homegrown companies by global pharmaceutical giants. For nine years, between 2004 and 2013, 185 manufacturers in the pharmaceutical industry received foreign investment, and 191 companies received investment in the services sector. Manufacturing accounted for about 90% of the inflow. This is when the medical devices and APIs are majorly dependent on imports.
Of course, these foreign investors are only looking at ROI on their investments, so the future of the healthcare sector for investors is bright, and the result of this will be increased lobbying with the government to raise prices, do more PPPs, and finally, go the US route of corporatizing healthcare. Let us take the example of PE firms; KKR exited Max Healthcare last year with a 5X return on their investment, and the same is the story of Everstone’s from Sahyadri and Carlyle exiting Medanta and Rainbow. These investors are not for funding the growth of healthcare, but their growth by maximizing the return on their investments and not on serving healthcare! This is best validated by the fact that, In 2022, healthcare gave amongst the best returns to the investors, adding to about 16% of the total exits at USD 3.5 billion.
The result of this foreign investment in Indian healthcare: The hospitals invested by the cash-rich investors will have to tweak their business model by focusing on procedures with high margins and also lobby with the payers (government and insurance ) to increase the cost of procedures. Already, this is underway with all hospital bodies – government meetings pressuring the government to increase the prices of procedures. The consumers will take the final hit (either as enhanced insurance premiums or increased taxes). Given the global investment trends by the foreign PE firms, India will see more acquisitions and mergers across pharma, MedTech, hospitals, nursing homes, and primary care providers, thereby concentrating the bargaining power in the hands of the few players. I expect the price inflation to go up by 50 percent in the next five, primarily driven by these investors, who will have a disproportionate say in healthcare. Already, the NHA is under the influence of BigTech on how the flagship ABDM is being run, and this is contrary to the National Health Policy 2017, which mentions strategic purchasing as a short-term measure with a long-term goal to strengthen the public health infrastructure. The government must rethink its approach to Indian healthcare, with India being the most populous country, and by 2047, every fifth person will be a senior citizen. PE-driven healthcare does not bode well for India. India has about 50,000 hospitals and less than 4000 hospitals with less than 100 beds, and the smaller towns are served by hospitals with less than 100 beds. They face a crisis of existence if they cease to exist or merge with bigger players; affordability of healthcare will become the biggest challenge. India must study the Sri Lanka and NHS model closely to create a localized model with an integral role of AYUSH in Indian healthcare delivery.
With over 130,000 doctors being produced annually, before the end of this decade, India will have enough doctors available, and technology (including automation) will reduce the dependence on doctors in the healthcare system. Investors are not for ‘Make in India’. They are about ‘Make from India.’ India must be wary of engaging the big four consultancy firms in ministries and NITI Aayog as they best serve the interest of the foreign masters while helping the government to draft pro-west policies. If we mindlessly followed what the big four flush out through glossy reports, the Indian healthcare system would be out for sale! So, it is time to rethink and reimagine India’s healthcare journey for Viksit Bharat.
(Dr. Rajendra Pratap Gupta leads a global health think tank, Health Parliament & Viksit Bharat Abhiyan, and is a former Advisor to the Union Health Minister. x@rajendragupta . Views expressed are personal and do not reflect the official position or policy of the FinancialExpress.com.)
