By Ashok Patel
In recent years, India has emerged as one of the fastest growing healthcare markets in the world with most constituents of healthcare showing impressive results including the medical device sector. In fact, Indian medical devices market is said to be the fourth largest in Asia and features among top 20 markets globally. Yet, while healthcare as a whole has become one of the largest sectors in terms of both revenue and employment, nearly 80% of medtech sector sales in the country continue to emanate from imports. To clarify, healthcare roughly comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.
What is really holding back the Indian medical device sector from developing a truly home-grown industry and what can be done to catalyze the growth and development of a well-developed and indeed flourishing indigenous medical device ecosystem?
Absence of a supportive infrastructure and supply chain network
First, although the government has taken several initiatives in this regard in recent past, for a country with as high a disease burden as India, there is lack of sufficient supportive supply chain network, ancillary manufacturing, and relevant infrastructure for making quality medical devices. This is especially true of high end devices and in particular those that entail expensive technologies and components. For their part, Indian manufacturers are mostly focused on low-end products for local as well as global markets. According to the government’s own Approach Paper to National Medical Device Policy 2022, the high technology end of the medical devices market is near-completely served by the foreign multinational companies. On the other hand, domestic players mainly cater to the low end consumables segment and have a market share of nearly 65 percent. Although it is changing in recent years, most multinationals have production (and R&D) facilities outside India from where they import products for the Indian market.
Inverted duty structure favouring import of finished goods
Second, the import duties on raw materials and components are generally higher than those on finished products. In other words, there is low entry barrier for finished medical goods and equipment. This naturally incentivizes players in the medical device sector to bring in complete standalone products into the country instead of raw materials and inputs that they could possibly use to innovatively manufacture a completely new product by themselves. In the process, many players effectively become traders and not really manufacturers with respect to several medical devices.
The peculiar nature of the domestic market
Third, even as India has a high population and a high disease burden, from the point of view of manufacturers of high-end and technologically-sophisticated medical devices, there is insufficient demand domestically for them to make investments and run full-fledged operations. Whatever demands that is there, it is limited to hospitals and healthcare facilities as well as individuals and families in the metros and big cities in India. In fact, hospitals in non-metro cities are likely to opt for inexpensive products and devices compared to high-end products stemming from affordability issues. Therefore, besides the usual risks associated with the very nature of a nascent business venture, the long-term sustainability within the country has often played on the minds of the manufacturers within the country.
Lack of relevant educational and skilling base
Fourth, although India produces one of the largest numbers of STEM graduates including engineers, there is a clear lack of alignment between biomedical education and engineering disciplines. For the fourth largest medical device manufacturer in Asia, there are only 217 biomedical engineering colleges in the country offering full-fledged courses, according to an education sector-tracking portal. Then in a survey by Andhra Pradesh Medtech Zone Ltd. (AMTZ), there are less than 20 courses related to biotechnology engineering across India.
Designing devices for different temperature conditions not easy
Fifth, from the design engineering standpoint, according to experts, it is difficult to make devices and customize them for different international markets with widely different climatic conditions. This becomes even more difficult in India due to the absence of a supportive ecosystem.
Limited transfer of technology to Indian companies
Sixth, while the rules allowing up to 100% investments for both Greenfield and brownfield through automatic route into this sector have certainly brought in increased investments from foreign companies, it remains to be seen how much of that has translated into transfer of technology and knowhow to their Indian counterparts.
Continued absence of a separate regulator for medical devices
Seventh, even as the government has from time to time brought in new rules and laws with an eye on streamlining and upgrading the regulatory framework for medical devices, the segment continues to be bereft of a separate regulator of its own.
In the backdrop of the aforementioned reasons, what should the authorities do?
First, while identifying high import-dependent devices and technologies and preparing a priority list, the government should encourage a supportive ecosystem for these high-end and sophisticated medical devices. Those Indian companies willing to make an investment in such high end quality devices must be suitably incentivized through policy and other financial support. It would also entail imposing high import duties on finished products and reducing taxes on input and intermediate materials. Furthermore, the existing PLI schemes must be extended to more device categories. Importantly, the government should keep its focus on incentivizing core technology-based products and innovations and not get taken in by replica and/or reverse engineered medical device products. Simultaneously, local value chains for components must also be nurtured and allowed to develop.
Second, there should be hard negotiations with foreign companies on investment and consequent transfer of technology, knowhow and good practices to domestic companies. We must use the large number of high skilled professionals (and who are trainable) and the relatively low labour costs as a bargaining chip during those negotiations.
Third, against the practice of imposing price caps, the government should allow rationalization of trade margins which would pave the way for a level playing field for all players in the value chain eventually benefitting the end-consumers too.
Fourth, human resources upkilling and knowledge sharing among different stakeholders is the key to a long term vision for the industry. According to a survey by Andhra Pradesh Medtech Zone (AMTZ), nearly half of the workforce in medical device sector is unskilled. To address this gap, structured biomedical engineering courses and relevant curricula on biotechnology derived from latest developments in the West and elsewhere must be available not only at premium institutions but also at second and third tiered institutions.
Fifth, the government should aggressively focus on creating a vibrant R&D environment in the country while also facilitating industry-academia collaboration. Across all stages of product development, from conception to design to prototyping to validation and testing, research and innovation should receive impetus. New-age healthcare and medtech start ups should also be incentivized to join forces with companies specializing in emerging technologies such as Artificial Intelligence (AI), Internet of Things (IoT), Robotics, and Nanotechnology, among others.
Sixth, the government could consider targeted procurement from local companies for devices and equipment for which there is sufficient local capacity and competition available in the country. This would give a boost to local production as well as innovation. Last year, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry has notified 135 in-vitro diagnostic medical devices and 19 medical devices for this purpose. This is a promising development. Seventh, protection of IP and patents must be rigorously pursued and implemented.
(The author is Founder & Ceo, Max Ventilators. Views expressed are personal and do not reflect the official position or policy of FinancialExpress.com.)