The fast growing Indian medical devices industry should increasingly focus on setting up alliances with multinational companies (MNCs) and add thrust to the research and development activities to provide modern equipments at low cost, in order to win the market and reduce dependence on imports, according to a latest analysis.
The Indian medical devices market is estimated at Rs 5750 crore with a growth rate of 23 per cent expected in the coming years. The market for medical supplies and disposables is dominated by the domestic manufacturers. The diagnostic equipment market is reported at Rs 2000 crore, surgical equipment supplies and imaging services at Rs 1300 crore each and electronic treatment devices at Rs 1000 crore, according to a latest sector analysis conducted by the National Institute of Pharmaceutical Education and Research (NIPER) - Ahmedabad. The total medical devices supplies and services market is estimated at Rs 7455 crore with a growth of more than four per cent from previous year, according to the analysis.
However, around 50 per cent of the market needs are satisfied with imports, mostly of specialised products, from countries like US, Japan, UK, France, Finland and Germany whereas the Indian companies are catering low cost common medical devices to the Indian healthcare market, comments the NIPER - Ahmedabad analysis submitted to the Department of Pharmaceuticals.
At present, high value medical devices products like cancer diagnostic, medical imaging, ultrasonic scanning, plastic surgery equipment and polymerase chain reaction (PCR) technologies are mostly imported in India. The analysis based on the level of technology involved in the manufacture of devices indicates that the import of high-end technology products have increased during 2001-06.
For instance, the import of LCDs, laser, other optical appliances and instruments has grown at 34.36 per cent, instruments and appliances used in medical, surgical, dental sciences including electro-medical apparatus and sight-testing instruments at 15.65 per cent, orthopaedic appliances and artificial parts of body at 23.23 per cent, radiotherapy instruments, X-ray generators and screens at 26.81 per cent, during the period.
"One possible reason for higher dependence on imports can be traced back to low level of R&D spending by Indian medical devices industry. Moreover, import duty exemption for devices and technologies that are not available in India in turn encourages the import rather than investing in domestic R&D and manufacturing; also, domestic manufacturers cannot offer their products at a competitive price against that of the imported products that have the benefit of tax exemption," explains the study.
Having an alliance with overseas companies will give an edge to the Indian companies in terms of huge product basket, advanced products and technologies and technical expertise, which will help the domestic players in turn, to widen their business scope. Alliances like Wipro-GE and R&D alliances like Piramal Healthcare-Morvus Technology Ltd are some of the examples of successful partnership models for Indian medical devices companies.
Further, the level of R&D spending should also be addressed by the Indian firms. According to the study, the level of R&D spending in the medical device and diagnostics industry, as a percentage of its sales, has been consistently increasing from 5.4 per cent in 1990 to 12.9 per cent in post 2000. While western companies are ready to conduct their R&D in India in collaboration with local partners, the Indian industry is seldom investing in R&D, it shows.
The industry, which is focusing to bring in low cost products affordable to the end users, has to increase their R&D efforts for cost effective methods of developing products. Bringing down the cost of medical devices or manufacturing low cost devices can be achieved through intensive and continuous R&D efforts, high levels of process automation in the manufacturing facilities, striking manufacturing alliances with foreign companies to manufacture them locally so as to cut logistics and other import-related duties and taxes, lowering product registration fee and other documentation costs.
The low levels of health insurance coverage, recent stringent regulatory amendment in the country, high import duties which tends to escalate the cost of medical devices, poor medical infrastructure facilities and low level of awareness about the latest technologies in rural parts of the country are the challenges in the growth of medical devices segment, according to the study.