The Healthcare sector in India is one of the rapidly growing sectors and has become the main contributor to employment and revenue to the economy. Though changes have been ongoing for a long time, the trends are more visible now because of renewed policy push from the government and consumer interest for healthcare products and services. India’s population is growing at 1.6% per year, with an elderly population of 100 million. Increasing middle-class incomes, consistent economic growth, and increased awareness of health insurance boost health sector growth. In addition, there is a general shift from chronic to lifestyle diseases due to changing demography. This has also led to an increase in healthcare spending.
The Indian health care industry has reached $160 billion in 2018 and is expected to reach $370 billion by 2022, according to reports by India Brand Equity Foundation (IBEF). This would spur the increased demand for high-quality and specialized healthcare facilities. The improving products and services include medical devices, hospitals, telemedicine, clinical trials, health insurance, medical tourism, and medical equipment. The rapid developments in the industry are driven by large investments from existing hospital chains and new entrants with private investment money. However, various challenges need to be addressed in terms of patient care quality and service accessibility.
According to a 2018 study by Global Burden Disease (GBD) published in Lancet Medical Journal, India ranks 145 out of 195 countries in the healthcare index. The Healthcare Access and Quality (HAQ) index of India has improved over the years and has increased from 30.7 in 1991 to 44.6 in 2015 and 67.5 in 2020.
Covid pandemic is a brutal reminder of the underinvestment in the healthcare sector in India. Industry experts anticipate that there will be a major healthcare thrust by the government in the next few years. The Indian government has spent only1.2 percent of its GDP on healthcare every year. But it is projected to increase to 2.5% of GDP by 2025. This is expected to provide opportunity and a safety net for the underprivileged in the coming years. As the public expenditure increases, there will be a demand for medical equipments and other healthcare products and services.
Opportunities in the healthcare sector
Health insurance is becoming big in India. Currently, only 15% of the population has government-sponsored health insurance, and only 2% have private insurance. However, due to the opening up of the insurance market, various private companies have entered the market and have enabled hospitals to provide cashless treatment to insurance customers.
Healthcare in India is provided at various levels through primary, secondary, and tertiary care hospitals. The government manages both primary and secondary care hospitals. In the tertiary care sector, while the government is still a big player, private companies have been growing faster than the government. The private medical infrastructure is expected to grow at 15% per year. There are several new specialty and super-specialty hospitals planned by both government and private companies. The government also plans to modernize the existing hospitals. In rural areas and tier 2 and 3 cities, there is a lack of healthcare infrastructure. According to industry estimates, India will need 2 million more hospital beds by 2025. This is a great opportunity for foreign investors to set up hospital chains throughout India through foreign direct investment. The hospital industry is expected to grow at 16-17 percent and reach $130 billion by 2023.
Biotechnology is one of the advanced sectors of life sciences and provides a great opportunity for foreign firms. The size of the Indian biotech industry is about 2% of the global industry. It has around 800 companies with a market capitalization of $7 billion. India is emerging as a go-to destination for contract research, clinical trials, and biomanufacturing owing to this sector growth.
Telemedicine and Digital healthcare are still new in India. However, it is rapidly expanding due to the Covid-19 pandemic. People are slowly getting used to advanced healthcare technologies and intelligent solutions that improve communication between patients and hospitals. Artificial intelligence and Telemedicine technologies are a great opportunity for U.S firms in the future. Even Indian hospital chains like AIIMS, Apollo, and Narayana Hrudayalaya are adopting telemedicine services. Niti Ayog and the Ministry of Health and Family welfare have released guidelines for telemedicine practices that enable registered medical practitioners to provide remote consultation services under the supervision and guidance of the Medical Council of India (MCI). As the country recovers from the pandemic, we can expect more digitalization for healthcare by providing better patient care and improved efficiency.
There is also a market for refurbished medical laboratory equipments in India. These equipments can be used as a backup in top hospitals. The district hospitals and less sophisticated ones can use these as they can lower the upfront investment costs. International companies are best placed to supply refurbished equipments to both hospitals and customers. They can provide 24X7 service and spare parts support for these instruments. In addition, foreign companies can set up liaison offices in India to promote their products in the refurbishment market.
Government regulation and policies in the Healthcare sector
Foreign companies need to understand the import-export policy of India as several regulations are governing it. Second-hand capital goods which have 5 years minimum residual life can be imported without a license. The importer needs to provide a self-declaration form to customs declaring the residual life of the product being imported. The refurbished equipment shall not be sold, transferred, or disposed of within 5 years of import date except in exceptional cases where approval from the Director-General of Foreign Trade (DGFT) is required. The value of imported spare parts can be a maximum of 15 percent of the equipment value.
To improve health care quality, the Government of India had increased the list of medical devices covered under the 1940 Drugs and cosmetics act, bringing it under unified regulation. This regulation was later revised in 2018, bringing in more medical devices. Further in 2020, GoI categorized all medical devices as “Drugs,” including medical implants, instruments, and software intended for medical use for animals and humans under the Drugs and cosmetics act of 1940.
In 2017, GoI also announced price caps on cardiac stents, limiting it to 70% of its prevalent market rate. This was followed by knee cap implants later. The national list of Essential Medicines (NLEM) governs the list of items under price control. Medical equipments such as knee implants, cardiac stents, condoms, drug-eluting stents, and intra-uterine devices are part of NLEM. In 2020, with the help of the Self-reliant Bharat program, the Department of promotion of industry and internal trade (DPIIT) had given priority to local companies that have 50% or more raw materials sourced within India. Companies with less than 20% of local content are categorized as non-local suppliers. Therefore, they cannot participate in government tenders. This is a policy measure to stimulate local investment from foreign firms.
In addition, the Government of India has removed the need for constant re-approval of import and manufacturing licenses. Their licenses are now perpetual unless it is terminated, suspended, or surrendered. The licenses are provided by a central licensing authority. Hospitals also need to comply with international quality accreditations such as ISO, NABH, and JCI.
The most promising sub-sectors in the medical equipment and healthcare sector are:
- Medical Infrastructure
- Medical Imaging
- Orthopedic and Prosthetic Appliances
- Cancer Diagnostics
- Orthodontic Equipment’s and Dental Implants
- Digital healthcare, Health IT and Telemedicine
- Medical and Surgical Instruments
- Electro Medical Equipment
- Ophthalmic Instruments and Appliances
- Point of Care Testing (POCT) Diagnostic devices
The increasing demand for quality healthcare and the absence of better delivery mechanisms are both challenges and opportunities. FDI in the infrastructure building, management, equipment, and financing of super-specialty hospitals is important for the future growth of this sector. Foreign companies can enter into the medical consumables and equipment supply business. Many foreign companies are already investing in this area. India has become one of the best destinations for high-end diagnostic services. There has been enormous capital investment in advanced diagnostic facilities. Hospital administration and health insurance are other areas that have tremendous potential. Companies can also enter into quality certification market rating hospitals and healthcare centers.
Other growth areas include reagents, diagnostic kits, operating room simulation, and hand-held diagnostic equipments. This segment has 50% of imports. Due to the increased prevalence of diabetics, hand-held diagnostic equipment such as blood pressure and blood sugar test kits are becoming a fast-growing segment.
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