Gaps in funding and regulatory hurdles are making it difficult for medical device companies in India to develop new products and scale up even as the sector is growing fast, a new study by Department of Pharmaceuticals (DoP) said.
The study said that MNCs still dominate the specialised and high-end medical-device market, where their market share is around 80-90%. Domestic manufacturers face a bunch of issues, including inadequate infrastructure, broken supply chain, high financing costs, and low spending on research and development (R&D) and skill development.
The funding problem is particularly serious for smaller companies. The study noted that these firms face difficulties in raising start-up capital, developing products and selling them to hospitals. Many of them remain unprofitable for years while developing a viable product.
“The prospects for these companies are uncertain given the challenges of securing enough start-up funding, developing the new medical device itself, figuring out how to manufacture the device in a cost-effective manner, obtaining the necessary regulatory approvals, and marketing the device to providers such as hospitals and physicians,” the study said.
Developing an innovative medical device can take 5-15 years with costs ranging from $100 million to $1 billion, as per the study.
Despite efforts to grow domestic manufacturing, import dependence remains high. Imports account for around 60% of domestic medical device consumption, according to the DoP.
The study covered 23 medical device manufacturers, 10 promoters, two incubators and three VC firms. As many as 82.6% of respondents talked about government guarantees, including assured purchases from government organisations, to reduce investment risks. It also recommended additional government in the form of subsidies, tax incentives and grants.
“The real trouble the medical device manufacturers face is the capital expenditure. In order to set up a manufacturing unit, they need to invest huge capital. For addressing this issue, the Government can invest on the land, infrastructure and to an extent on machinery for scientific facilities,” the study stated.
The sector’s growth makes the funding gap more significant. Estimates suggest that medical device market stood at $12 billion in FY24. With the annual growth rate of about 15% the sector is expected to reach $50 billion by FY30.
The report recommended milestone-based funding with money released as companies meet targets such as prototype development, clinical trials and regulatory approvals. It also backed blended finance, grants, medical device parks and shared testing facilities, along with faster regulatory clearances, to lower the cost and risk of developing new devices.