The Indian medical device industry is on the cusp of a major transition. It is now perched at an incomparable vantage point from where it can significantly accelerate the standards of healthcare by adopting advanced medical technology. The major trigger was the move by the government to notify the Medical Device Rules 2017 providing predictability and pragmatism on registration rules and costs.

Medical device sector represents nine per cent of the overall Indian healthcare industry. The Indian medical device market is the fourth largest in Asia and under top 20 in the world. It was valued at $4.2 billion in 2014 and is growing at a CAGR of 16 per cent over the period of five years.

There are several contributing growth factors such as high volume demand, epidemiological transition, growing GDP and the government efforts such as Make-in-India, 100 per cent FDI, medical parks and shared infrastructure facilities buoyed by modest private sector investment.

The import dependent industry pegged at over 70 per cent by value has gained significant attention for the potential it holds to contribute to ‘Making in India’. There are about 800 medical device manufacturers in India, but hardly 10 per cent generate a turnover in excess of Rs.600 million, creating a wide stratification in indigenous manufacturing landscape. Most indigenous companies in this space have focused on consumables and disposables.

Moving up the value chain
The medical device industry in India is moving up the value chain steadily. The sector is building competitiveness through indigenous innovation, absorption of acquiring synergistic and sophisticated technologies from global sources and strategic partnerships.

The Indian multinational companies including GE, Siemens and Philips to name a few are now seeking to grow beyond the high-end of the market and establish presence in the low value segment. They are exploring possibilities such as setting up their own facility like for instance 3M in Pune and Becton Dickinson in Haryana. There was also a move to acquire local manufacturers as Philips Medical System’s bought over Alpha X-Ray Technologies. Another effort is to develop cost-efficient solutions relevant to the Indian context like the GE’s low cost warmer or even and even introduce Orthopaedic devices from Stryker and Medtronic.

However more needs to be done for the segment for its greater growth by solving basic issues like the inverted duty structure that often favours importers over manufacturers and regulatory reforms needs to be expedited. Public health procurement channels for innovative devices have also been underdeveloped and call for attention, stated experts.

Despite the challenges, devices represent the segment where greater change is expected in the next five to 10 years. In the current context, the industry experts see the need to have a dialogue with the Union government on price regulation and the new public procurement policy with preferential market access as it would be detrimental if the multinational companies come with novel products.

According to Ganesh P Sabat, CEO, Sahajanand Medical Technologies , India imports almost 80-90 per cent of the medical devices and government needs to reverse the same. This would be possible only if government funds projects and also opts for only high quality and affordable stents manufactured by Indian companies. PEs and VCs are also supportive of the medical devices sector.

The industry while appreciating the government’s intent to improve affordability, feels that the approach towards pricing control could have been different. They contend that various industry suggestions including capping of trade margins, evaluating differential or tiered pricing based on the essentiality of the device and other such factors which are based on an in-depth market understanding of other countries were made to the government.

Need to broaden vision
The government should broaden its vision from Make in India to include both Innovate in India and Heal in India. A faster-growing healthcare delivery sector will boost the demand for medical devices and provide the necessary scale the industry seeks.

 “The medical device industry is highly technology driven, innovative and a rapidly advancing industry globally. It is an industry that is changing the face of healthcare worldwide, impacting and improving diagnosis, treatment, and delivery. Understanding the nature of this industry will help ensure the country maximize the opportunity provided by medical technology to improve India’s healthcare status. This industry is still nascent with low levels of adoption and penetration. However, it presents an opportunity to play a much larger role in the transformation of Indian healthcare, stated Guljit Singh, Executive Chairman, SKP Business Consulting LLP.

“Quality and innovation are key to building a strong healthcare ecosystem that is able to meet the current and future needs, and the recently introduced price controls represent a step in the wrong direction rather than addressing concerns surrounding affordability and accessibility. Price controls lead to significant negative impacts including concerns over access to high quality care and impedes availability of the most advanced treatments and cures from the medical technology industry. The medical technology industry stands ready to work with all stakeholders toward sustainable, market-oriented alternatives, said Abby Prett, Vice President, Global Strategy & Analysis, Advanced Medical Technology Association

MTaI view
Even though the Union government brought in the foreign direct investment into medical devices via automatic route from February 2015, the inflows rose from US$ 63 million per annum to US$ 161million in 2015 and US$ 439 million in 2016, according to Medical Technology Association of India (MTaI)

The steady surge in FDI, since the decision to bring it on the automatic route is demonstrative of what is improving ease of doing business. However in January -September 2017, the US$209 million inflow indicated a drastic dip compared to the US$ 417 million for the same period in 2016. This according to the experts could be because of the outcome of price control effected in February 2017.

MTaI has maintained that it is not product specific margins but overall corporate margins which reflect the reality of corporate profitability in this highly cross-subsidized industry. To ensure that industry viability and continued supply of critical care medical devices is balanced with patient access, it endorsed the Trade Margin Rationalization Committee report of the Department of Pharmaceuticals.

Further, MTaI looks to partner with the Government of India in setting a roadmap for the growth of medical devices industry by bringing in even bigger investments through technology upgradation and knowledge dissemination in the provider space. This will be achieved through the active participation of the industry that can contribute towards furthering FDI and the government’s ‘Make in India’ initiative.

Internet of Things (IoT) and smart phone app are seen to reinforce the developments in the areas of medical devices and teleradiology. This could strengthen the healthcare system particularly in the rural areas.

Designing IoT devices is creating massive opportunities for existing businesses and giving rise to brand new markets and companies. Engineering simulation helps engineers develop the best possible in IoT. The engineering challenges of designing IoT devices have proven that the simulation-driven product development approach is even more applicable to designing the connected, low-power devices of tomorrow, whether they are wearable consumer devices, medical implants, connected cars or industrial turbines, said Shital Joshi, Sr. Manager, ANSYS.

The medical device industry is now focusing on innovation, novel technology and investing in research. The industry has shown adaptability and has created an optimism for the future.