Sector Survey: Medical Devices

17 Days agoEverything you need to know about India's burgeoning Medical Devices Industry, here.

The health care industry in India has been one of the country’s largest economic sectors, with regard to both employment and revenue. Several diseases such as polio and syphilis have been successfully eradicated. Besides, there is a sharp reduction in infant mortality ratio, malaria, HIV and AIDS-related deaths. In the last few years, the industry has registered a growth of 10% and is expected to reach USD 145 billion by 2018 and over USD 280 billion by 2025.1 Furthermore, the health care expenditure is likely to witness a rise due to rising awareness, increasing disposable income as well as growing population.

By definition, a medical device is any instrument, apparatus or appliance used specifically for diagnosis, prevention, alleviation of diseases or wellness purposes.2

Medical Devices are segregated into six major segments, out of which diagnostics imaging constitutes the largest chunk (from a global perspective), with an annual sales estimate of USD 60 billion in 2015. Next in line is IV Diagnostics, with an estimated 24% share.3 The global medical devices industry was estimated at USD 228 billion in 2015. At its current growth trajectory, the market is expected to reach USD 332 billion by 2020.4

 

OVERVIEW OF THE MEDICAL DEVICES INDUSTRY IN INDIA

 

The Medical Devices industry in India is presently valued at USD 5.2 billion and contributes 4-5% to the USD 96.7 billion Indian health care industry. Currently, India has about 750–800 medical device manufacturers in the country, with an average investment of Rs 170–200 million and an average turnover of Rs 450–500 million.5

The industry has steadily grown and witnessed a surge from USD 2.02 billion in 2009 to USD 3.9 billion in 2015 at a Compound Annual Growth Rate (CAGR) of 15.8%.6 As per industry estimates, the Indian medical devices market will grow to USD 50 billion by 2025. Currently, India is counted among the top 20 global medical devices market and is the 4th largest medical devices market in Asia after Japan, China and South Korea. Equipment and Instruments (surgical and non-surgical) form the largest segment (53% of the Indian medical device industry), constituting about USD 2.7 Billion (2017), while the estimated market size of the consumer and durable segment is USD 1404 million.7

With the liberalising of government policies, up to 100% Foreign Direct Investment is permitted in Medical devices through the automatic route. During the period between April 2000 and March 2017, USD 1.57 billion worth FDI came into the country.8 Taking advantage of this lucrative opportunity, an increasing number of MNCs are setting up their manufacturing bases in India. Some instances include the Becton Dickinson’s manufacturing plant in Haryana9 and Philips Medical Systems’ acquisition of Medtronics10.

 

There are a range of Medical Device Clusters that have emerged due to supportive state-level policies as well as the availability of skilled labour. There are a few Medical Device Parks planned across India, including Andhra Pradesh MedTech Zone Limited (AMTZ),11 a park in Sultanpur village (Telangana)12 and HLL Lifecare Mediparks in Tamil Nadu, Maharashtra and Gujarat.13

 

GROWTH DRIVERS

 

The demand for medical devices is predicted to rise so as to meet the demands of a growing population. According to the United Nations, India’s population is set to touch 1.45 billion by 2028, making it the world’s most populous nation.14 With socio-economic changes such as rapid urbanisation, demographic and lifestyle changes, the society is more prone to lifestyle-related ailments, including diabetes, obesity, stroke and cancer.

Also, out of the total population, the share of ageing population in 2011 was 5.3% and is expected to increase to 6% of the total population by 2021. With an increasingly ageing population, there will be a greater demand for better health care facilities and medical devices.15

Also, with a large number of private players making their foray into healthcare, there is a growth in the number of hospitals, diagnostic centres and specialised facilities. Most of these hospitals have their quality and accreditation at par with international standards. 393 hospitals have already received the National Accreditation Board for Hospitals & Healthcare Providers (NABH) accreditation in the last decade.16

 

Government support

 

In the last two decades, the Medical Devices Industry has undergone a transformation - from being a domestic-industry- dominated sector prior to 1991 to conversion to import-dependence post - New Economic Policy-1991, to being a non-regulated sector prior to 2006 to regulation of 15 notified devices to the new Medical Device Rules announced in 2017.

The government has taken various steps to ensure that the medical devices sector is considered as significant as the other sectors. To take this further, a task force was constituted to implement a range of recommendations, including the segregation of medical devices from drugs. Currently, only 15 categories of medical devices are regulated as drugs. The new set of regulatory practices aims to remove these hurdles so as to prepare India to meet the Medical devices sector requirements. These new rules shall thus enhance ease of doing business and ensure availability of quality medical devices.17 Also, for the very first time, periodic renewal of licenses will not be required. Consequently, manufacturing and import licenses will be valid until it is suspended or cancelled. The rules also aim to promote a culture of self-compliance by manufacturers of medical devices. In addition, the manufacturing licences for certain medical devices are granted without prior audit of the manufacturing site. In such cases, the manufacturer has to do self- certification of compliance with the essential requirements and on the basis of such certification, the licence will be issued.18

In 2017, the government also approved the National Health Policy, which envisages the realisation of quality health care through both promotive and preventive practices. Through this Policy, the health care system will be made stronger and registries will be established for diseases of public importance.19

One of the most critical policies is the Draft National Medical Device Policy – 2015 that was proposed to strengthen the Medical Devices sector by reducing dependence on imports, thereby giving impetus to the ‘Make in India’ initiative. Under this Policy, a single-window mechanism will be provided to the industry to not just focus on self-reliance, but also work towards making India the global hub of production in medical devices. Additionally, the Policy envisages interest subsidy for MSMEs, concession on power tariffs, seed capital and minimum or zero duty on raw materials, among others. Currently, the policy is awaiting inputs from stakeholders and their validation.20

 

Impact of GST on the Medical Devices Sector

 

 

Medical Devices, including surgical instruments, attract 6% central excise duty and 5% Value Added Tax (VAT) and along with CST, octroi, entry tax etc. comes to more than 13%. With the new Goods and Services Tax regime, the rate is 12%. This new rate is advantageous to achieve lower costs of manufacturing, and thereby proving beneficial to consumers.21

Technological advancement and expertise coupled with government support has proved to be advantageous for the sector. With Medical Parks planned in Gujarat, Andhra Pradesh and Maharashtra and emphasis on excellence in Research and Development (R & D), the medical devices industry in India is poised to cross a market size of USD 50 billion by 2025.

Source:
1 http://pharmaceuticals.gov.in/sites/default/files/medicaldevicemanufacturinginindia-asunrise-170221053503%20%281%29.pdf
2 http://www.who.int/medical_devices/definitions/en/
3 http://pharmaceuticals.gov.in/sites/default/files/medicaldevicemanufacturinginindia-asunrise-170221053503%20%281%29.pdf
4 http://pharmaceuticals.gov.in/sites/default/files/medicaldevicemanufacturinginindia-asunrise-170221053503%20%281%29.pdf
5 http://pharmaceuticals.gov.in/sites/default/files/medicaldevicemanufacturinginindia-asunrise-170221053503%20%281%29.pdf
6 http://pharmaceuticals.gov.in/sites/default/files/medicaldevicemanufacturinginindia-asunrise-170221053503%20%281%29.pdf
7 http://www.medicalbuyer.co.in/index.php/medical-technology/patient-monitoring-equipment/198-medical-buyer/medical-technology/3980-making-in-india-a-leap-for-indian-healthcare
8 http://dipp.nic.in/English/Publications/FDI_Statistics/2017/FDI_FactSheet_January_March2017.pdf
9 http://www.bd.com/india/aboutus.asp
10 http://www.medtronic.com/covidien/products/oem-monitoring-solutions/oem-partners/philips-healthcare
11 https://amtz.in/
12 http://www.deccanchronicle.com/nation/current-affairs/180617/medical-devices-park-opened-in-sangareddy-district-of-telangana.html
13 http://www.ndtv.com/india-news/cabinet-approves-setting-up-of-indias-first-medical-park-1470558
14 http://www.thehindu.com/todays-paper/tp-national/india-will-be-worlds-most-populous-country-in-2022-un/article7490465.ece
15 https://www2.deloitte.com/content/dam/Deloitte/de/Documents/life-sciences-health-care/Medical-Devices-Making-in-India.pdf
16 https://www2.deloitte.com/content/dam/Deloitte/de/Documents/life-sciences-health-care/Medical-Devices-Making-in-India.pdf
17 http://pib.nic.in/newsite/PrintRelease.aspx?relid=157955
18 http://pib.nic.in/newsite/PrintRelease.aspx?relid=157955
19 http://pib.nic.in/newsite/PrintRelease.aspx?relid=157955
20 http://economictimes.indiatimes.com/news/economy/policy/after-pmo-push-medical-devices-policy-likely-soon/articleshow/58048905.cms
21 http://economictimes.indiatimes.com/news/economy/policy/gst-will-lower-tax-burden-on-medical-devices-smartphones-finance-ministry/articleshow/58803677.cms