India has a population of more than 1 billion, which is growing at an annual rate of 1.6 percent. Over the past many years, India’s healthcare industry has been witnessing a rapid transformation, driven by the government’s health initiatives, rapid economic growth, increasing middle class income, and a rise in lifestyle diseases. This, coupled with an ageing population of over 100 million and increased penetration of health insurance, are fuelling the growth of the country’s healthcare industry, thus driving the demand for medical devices.
In 2012, India’s overall healthcare industry (including hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance, and medical equipment) was estimated to be worth USD 78 billion and is likely to reach USD 280 billion by 2020, led by the growing demand for specialized and quality healthcare facilities.
The Indian healthcare industry, which is dominated by private players, is developing at a fast pace, as existing corporate hospital chains and new entrants backed by private equity investors continue to make significant investments in developing medical infrastructure. India’s changing demographics and shift from chronic to lifestyle diseases, widening reach of health insurance, and increasing number of private-public projects in healthcare will continue to drive the requirement for medical devices.
The Indian medical device market is the fourth largest in Asia with 700 medical device manufacturers, and ranks among the top 20 in the world, as per data provided by the India Semiconductor Association. India’s medical device market is estimated to be worth USD 3.2 billion and is likely to be among the world's fastest growing markets over the next five years. The need for sophisticated medical devices and equipment is being driven by an increase in the number of hospitals and higher demand for healthcare facilities.
The country is heavily dependent on imported medical devices and meets almost 80 percent of its requirement from imports. The demand for higher end medical devices, including cancer diagnostics, medical imaging, ultrasonic scans, and PCR technologies, is particularly high. Over the period 2008-2013, India’s medical device imports grew at a CAGR of 16.7% in Indian Rupee terms and 9.9% in US Dollar terms. The running annual import for the 12 months to August 2014 grew 13.5% Y-o-Y to reach US$2,777.0mn.
Current market scenario
India’s rapid economic growth, ageing population, growing middle class affordability, increase in lifestyle diseases, and greater adoption of health insurance is driving a huge demand for healthcare facilities. However, the region continues to experience a shortage of healthcare infrastructure, especially in the country’s rural areas and Tier II and Tier III cities. Both the government and private sectors are focusing strongly on improving the country’s healthcare infrastructure, though the contribution of the private sector has been increasing at a faster pace in comparison to the government. More private players are expanding into the country’s under penetrated Tier II and III cities due to rising real estate costs, huge upfront investments, and long gestation periods in Tier I cities.
As a result, the outlook for medical devices in India over the next few years remains strong, with some categories expected to witness comparatively higher demand, including medical and surgical instruments, medical imaging, electro medical equipment, orthopedic and prosthetic appliances, cancer diagnostic, orthodontic and dental implants equipment, ophthalmic instruments and appliances. Some other medical device categories that are also expected to witness a higher growth are diagnostic kits, reagents, hand-held equipment and stimulation for operation rooms, and hand-held/portable diagnostic equipment (for testing blood sugar and blood pressure).
India’s changing patient demographics due to an increase in its aging population is fuelling the growing incidence of age-related diseases. The adoption of health insurance is also fast gaining momentum in India and its higher penetration is leading to a significant increase in the affordability of healthcare services, thus fuelling the demand for sophisticated medical treatment and devices.
However, there exists a chronic shortage of healthcare infrastructure in India, particularly in the country’s rural areas and Tier II and Tier III cities. By the end of 2025, India is estimated to have a requirement for 1.75 million new beds. The government and private sector plan to build a number of new specialty and super-specialty hospital facilities, as well as modernize existing hospitals. These new facilities will depend upon imports for meeting their medical device requirements.
Over the period 2013-2018, India’s medical device market is forecasted to grow at a CAGR of 14.9% in local currency terms, or 15.0% in US dollar terms, making it among the world’s fastest growing markets. The private sector is expected to contribute 80–85 percent of the investment towards developing the country’s healthcare facilities.
U.S. companies account for a quarter of all medical devices exported to India, with the main competition being European and Japanese companies. China is also a competitive player in India’s medical device market due to its price sensitivity and preference for low-priced Chinese products.
Domestic medical device companies manufacture mostly low-end products for the local and international markets. Of late, there has been an increase in the number of international medical device companies setting up manufacturing facilities in India, or acquiring domestic manufacturers. For example, 3 M has set up a manufacturing plant in Pune, Becton Dickinson has a manufacturing facility in Haryana, and Hollister is setting up a manufacturing facility in India, while Philips Medical Systems has acquired Medtronics and Alpha X-Ray Technologies.
The Indian medical device market will continue to be import led, though efforts to promote local manufacturers is expected to result in intensifying competition from products manufactured domestically over the long run.
Both the public and private sector deliver healthcare services in India, though investments by the private sector for developing healthcare infrastructure has been growing at a faster pace. Large private providers of healthcare services are aggressively expanding their reach across the country by either building new hospitals, or acquiring and upgrading existing hospitals.
Public hospitals follow a tendering process for purchasing medical devices and generally take more time to place orders, while private hospitals move faster. More emphasis is placed on price, quality and after-sales service support at the time of making purchase decisions. Payment for all imports is usually made through letter of credit.
The majority of the region’s requirement for medical devices is being met by imports, which is allowed under the “Open General” category of the import regulations. The customs duty on imported medical devices is based upon product classification. For instance, the customs duty on medical devices classified as “life saving equipment” has been kept low in order to encourage hospitals to import modern products.
Thus, India’s growing number of healthcare centers specializing in advance surgery, coupled with its low customs duty on medical devices, provides opportunities for overseas companies to directly supply high-tech medical devices.
Medical device imports into India remain largely unregulated, with the final procedures and guidelines yet to be laid down. The Central Drugs Standard Control Organization (CDSCO) is India’s key regulatory organization. Manufacturers of medical devices in the US, Canada, Europe, Australia and Japan, who are interested in registering their medical devices in India are required to provide evidence of prior marketing authorization, as well as proof of approval in their home market. The companies must submit complete technical documentation of their products for review by the CDSCO - Medical Devices Division, and also register their manufacturing facility. Additionally, hospitals may also seek quality accreditations, such as JCI, NABH and ISO, from medical device companies.
The barriers to entering the Indian medical device market are lower in comparison to other markets in the region. However, overseas companies need to be fully aware of the region’s other laws, like foreign exchange regulations and tax statute, which can impact the ability to make investments as well as withdraw returns, and determine their profitability levels.