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Industry in India
The Evolving Landscape,
Opportunities and Challenges
September 2017
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01
03
An overview of 07
Make and Heal 05
Medical Device Case Studies
in India Market 2020
Industry p15 p35 p43
p01
Executive 02 04 06
Summary Regulatory and Price Control Survey
Business Policy – Impact Findings
Environment and Implications p39
p09 p23
Abbreviations
AYUSH Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy MDP Medical Device Park
BRICS Brazil, Russia, India, China and South Africa MSDE Ministry for Skill Development & Entrepreneurship
CAD Coronary Artery Disease MNC Multinational Company
CAGR Compounded Annual Growth Rate MoHFW Ministry of Health and Family Welfare
CDSCO Central Drugs Standard Control Organization MRP Maximum Retail Price
CPAP Continuous Positive Airway Pressure NABH National Accreditation Board for Hospitals & Healthcare Providers
DES Drug Eluting Stents NCMD National Centre for Medical Devices
IMF International Monetary Fund TRIPS Trade Related Aspects of Intellectual Property
IOA Indian Orthopedic Association USD United States Dollar
An overview of Medical
Device Industry
• Healthcare Indicators
• Medical Devices in India
• Structure of the Industry
• Segments
• Existing Clusters
• Growth Drivers
• Challenges
Medical Device Industry in India 2
Healthcare Indicators
The healthcare industry in India has A more focused approach from the • India is the only country out of the
registered a compound growth rate government, with increased public major world economies where out-
of 20% over the past few years and expenditure on health, greater utilization of-pocket expenses are increasing,
is expected to reach USD 175 billion of technology, vibrant private sector despite a concurrent increase in
by 2020. Factors such as changing participation, and continued innovation public spending. This effectively
demographics, rising life expectancy, can transform the sector and move India means that more people are availing
growing incomes and public awareness closer to its goal of providing quality private healthcare services due to
have contributed to a higher demand for universal healthcare. rising incomes, or are forced to spend
medical care. due to inadequate public expenditure.
Some of the key issues faced by the
However, the Indian healthcare system Indian healthcare industry are evident in • With India’s disease burden shifting
continues to lag behind both developed the tables below. from acute to chronic diseases, large
and other developing countries in terms numbers of the population continue
• Medical service providers are not only to not have access to basic healthcare
awareness, availability, affordability, inadequate but are also unevenly
and access to quality health services. services. Public health infrastructure
distributed across rural and urban is poorly equipped to deal with this
While the government and value chain areas. This shortfall occurs despite
participants are undertaking several shift toward NCDs. It is essential
an increase in the number of medical that healthcare professionals are
steps to address these issues, they have colleges from 23 in 1947 to 398 in
been executed in silos. appropriately trained and adequate in
2014. The quality and availability of numbers.
healthcare deteriorates as one moves
away from large urban centers to
lower-tier towns and rural areas.
Countries Beds Per 10000 Physicians per 10000 Government Out of Pocket Total Healthcare
population Population Expenditure of Expenditure Expenditure as a %
Total Healthcare of GDP
Expenditure
Global 27 14 58.80% 49.70% 9.10%
8.85%
Stents
14%
Hospitals 53.75% 8.20%
Implants
Pharmaceuticals
Patient Aid
13.20%
Medical Devices Consumables and
Disposables
Diagnostics
Equipment and
16.00% Instruments
77%
Currently, there are approximately 800 The growing focus of the government
medical device manufacturers in India, and better availability of capital has led
10% of which have a turnover of more medical device companies to upgrade
than USD 8 million. their technology, manufacturing facilities
and product portfolio customization
to compete with the international
companies.
Source: Recommendations of the Task Force on the medical devices sector in India – 2015, DoP,
Ministry of Chemicals and Fertilizers
5 Medical Device Industry in India
Segments
Patient Aid
Hearing aids and pacemakers form a
major part of the patient aid segment and
constitute 70% of the segment collectively.
Most of the products are sourced from
Ireland, USA, Australia, Singapore, China,
and South Korea. Some of the key players in
this segment are Abbot Healthcare, Shree
Pacetronics, Medisafe International, and
Medtronic.
Existing Clusters
The Indian medical device manufacturing sector is fragmented, both in its scale
and geography. Currently, there are five device manufacturing clusters in the
country. These clusters along with the upcoming medical device parks and MedTech
parks developing around them, have the potential to create a large ecosystem of
manufacturers, suppliers, and developers. It will also create manufacturing capability,
encourage R&D, improve quality, and reduce dependence on imports.
Haryana
Consumables, Dental Equipment
Becton Dickinson, Hollister, Poly Medicure
Karnataka
Insulin Pens, Medical IT, Cardiac Tamil Nadu
Stents and implants, PCR machines Diagnostics, Critical life support
Biocon, GE Medical, Skanray, systems, Ophthalmology
Bigtec Labs Trivitron Healthcare, Opto Circuits,
B. Braun, Perfint Healthcare
7 Medical Device Industry in India
Growth Drivers
Key factors that will help drive growth • The increase in insurance coverage
in the Indian medical devices sector are has led to better affordability and
listed below. accessibility.
• According to the World Bank, per • Medical devices were classified as one
capita income in India is estimated to of the priority sectors in the Make in
rise to USD 3,500 by 2020 from USD India campaign.
1,862 in 2016, thus adding significant • There has been an increase in medical
numbers to the already expanding tourism due to affordable treatment.
middle-income group. • An increase in adoption because of
• Awareness levels are increasing technological upgradation and more
with the increased media reach skilled healthcare professionals has
and coverage. There has been an taken place.
increase in diagnosis and treatment as
people are becoming more aware of
advancements in medical technology.
Challenges
The growth in the healthcare industry • Real estate prices and high capital
has been attractive. However, much costs limit the growth of delivery
more needs to be done. Despite the infrastructure.
advent of private players and better • Insufficient attention by
government spending, most Indians can policymakers and a complex tax
only afford and/or have access to basic regime are also responsible for the
healthcare. Hence, the path to universal sector’s underdevelopment.
healthcare coverage is challenging. Some
of the obstacles faced are listed below. • The lack of a comprehensive policy
and focus to develop the healthcare
• Low Penetration - The per capita eco-system.
medical device spending of USD 3,
compared to USD 7 in China and • The limited attractiveness of India
USD 42 in Russia is significantly low. as a destination for medical devices
due to uncertain regulations and
• Lack of Accessibility - The Indian pricing environment, unavailability
healthcare system is inadequate, of skilled resources, and ease of
inefficient, and unevenly distributed. doing business compared to other
69% of the Indian population lives comparable destinations in Asia.
in rural areas, while 73% of qualified
consulting doctors reside in urban • Lack of innovation and
areas. Eight percent of qualified customization resulting in fewer
doctors are in rural areas, and the options available to the patients.
remaining 19% are in semi-rural
areas.
• Inadequate regulatory systems:
Non-alignment with global
standards and the lack of quality
product testing infrastructure are
issues that hinder sectoral progress.
Medical Device Industry in India
Section 2
INSIDE
• Regulatory Regime
• New Medical Device Rules – Key Highlights
• Business Environment
• Proposed Government Initiatives to Help Create a
Favorable Environment
• The Shift in the Medical Device Sector Post Regulatory
Changes
Medical Device Industry in India 10
Regulatory Regime
The existing regulatory framework for However, medical devices still continue It is anticipated that as the Indian
medical devices in India is inadequate for to be defined as drugs under the market and manufacturers mature, the
a USD 6 billion industry. Medical devices DCA and going forward ideally the perception of devices manufactured in
were unregulated in India until recently. government should pursue a full India will also improve and these rules
At present, 22 medical devices have been separation of medical devices and drugs will help quality improvement.
notified by the MoHFW and are treated with each having distinct and separate
as ‘drugs’ under the Drugs & Cosmetics regulations.
Act (DCA), 1940 & Rules.
The Rules generally adhere to the
The MoHFW released the first draft of framework laid down by the Global
The Medical Device Rules in July 2016 Harmonization Task Force (GHTF) on
and after consulting the industry and medical devices and are on similar lines
stakeholders, released the second draft with global standards.
in October 2016. In January 2017, the
MoHFW notified the Medical Devices The Rules further address procedural
Rules, 2017 and announced that they issues such as the need for constant
would be effective from 1 January re-approval of manufacturing licenses,
2018, thereby giving the industry time while eliminating the need to apply for a
to adapt to the new Rules. The Rules registration as well as an import license.
clearly separate medical devices as The process of tracking applications
being distinct from drugs, clearing some for licenses is made easier with online
hurdles for the industry. systems. While the new Rules attempt to
plug various loopholes within the existing
framework, it has caused ambiguity
amongst medical device companies.
• Authority: Central or State License Approval Authority • Authority: CLAA-appointed notified bodies
(CLAA)
• Impact: Imported or manufactured devices bearing license
• The new Rules have eliminated the need for constant may be subject to warnings and recalls
re-approval of manufacturing licenses and these licenses
have now been made valid unless the license is suspended,
terminated or surrendered. The entire process has been
made online for easy tracking
The Medical Device Rules 2017 are a good step in the right
direction. There still exist significant gaps and ambiguity and
the industry is hopeful that these will be addressed soon. A
full separation of ‘drug’ and ‘device’ regulation will facilitate
formulation of medical device regulations that are appropriate
for this category and also aligned with global best practices.
This will also facilitate better focus on standards, quality and
compliance bringing up the industry stature.
Medical Device Industry in India 12
Business Environment
In past few years, the Indian government Government is taking steps to use could eventually address affordability
has taken several measures to improve technology to increase transparency and accessibility issues. There are several
the business environment for foreign and ease procedural load such as online start-ups such as Innaccel’s SinuCare,
investors in India. This section describes filings, single point clearances. Clearly Forus Health and Achira Lab that develop
some of these initiatives as well as some while there is a progress, investors affordable products and cater to the
of the continuing challenges that the continue to find the bureaucratic and unique needs of India’s vast underserved
industry faces. procedural hurdles for a new company population. The products are inexpensive
to be onerous and hard to navigate and and do not require skilled resources.
Foreign Direct Investment (FDI) more needs to be done. It is important In most cases, the products are priced
FDI up to 100% under the automatic to create a single point of contact with at one-third or one-fourth of their
route is permitted for manufacturing sectoral insights to drive the ease of imported competitors. This innovation
medical devices. The sector is also doing business, growth, and investments is not only being pursued by start-ups,
witnessing strong FDI inflows, which in this sector. but also by established players like
reflect the confidence of global players in Smith & Nephew, who conceptualized,
the Indian market. Medical Device Taxation designed and manufactured a product
The medical devices sector has been ReSTOR Prosthesis in India which is used
According to DIPP estimates, the medical subject to an inverted duty structure
and surgical equipment sector received a worldwide and costs half the price of the
for many years (i.e. finished goods are competing imported products.
total of approximately USD 1,452 million cheaper to import than raw materials
between 2000 and 2016. Out of this, for domestic manufacturing). This Absence of a Transparent and
about USD 600 million FDI was received structure impacted the industry’s growth, Predictable Policy Framework
in the last five years. often making imports more attractive. Some of the recent policy initiatives
Intellectual Property Rights (IPR) In the 2017 Budget, the government such as the price control in certain
To comply with WTO regulations and has tried to correct this by increasing devices and preferential procurement
specifically Trade Related Aspects duties on finished goods. While it is of local products have left the industry
of Intellectual Property (TRIPS), the important to reduce raw material costs confused and alarmed. While the need
government passed new patent laws and duties to boost manufacturing in to widen access and support care for
in 2005. Before being TRIPS-compliant India, increasing finished goods duties underprivileged segments is understood,
there was a major concern with respect may not be the right approach. In an industry believes that the goals could
to IPR for foreign medical device industry where certain technologies will have been achieved with alternate
manufacturers. need to be imported it will be important approaches that would have had less
for Government to ensure that finished damaging impact on the industry and not
Currently, India has reasonably defined goods imports are not made difficult. impacted investor sentiment.
judicial, statutory, and administrative
frameworks to protect IPR. Over the Innovative Start-ups – Creating a This could be facilitated through more
years, many international brands such as Culture for Frugal Innovation inclusive policy making, wherein industry
Whirlpool and Volvo have protected their Over the past few years, the medical concerns are heard and acknowledged
trademarks despite not being registered device industry has seen rapid innovation in the policy. Additionally a clear long
in India. to cater to a largely underserved term road map is essential to bridge the
population. This is aided by government healthcare gaps in the country, so that
Product Liability encouragement to create a culture for sudden unexpected moves by regulators
Pharmaceuticals and medical devices are frugal engineering and innovations that do not create an alarm.
in constant danger of product recalls and
the associated liabilities. Product liability FDI Inflows (In USD million)
law governs the liability of and vendors
for injury to a person or property caused
by dangerous or defective products.
Nascent regulatory framework International players preferred to import International players focused on high-
and distribute. Selective participation end products to achieve reasonable
due to the uncertainty of rules margins
Lack of conducive environment for Domestic companies continued to focus Domestic players focused on cost
technological innovations on low-end products and refrained from competitive/high volume products
investment in R&D resulting in low margins. No efforts to
build competency in R&D
Inverted duty structure
Low investments were made in
manufacturing and R&D infrastructure
Robust regulatory Conducive environment for technological Companies who demonstrate quality
framework innovations standards together with cost efficiencies
to thrive
Focus on manufacturing and research in More International companies to Focus on technology and innovation to
India manufacture in India and expand their drive down cost and improve margins
presence across segments with better and differentiated products
• Outsourcing of manufacturing
and R&D activities to India to take
advantage of cost arbitrage.
17 Medical Device Industry in India
Domestic manufacturing to
improve quality matching
international standards for
export sales Scalability of business
Quality manufacturing at
competitive cost vis-à-vis
countries such as Thailand and
Conducive environment for doing
Singapore
business in India
Developing and manufacturing in India has its own pros and There are several examples of companies successfully
cons, but needs active consideration by the industry. Private manufacturing medical devices in India. Some of which are
players have a big role to play inthe modernization and highlighted below.
the growth of the market through innovation, localization,
increasing awareness and training.
The company’s ReSTOR Prosthesis GE Healthcare introduced an Philips India launched Mobile
was conceptualized, designed, electrocardiogram (EKG) system Diagnost Opta, a digital X-ray
and manufactured in India and is that is priced 80% lower than system, and BV Vectra, a mobile
now sold across the world. a similar imported product C-arm system dedicated to
available in India. They also orthopedic surgical procedures in
introduced a cardiac ultrasound 2015. Both of these products were
machine that is about 50% conceptualized, designed and
cheaper than its imported manufactured in India. Philips
counterparts. GE conducted also plans to increase localization
R&D for several years before of these products which varies
finalizing the design and made currently from 10-50% and
sure that a substantial amount creates an ecosystem for these
of components of the machine products. Nearly 20-25% of the
could be sourced locally. Hence, it total production at its Chakan
not only created an India specific plant is exported to 90 countries.
product but has also assisted in India has become an important
creating an ecosystem around it. region, not only for R&D but for
manufacturing as well.
In a scenario where a market fails to Price Control Mechanism – retail price for a bare metal stent
achieve the optimal and reasonable price Implemented by Regulators was approximately USD 700, while
for a trade, as the Government of India The National Pharmaceutical Pricing drug-eluding stents were priced at
believes has occurred in this instance, Authority (NPPA), an organization of the approximately USD 1900. The industry
regulators intervene and explore Government of India under the Ministry offers a large number of models priced
economic regulations such as price of Chemical and Fertilizer’s Department according to their technology and value.
capping. of Pharmaceuticals (DoP), was set up Although the average Price to Distributor
through an executive order and is (PTD) was significantly lower, MRP prices
India has been facing challenges to were high, leading to unreasonable trade
provide quality healthcare to its 1.4 therefore not a statutory body. Its aim is
to monitor, fix and/or revise the prices of margins. In light of these large margins,
billion people. NCDs such as heart in February 2017, the NPPA, fixed a
disease, diabetes and respiratory controlled bulk drugs and formulations
and to further enforce prices as well as ceiling on the price of cardiac stents and
diseases comprised of 45% of all diseases slashed their rates by nearly 75%. While
in 2010, and are expected to reach up to ensure the availability of these medicines
in the country. The NPPA usually fixes the it considered various price identification
75% by 2025. Despite a 42% increase in models based on landed costs,
the number of angioplasties performed prices of any drug after it is included in
the National List of Essential Medicines production costs and other industry
in 2015, only 2% of the patients needing submissions, the NPPA finally chose
this type of surgery were treated last (NLEM). However, it has emergency
powers to act suo motto. to classify all stents under two kinds,
year, according to a report by the namely, Bare Metal Stents (BMS) and
National Intervention Council (NIC). The first device to receive the DoP’s Drug Eluting Stents (DES). The revised
While price capping is meant to make attention has been coronary stents. prices are listed in the table below.
healthcare more affordable and Prior to the pricing control, the average
accessible to a wider population, it may
not benefit the market in the long run.
This section investigates the impact and Sr. No. Coronary Stents Ceiling Ceiling
implications of the ongoing government Price (INR) Price (USD)
interventions and examines the policy 1 Bare Metal Stents (BMS) 7,260 114
options.
The NPPA subsequently issued a Post the price capping of stents, the After capping prices for coronary stents,
notification stating that the ceiling prices NPPA published a list of 19 medical the NPPA focused its attention on
were inclusive of the eight percent trade devices that were placed on its orthopedic implants. In August 2017, it
margins for the distributor. monitoring list in May 2017. The capped the prices of knee implants used
devices which were covered under both for primary and revision surgeries
In the larger scheme of things, less this order included catheters, heart and further capped the trade margins
than 0.02% of the population opt for valves, orthopedic implants and internal for distributors/importers and hospitals.
coronary intervention procedures. This prosthetic replacements amongst others. Before capping the prices for knee
is far lower than the number of people It is believed that this step is a precursor implants, the NPPA released an analysis
affected by other healthcare diseases. to bringing additional devices under the of trade margins for the same and
However, this directive sets a precedent ambit of price control. It is important to revealed that the margins ranged from
to include price control measures on note that after the price cap notification 135% to 300%.
other medical devices as well. Given is issued, no manufacturer can withdraw
the significant slashing of prices, many the products from the market for a
manufacturers have found it extremely period of 12 months from the date of
difficult to continue selling some models. notification without the prior approval of
Hence, major stent manufacturers such the NPPA.
as Abbott Vascular and Medtronic have
submitted applications to increase the
ceiling prices for their latest generation Type of Knee Implants Old Price (INR) New Price New Price
of products and/or allow them to (INR) (USD)
withdraw the products from the market. Cobalt Chromium Knee 1,58,300 54,270 848
Implant
Titanium Oxidized Zinconium 250,000 - 450,000 76,600 1197
Technology Assessment of Devices clinical conditions, including disease Linkage between Device Cost and
and the Evaluation of Clinical Benefits stage and complicating co-morbidities, Total Procedure Cost to Patients
The subcommittee and the NPPA and often display different lesion Reduction in device costs alone may not
decided to consider different stents as characteristics in their coronary vessels. significantly impact procedure costs
equivalent except for the difference Thus, it is important to understand that which is the real parameter that can
between bare metal and drug eluting all coronary artery disease (CAD) patients widen affordability and usage. In most
models. Bare-metal stents (BMS) were are not the same and different products cases, the cost of implants (Ortho and
first introduced in 1986, followed by may have significant and distinct clinical Cardiac) is less than 25% of the overall
drug-eluting stents (DES) in the early benefits. The assessing authorities cost that a patient bears and very rarely
2000s, which have since been followed should take into account the current exceeds 35-40%.
by four other generations of stents (DES). technology for factors such as the ease
Stents today not only differ in clinical of procedure, probability of restenosis, Medical service providers fee (surgeon,
outcomes but also in drug dose/elution improved recovery, shortened lengths of physicians, nurses and other consultant
kinetics, platform material/design and hospital stay and reduced readmission charges) and infrastructure costs such
polymer type/coating, thereby impacting rates. For example, the use of an older as operation theatre charges, room
their performance and long-term patient generation stent on a diabetic patient rent and diagnostics are significant
outcomes. Globally, new devices are may result in restenosis for 70-80% of components of the treatment costs.
approved for marketing after conducting patients, resulting in higher long term Contrary to popular belief, over the
efficacy studies against current products. costs to the system. last 4-5 years, the cost of implants as a
percentage of total procedure costs has
The Industry believes that pricing should Willingness to Reward Innovation and declined. The cost of stents for patients
ideally be set by market forces. In some Quality has gone down by more than six percent
economies payers/governments use in the last four years.
Health Technology Assessment (HTA) Currently, there is a striking difference in
selectively to determine pricing based on the number of clinical studies among DES
health economic value of the technology. products for different manufacturers.
HTA is considered a specialized task that Many studies support the products sold
needs to be done by qualified scientific across global markets, whereas some
organization. Some industry experts products approved only in India for the
believe that this task be given to the Indian market are supported by very few,
MTAB, a government created body, and if any, clinical studies.
that the MTAB be provided adequate With extensive regulatory requirements
resources to accomplish this task, in place for US FDA approvals and CE
including full HTA on a selective basis.. Mark, the safety of medical devices is
The MTAB will be better placed to provide ensured. Indian regulations in their
recommendations to the regulators current form appear to be inadequate According to the WHO,
on technology differentiation and if
necessary value.
to measure and ensure the safety and following in the footsteps
performance of medical devices to be
used for patients in India.
and practices of the ‘access
NPPA’s Stent Assessment Differs from to essential medicines’ may
The greater volume of clinical evidence
the Cardiologist’s Viewpoint
published for globally marketed DES
not be enough to achieve the
Cardiologists, in general, feel that there models, provides greater certainty for overall objective of improving
are important differences in the various
generations of stents from a clinical
medical practitioners, as well as patients, access. The agenda to improve
about the safety and performance of
benefit viewpoint. Patients have differing those stent models. It is important to
access to medical devices
anatomies, vascular structures and recognize this investment in R&D and requires, and deserves, its own
clinical conditions, including disease
anatomies, vascular structures and
consider it in pricing if India wants to unique modalities.
encourage development and innovation.
Medical Device Industry in India 28
While it might be true that the cost to patients is high for stents, it
might also be equally true that stakeholders are not profiteering.
Hence, the issue requires a deeper understanding of the overall
healthcare delivery mechanism in India and the various socio-
economic factors at play.
29 Medical Device Industry in India
Product Price Caps, Procedure Price Costs Distributed across the Supply Chain
Caps or Both? Limiting prices may impact all outcomes. Many of the Indian
Recently, the state of West Bengal stakeholders - medical device teaching institutions do not have the
amended its Clinical Establishment Act, manufacturers, distributors, and infrastructure to train their students
2010 by introducing the West Bengal hospitals, and may, in turn, have an on the newer technologies and
Clinical Establishments (Registration, adverse impact on their ability to invest devices and the industry plays a major
Regulation and Transparency) Act, 2017. in newer infrastructure. This could lead role here.
It aims to bring greater transparency, to to limited healthcare access growthfor • Rush orders and off-time deliveries
bring an end the harassment of patients the underserved sections of Indian resul in higher logistics cost
and check medical negligence in private society.
hospitals and nursing homes. The act • Huge investments in infrastructure –
has many patient friendly steps, from The costs incurred to make devices capital expenditure and interest cost
requiring healthcare providers to treat accessible are listed below.
There are several costs incurred by
accident victims without the advance • High Working Capital inventory the distributor in making the devices
payment of fees to outlawing the practice and a large number of days of sales available within the market. We have
of holding a deceased patient’s body outstanding in government schemes considered the example given below
until their hospital dues are paid. • High precision instruments on loaner of costs incurred for the distribution of
An important pro-patient step in the basis with highly skilled and trained stents to hospitals.
act is the capping of package rates experts to help in the selection and
for consultations, investigations, bed usage of instruments and devices
charges, intensive care, ventilation, • Cost of training the surgeons and
implants and other similar procedures. paramedics staff to ensure high-
Further, any additional treatments quality procedures and patient
or procedures will not be charged to
the patient over and above the fixed
package rates, irrespective of whether Stent Distributor Margin Analysis
any additional treatment is provided to
the patient or not. The state of Karnataka
has also introduced a similar legislation
termed the Karnataka Private Medical
Establishments (Amendment) Bill, 2017.
However, it has been kept in abeyance
given the strong protest from the medical
community.
Unlike other large economies, Thus, the central and state governments
India spends a substantially lower need to come together and adopt a
amount of its GDP on healthcare. holistic and methodical approach to
Consequently, while the government’s reduce costs and increase affordability. A
intention of decreasing this burden is diligent way to achieve this might be for
understandable, capping device prices NITI Aayog first to first prepare a model
might not be the most effective way to ‘Clinical Establishment’s Bill’, which can
do this. then be introduced in Parliament and
later adopted by the majority of states.
For the healthcare industry in India to
operate effectively, it is imperative that
legislation and regulation do not put Alternatively, the regulator could have looked
them under undue stress and make it
difficult to conduct business as usual.
at only capping the total Trade Margin of
As demonstrated above, there are not specific devices, especially in a market where
enough margins in the entire value distributors service most of the hospitals.
chain to have a sustainable industry that
attracts fresh investment with price caps
However this cannot be a fixed margin across
at both procedure and product levels. all device categories, as the services provided
by distributors varies significantly for different
devices, resulting in substantial variances in
costs and investments at the trade level.
31 Medical Device Industry in India
Product based Patient shared billing Case-mix system Fixed annual budgets Mostly out of pocket
reimbursement/co-payment with government and of reimbursement by local clinical expenses - Patient
insurers based on treatment commissioning group shared billing with
in public or private (CCG’s) along with government and
hospitals regional Strategic insurers
Health Authorities
(SHA’s)
Bundled/Package Rates Fixed procedure fee Fixed procedure fee Fixed procedure Procedure fees
based on diagnosis- based on French DRG fee based on DRG deviate based on
related groups (DRG) payment system payment system, hospital, quality of
payment system except few cases paid device and region
as unbundled rates
Device Pricing Covered in package List of reimbursable Manufacturer’s free Price capping for
rates products and to set prices but have stents, implants
services covers both to negotiate with
market forces drive
generic and branded CCG’s
the prices for all
products with
other products
incremental value
Price Capping Capping at healthcare Capping at healthcare Capping at healthcare Initiated capping at
provider fees provider fees and provider fees device fee
device fee
Value proposition from the Incentivize hospitals Differentiate between Controls hospital -
country to shorten surgical novel brands with budgets allowing
time and length of incremental value free competition in
stay product prices
India faces three major challenges in • Third, the Indian delivery market is Coronary stents and knee
implementing similar incentives for largely unorganized and therefore,
hospitals. price capping for healthcare provider
implants are the only products
• First, India does not fund its hospitals fees needs a much more robust currently under price control.
sufficiently to address the costs of information system. However NPPA has published
many medical products, particularly It should be recognized that every a list of 19 medical devices
imported medical device implants.
Thus, unlike the countries mentioned
stakeholder in the healthcare supply in May 2017 that as per
chain — manufacturers, providers,
above, the entire burden of pricing and payers have a responsibility to
indications could be subject to
in India is shared by private and address variation in cost and quality to price caps.
insurance agents. patients. When transparency of hospital
• Second, the infrastructure and data procedure costs and product-pricing
requirements needed to launch a DRG is absent, patients bear the burden,
payment system can be difficult due particularly those who self-pay and
to the lack of treatment guidelines and therefore have no bargaining power on
patient records. the prices they pay.
Medical Device Industry in India 32
Some of the concerns raised by industry longer sell their latest products in
To be ‘efficient’, the market must
experts on price capping are: India and their margins on other
maximize consumers’ (patients) and
products are not high enough
• A manufacturing company who brings producers’ (device manufacturer’s)
to conduct these conferences or
in state-of-the-art technology will fail surplus
sessions”.
to be justly remunerated for their
Deadweight loss is the waste of
R&D efforts and would thus end up • A sudden and severe downturn
resources and economic inefficiency
withdrawing these products from in profits for manufacturers and
the market. In the past few months, healthcare providers might lead to an The price ceiling would also increase
there have been applications by increase in the prices of products that demand, creating shortages if
multinational companies such as do not fall under price caps. resources are not available (unmet
Abbott and Medtronic to withdraw needs)
some of their latest-generation • Reduced returns would detrimentally
stents from the Indian market as the affect capital expenditure on If the government wants to address
unit economics do not make them infrastructure such as catheterization the demand, it can be done through
commercially viable. They have also labs. the government directly producing
argued that since the NPPA deems the goods or offering subsidies to
Although manufacturers might not
them equivalent to low priced encourage production
ignore India due to its sizeable market,
products, it should not be an issue for the undesirable unit economics will
the regulator. This also discourages weaken the case for introducing new
investment by the manufacturers generation of stents and implants. They
into R&D and will prevent newer will continue to sell the generic devices, Price capping may be an
generation products in this dynamic and as a result, the quality of care will easy fix from the regulator’s
and innovative industry from being suffer.
introduced in India. perspective, though this may
This makes it necessary to rethink some not have the desired impact on
• Given the lack of cutting-edge of the critical parameters that must be
technology products, older products considered while drafting appropriate transparency and in creating a
will be in the market for longer than regulations and in shaping the Indian better payment system. It has
they should be and the customers healthcare ecosystem: the potential to hamper the
who wish to use the latest technology • Is it appropriate to reclassify devices
products will be forced to compromise building of a robust healthcare
as drugs and apply similar rules?
or find newer avenues to access the ecosystem, depriving every
desired product or adopt different • Is it right in considering that newer
generations of devices have minimal stakeholder the benefit of
procedures.
value addition from the previous being part of the supply chain
• There will be a substantial impact on ones?
medical tourism as foreign patients • Are regulators focusing on generic
seeking high quality healthcare devices or quality devices for Indian
products will not travel to India for patients? Or should they focus on both
treatments and Indian patients will and allow patients to make the choice?
have to visit neighboring countries to
obtain newer generation products. • Are we depriving patients the choice
Similarly, high-income Indian of quality of medical devices and
customers who provide some cross products? Will extreme price capping
subsidy to hospitals for low-income hamper innovation?
patients may opt to obtain treatment • Are the levels of margins reported real
overseas, further straining the and carefully analyzed?
providers’ P&L. • Has price capping resulted in a
• Restricts private players’ contributions reduction of the overall treatment cost
in building a robust ecosystem. As as intended by regulators?
quoted by a renowned cardiologist,
“MNCs are not conducting training
conferences because they can no
Medical Device Industry in India 34
Recommendations
• Cap Trade Margins and not Price • There is a need to work towards • Increase government healthcare
to the dealers, should be capped bundled payment models as used in spending as a percentage of GDP.
after detailed evaluation of each many other countries to better align India lags behind the other BRICS in
Medical Device segment and the incentives for hospitals and their this regard.
role of trade. Trade margins should business models.
be fixed differentially for different • Adequate utilization of government
categories of devices, based on service • Specify certain quantities/proportions infrastructure to reduce the cost to
requirements and role of distributors. of supply of different stents at lower private players – PPP model could be
Allow the dealers to compete with prices to specified government an attractive alternative to explore.
each other and provide a fair price to agencies for use with underprivileged
the hospitals based on the terms and sections.
conditions of services and payments.
• Empower the Medical Technology
• Evaluate the model of tiered pricing Assessment Board (MTAB) to
as observed in the French healthcare identify priority medical devices and
ecosystem, wherein the NPPA cap the procedures that demonstrates the
generic products and leave the latest greatest need stemming from disease
generation products with incremental burden. MTAB along with other
value out of the ‘essentiality purview’. regulators for medical devices should
The incremental value could be on ensure that there are minimum
account of efficacy, material used, quality parameters—in terms of
ease of delivery and shortened safety, clinical efficacy, and cost-
recovery time. Various combinations effectiveness—for medical devices
are possible here such as: an increase that get used in the public and private
in the number of tiers, allowing new health system, such that long-term
introductions to be free of price costs are lowered over a patient’s
intervention for a certain number of lifespan, with need for fewer hospital
years. readmissions, lowered need for
medication, and overall better health
outcomes.
Section 5
Market 2020
Stents
Implants
Patient Aid
Consumables and
Disposables
Equipments and
Instruments
Medical Device Industry in India 38
Conclusion
Healthcare in India is at a crossroads Indian companies, across sectors, are
and needs intervention in many ways. immensely dependent on foreign the
The success of initiatives such as Make in technology transfer. The medical devices
India is dependent on a number of policy industry is no different, the majority
initiatives as described earlier. of these 800 manufacturers produce
products which are less technology
While Make in India is a laudable dependent. The industry would require
initiative, it would be very worthwhile new investments and policies to support
for the government to combine it with its development.
as many experts are starting to call for
a Heal in India campaign. This would The manufacturing curve for India
have a multiplier benefit on the entire in medical devices is likely follow the
healthcare sector and significantly growth rate of the middle class.
increase investments in healthcare
through increased participation from
private players.
Survey
Findings
Medical Device Industry in India 40
To understand the larger industry view • Price Caps but it is not sufficient to kick-start
on the relevant aspects of the industry, The industry is of the view that Trade domestic manufacturing. Also, in the
a survey was conducted among broader margins should be capped. Proper age of global harmonization, creating
industry players. The responses are differentiation between different a separate standards like ICMED
summarized in this section. generations of technologies needs and make the local companies less
to be done. Financial returns and the competitive in the global market. The
• Growth Drivers and Challenges introduction of new products are the domestic companies should instead
The industry believes that insurance immediate impacts of price capping be advised to adapt to tested Global
penetration and government on devices. norms.
spending will be major growth drivers
while healthcare infrastructure and • Make in India • Sectoral Outlook: Even though the
inadequate regulations are major Commercial attractiveness of India industry remains positive on the
challenges to the industry. in comparison to other emerging sector’s outlook, issues like ease
markets and adequate demand are of doing business in India need to
• Affordability and Accessibility factors which will influence a decision be addressed more significantly as
Insurance penetration and engaging on ’Make in India’. they remain a major hurdle while
the industry through a PPP model considering any new investment in the
to increase healthcare spending • Regulatory Environment country.
are the measures that the industry The draft of the regulatory changes
believes will increase accessibility and is a step in right direction. However,
affordability. more is required to have a substantial
impact. For example, addressing the
inverted duty structure is a good step,
Rank 1
Rank 2
Rank 3
Rank 4
Rank 5
Strongly Agree+Agree
Neutral
41 Medical Device Industry in India
Rank 1
Rank 2
Rank 3
Rank 4
Rank 5
Rank 6
4%
15%
15%
37%
70%
59%
7%
30%
63%
Neutral
Medical Device Industry in India 42
33%
Adequate Domestic Demand
44%
Regulatory Environment and
Incentives
Commercial attractiveness to
emerging markets
22%
6%
29%
Case Studies
Abbott
Empowering Stakeholders and Creating Opportunities
GE Healthcare
Focus on Make in India
InnAccel
Driving Affordable Innovations for Emerging Markets
Narayana Health
Revolutionizing Healthcare Delivery in India
45 Medical Device Industry in India
Case Study
Abbott
Empowering Stakeholders and Creating
Opportunities
This case study details how Abbott selected the Cardio Vascular devices
as an underdeveloped market and played a critical role in developing the
market and empowering various stakeholders, thus creating accessibility
and awareness.
Cardio Vascular Market Despite such challenges, Abbott is across different stakeholders like
successfully boosting access to a physicians, nurses and patients.
in India: Challenge in wide range of healthcare services and
Skilled Talent/Resources products by working in partnership These initiatives gave an overwhelming
result whereby 2000+ interventional
Availability with numerous government agencies,
cardiologists were trained across 1000
healthcare professional societies, non-
Cardiovascular diseases (CVDs), governmental organizations and other healthcare delivery centers across the
especially coronary heart disease (CHD), key stakeholders. country.
have grown to significant proportions
worldwide wherein declaring them as an Abbott created an awareness program
epidemic will not be a stretch. Globally, Market Development at all levels and initiated several steps
which led to an increased understanding
CVD led to 17.5 million deaths in 2012 Strategy of the procedures, technology and
where 75% of the deaths occurred in
Catapulting to a Leadership Position in the remedies available for increasing
developing countries. The mortality
the Cardiovascular Device Market research and development. To put
rate from CVD in developing countries
Abbott was founded with the purpose things in perspective, an interventional
is rapidly increasing while the same is
of improving health worldwide. This procedure requires a physician to be
declining in developed countries. This
commitment has remained a critical an expert on several aspects such as
increase is driven by industrialization,
component of the company’s citizenship technical, clinical and imaging skills.
urbanization, and lifestyle changes and
approach and is integral to its core However, in medical colleges across
has led to an epidemiological transition.
business strategy in India as well. India at that time, no formal training
CHD in India has already reached
Through a combination of targeted was provided in this regard and the
epidemic levels. The Registrar General
programs, shared value initiatives, and physicians had to self-train. The industry
of India reported that CHD led to 17% of
responsible business practices, the played a crucial role and trained these
the total deaths and 26% of adult deaths
company has successfully expanded fresh medical graduates in these
in 2001-2003, which increased to 23%
access and the use of its products and lifesaving procedures. Abbott being a
of the total and 32% of adult deaths in
services among the industry. market leader in cardiac interventional
2010-2013. With the disease prevalence
high, India is highly ill-equipped to products has also taken the lead working
Abbott entered the Indian market in
provide care to all these patients. on this capability building in the manner
the early 2000’s and the coronary artery
described.
disease treatment was in its infancy
With critical shortages of trained
stage in India at the time. The numbers • Abbott has run awareness programs
professionals in modern diagnosis and
of PCI procedures carried out were in across the country for both doctors
treatment protocols besides inadequate
a few thousands which have increased and patients through various training
facilities and healthcare services, much
to over 300,000 procedures a year. The seminars and education programs.
of India lacks the required healthcare
numbers of catheterization labs were
infrastructure. In addition, healthcare • The first step in treating a disease is
also few and hence, trained physicians
practitioners in developing nations, to correctly identify the symptoms.
were also a scarce commodity. Abbott
like India, often lack access to the latest Abbott made sure that the referral
understood the ecosystem and formed
information on chronic diseases such as communities were aware of the
a holistic strategy where it focused first
diabetes, cancer and heart disease, all of symptoms and able to diagnose it on
and foremost on training medical service
which are increasingly prevalent. time.
providers around procedures. Abbott
also ran several awareness programs
Medical Device Industry in India 46
• Abbott not only provided training to Increased Adaptability: Due to constant • Under a special program, Abbott
surgeons but also provided them the sharing of information between the representatives meet 8,000 medical
opportunity to learn from the best physicians and the company there is a service providers and 10,000
interventional cardiologists in the greater comfort with new technology and retailers every month in four states -
world. This training was not limited to a better understanding of the use case of Maharashtra, Uttar Pradesh, Madhya
the basics and also included complex these products. In complex surgeries and Pradesh and Bihar. Such programs
procedures with multiple patient cases, it is imperative to have an absolute have helped the company’s products
issues. belief in the technology to do the job. reach 0.7 million people in 381
villages.
• Abbott also created learning platforms Market Growth: Abbott has been able
like the Cross Roads Academy. These to create awareness about diseases, • The company has also, at several
platforms provided both physical and procedures, and technologies, that stages, engaged in educating
virtual settings for the young fellows has led it to develop better products governments and policymakers about
and junior physicians to learn, discuss than its competition. Due to extensive healthcare challenges.
and deliberate on complex cases, outreach programs, Abbott has been
procedural steps and protocols. able to expand the overall market for its
cardiology products and also increase its
Conclusion
• Abbott ensured that its sales market share in parallel. Abbott’s approach to India’s medical
personnel were highly trained in the devices industry has been quite unique
science and technology behind the Strong Branding: Due to a strong and equally rewarding. Abbott not only
products and procedures, thereby understanding of the issues at the created awareness about the diseases,
leading to greater understanding procedural and disease level, during procedures and new technology but
of problems that can occur during the product development stage Abbott also worked with all stakeholders in the
the procedures and how to tackle addresses those issues and backs the ecosystem to expand the market, and
them with devices or otherwise. results with extensive and exhaustive build a sustainable growth.
This leads to more productive and clinical trials. The results of the trials
proactive engagement between and subsequent approvals from device
sales personnel and medical service regulators like USFDA help in establishing
providers as there was sharing of strong credentials, hence resulting in
knowledge and building of trust, thus enhanced brand position and recall.
eventually leading to better clinical
outcomes. This helped Abbott to
improve the current perception of
Continuing with similar
people about ‘unwanted sales visits’ initiatives to other under
to more ‘knowledgeable and engaging developed market
sessions.’
segments
With these initiatives, Abbott has been To empower communities and
consistently able to train more than 500+ consumers with educational programs
cardiologists on an ongoing basis. These on the prevention, diagnosis, and
trainings have a multiplier effect, thereby treatment of many diseases and health
leading to greater doctor awareness and conditions, Abbott launched:
skills.
• Thyroid awareness campaign in areas
with high prevalence but limited
Benefits to Abbott by Engaging with
access to diagnosis. The company has
Practitioners and Building their Brand
placed 100 points of care devices with
Effectively
on-site testing for clinical diagnosis
Driving Innovation: By being close to
and consultation. Such camps saw
their consumer and referrer, Abbott has
participation of 130,000 patients in
been able to understand shortcomings
2015-2016.
of various products better and can
deploy resources in the right areas for • Collaboration program with the Indian
driving innovation further. Abbott’s Orthopedic Association (IOA-OEP)
understanding of the market and human disseminates education by IOA panel
anatomy helped them bring products doctors to 500 orthopedics across the
which were more effective, reduce country.
complications, and improved clinical
outcomes.
47 Medical Device Industry in India
Case Study
GE Healthcare
Focus on Make in India
This case study details the company’s focus on strategies for an organic
growth in emerging markets through the development of customized
healthcare solutions and improving awareness and access to healthcare.
Strategize the Approach As discussed in the earlier part of the Customized Products for
paper with the Indian government’s
by Understanding Local focus on the Make in India campaign, Indian Patients Needs
Market Needs GE also initiated discussions with Rigorous Investment in
With large populations in emerging the government on making further R&D
markets having minimal or no access investments in the country to improve
to decent healthcare facilities, there its infrastructure in healthcare, among Among various products in categories
is a grave need to fill the gap in the other sectors. such as ultrasound imaging, X-ray
healthcare ecosystem. The lack systems, baby warmers and ECGs,
The company’s strategy is to develop and a classic and recent example of GE
of affordability, awareness, and capture the Indian market in a three-fold
accessibility are the three primary Healthcare’s indigenously developed
approach by: products is the Revolution ACT scanner.
reasons for this dismal state of affairs.
Only 25% of the Indian population is a. Domestic research and development The ratio of CT scanners per million
covered with health insurance, leaving on healthcare technologies and population in India is as low as 3. There
900 million people largely incapable introduction of new products for is a dire need for equipment that is
of affording most healthcare services. Indian and other relevant global affordable and operable with the limited
Even if affordability were to be solved, markets, resources at hand. The Revolution ACT
only 24% of the rural areas with 800 b. Manufacturing of products in India scanner was developed over a period of
million people have healthcare facilities. with resources increasingly sourced four years at the company’s Bengaluru
As India moves towards bridging these locally, and facility to fill this huge gap and penetrate
gaps, the market potential available for the unattended rural health centers and
c. Penetration in smaller towns and clinics. Specially tailored to address the
medical device companies can become cities largely lacking necessary
tremendous. Developing economies prevailing constraints, the scanner’s
healthcare solutions. size was reduced by half and power
are constantly seeking sustainable
and effective healthcare solutions for GE Healthcare’s strategy is already well consumption was brought down by
the masses. The low-cost equipment under way with the development of its 47%. The machine was also customized
market is expected to continue to grow affordable care portfolio. The company with a user interface simplified to
significantly with increasing awareness has designed and developed over 28 counter the lack of trained personnel
among patients and physicians. products in India that can effectively outside large cities and withstand
cater to the needs of the local population extreme Indian conditions of heat, dust,
Understanding the need of these keeping in mind the attached constraints. and humidity. 30% cheaper than its
developing markets, GE Healthcare aims It has set up various research centers imported counterparts, 500 units of the
to make affordable healthcare available through its joint ventures and other ACT scanner have been sold since its
through its Sustainable Healthcare alliances to augment GE Healthcare’s launch in 2015, and about 60 have been
Solutions (SHS) business in India, South worldwide operations. Majority of exported to other emerging economies
Asia, and Africa. With an investment the demand for these GE Healthcare in Asia and Africa. Majority of the sales
plan of over USD 300 million, the products are intended to be met through are to first time users in locations other
company’s focus lies on expanding its manufacturing operations in India. than metro and tier I city locations. The
operations in these economies through company has also partnered with various
the development of disruptive low cost, state governments to increase the reach
high-value technologies, and healthcare of the machines to each of the 631
delivery solutions. districts in India.
Medical Device Industry in India 48
Partnering with Local In addition to developing healthcare collaborated with Max Healthcare in
solutions and manufacturing its products India to conduct research on cancer
Companies for Research in India, GE Healthcare is also focused on care and technology solutions. The
and Manufacturing improving the distribution and service collaboration also intends to advance
Undertaking a predominantly organic of its equipment across the country oncology clinical skills by setting up
route, GE Healthcare’s execution of its through its subsidiary GenWorks Health. an oncology training institute. Directly
strategy in India is mainly attributed to its The company has entered several catering to the needs of the patients, GE
strategic collaborations for research and Public Private Partnerships with state Healthcare has also entered a strategic
manufacturing with local stakeholders. governments to cater to their lesser partnership with Cancer Treatment
developed regions and extend the reach Services International for the diagnosis
The company has partnered with two of its equipment to the remotely located and treatment of cancer at 25 well-
established domestic companies in health centers. equipped centers to be set up over a
majority owned joint ventures, leveraging period of five years.
their local know-how and expertise for
innovation and the advancement of
Increasing Awareness and
solutions specifically tailored for the Accessibility of Healthcare Other Initiatives
target markets. Solutions While the Integrated Development
Centre helps the company to stay close
With an aim to improve the health of to the patients and understand their
Wipro GE Medical Systems
the general populace worldwide, GE needs, the Skill India Initiative keeps
GE Healthcare Wipro Corporation Healthcare’s initiatives emphasize its the company connected to healthcare
51% 49%
three main objectives: professionals. First set up in Bangalore,
Product: Diagnostic imaging and patient
a. Continuous advancement of the IDC intends to conduct more than
monitoring equipment
healthcare technologies and solutions 1,000 scans annually as a part of clinical
b. Availability of affordable care for the trials, using GE’s diagnostic imaging
JV Partner Expertise: Information technologies. While the IDC is presently
masses
Technology solutions and engineering focused on isosmolar contrast agent
c. Competent staff enabling efficient launched by GE in 1996, its scope will be
delivery of healthcare solutions. widened to cover GE’s entire diagnostic
GE BE
The process would also help GE imaging portfolio.
GE Healthcare Bharat Electronics
Healthcare to directly stay in touch with The Skill India Initiative, GE Healthcare’s
74% 26% healthcare professionals and patients, biggest healthcare education program,
Product: X-ray tubes, high voltage tanks and thereby gaining valuable insights from aspires to train more than 100,000
detector modules for R&F and CT systems the market and increasing demand for its healthcare professionals over a period
products. of five years through institutes in every
JV Partner Expertise: Electronic equipment
for Defence and Communication sectors Cancer research and affordable cancer state in the country.
care - With over 1.2 million new cancer
The joint venture companies are cases each year, the mortality rate
responsible for the design and owing to cancer in India is very high.
manufacture of numerous products for Creating awareness and enabling timely
the global as well as domestic markets. detection as well as affordable access
The companies also provide software to cancer care are crucial to fight the
services and technological solutions for battle against cancer in the country.
GE Healthcare’s global manufacturing Availability of skilled and well-trained
activities. Products developed and healthcare professionals, makes
manufactured include ultrasound and the delivery of cancer care solutions
CT scanners, cardiology products, fetal challenging. GE Healthcare aims to
monitors, X-ray tubes, high voltage tanks, improve access to cancer care through its
detector modules for CT systems, and various partnerships with governments,
more. Facilities of the companies are clinicians, private operators and NGOs
in compliance with global safety and in areas including radiology, cardiology,
regulatory standards. critical care, fetal medicine and
leadership training.
Displaying a strong commitment to R&D,
GE’s Global Technology Operations at As part of its USD 1 billion commitment
Bangalore comprises of 650 employees for the advancement of oncology
working with GE’s teams worldwide on solutions, GE Healthcare has
software development, tables and power
components for medical systems.
49 Medical Device Industry in India
Case Study
Global US Headquartered
Medical Device Manufacturer
A Greenfield Set-up (Circa 2006-2009)
This case study discusses the Company’s strategy to expand and optimize
its global manufacturing footprint through high-quality products
manufacturing in India
Understanding the focused factory initiatives. This strategy • Availability of highly trained and
was core to its overall objective of knowledgeable professional human
manufacturer globally delivering high quality, reliable and cost- resources at competitive costs
This firm is an independent, global competitive products to its customers. • Universities and colleges producing
employee-owned US company that over 400,000 engineering graduates
develops, manufactures and markets The firm investigated various options
worldwide. A detailed study was every year
healthcare products and services
worldwide. The company’s healthcare conducted for several manufacturing • A rapidly growing product engineering
portfolio includes consumables, Ostomy regions of the world including Latin capability and a world class
Care, Continence Care, Wound Care and Central America, Eastern Europe information technology industry
and Critical Care products. Growing (now EU countries), Pacific-Rim and
from its humble beginnings in the mid- South East Asia. Some of the factors 2. Existing Eco-system for
west region of USA, the company now that formed part of their exhaustive Manufacturing
has a presence across the Americas, evaluation included the availability of • The tooling and machinery industry
Europe, Middle East and Asia Pacific, skilled labor, quality of management, which produced equipment locally at
with multiple manufacturing and ease of communication, safeguarding significantly reduced costs
distribution facilities located across the of technologies and copyrights, export
regulations, and much more. The • The construction cost was significantly
globe, including India. Presently, the less than in many other parts of the
company has direct operations in about company also undertook inflation
analysis over a long term period between world
40 countries and sells its products in over
100 countries. developed US / Europe and India. • Increasing availability of raw material
suppliers
Eventually, the company narrowed down
• Capability to build a facility that meets
Firm’s Objectives on Asia-Pacific, and within those region
both GMP and RA requirements of the
countries like India, China, Thailand,
1. Achieve World Class status in US. India had at the time the largest
and Malaysia. These were countries
manufacturing and supply chain number of US FDA approved facilities
where the firm’s markets were growing
with a competitive advantage in the outside of the US anywhere in the
at more than twice the rate as other
continence care products space. region. Contractors were available for
markets, margins were lower and had
2. To further the strategic direction of no manufacturing base. All previous building Class 100K to 1K clean rooms.
the focused factories. locations of the company were in the USA
3. Add capabilities for supporting other and Europe.
business processes closer to the
intended markets. Finalizing the Location -
The firm’s decision to set up its new
Making in India for the
manufacturing plant in an emerging World
economy was preceded by a thorough Based on its detailed study, India was
evaluation of all the pros and cons of chosen to be the location for the firm’s
entering an unfamiliar territory. This next global manufacturing plant. The
evaluation included the utilization primary reasons for its selection were:
of local professional consultants for
validation of various studies. The 1. Availability of talent pool
company’s strategy was to set-up a world • Large skilled population with an
class facility for a specific range of global average age of 29 years
products, complimenting their other
Medical Device Industry in India 50
3. Conducive environment in US and Europe to support the global 2. The company factored in the effects of
• Incentives for manufacturers to set-up demand. The facility meets the safety inflation, production of incremental
in India and regulatory standards specified by US units, and other such aspects. in
• Higher labor productivity was FDA, CE, CDSCO India and several other its projections to be as close as to
comparable to many regions of the local and international regulatory bodies, practically achievable. Although the
world and it is accredited with the latest ISO inflation rate in India was higher
certifications. Set up with strong support than developed countries, however,
• English is the primary business from the Haryana State and Industrial considering the low cost base in India,
language Development Corporation (HSIDC), the the analysis showed that the new
• Intellectual Property Rights laws that plant boasts of advanced manufacturing location would remain competitive for
conform to WTO norms technology and equipment and is the the period of evaluation and longer.
• Better cultural fit, a stable democratic greenest facility amongst the company’s
several facilities. 3. The company also outsourced most
political system of its non-core operations including
The State of Haryana, in North India In comparison with the firm’s global payroll, taxation, security, janitorial,
was finalized for location because of the operations, the firm could bring down cafeteria services and transportation,
presence of a medical devices cluster net manufacturing costs significantly. to focus completely on its core
of consumables, dental equipment and In its formative years of operation manufacturing objectives.
pharma companies. The establishment in India, the firm kept the same raw
of a strong relationship with the State material suppliers to reduce the 4. The funding of the project was
government during the investigative variables. However, over time the internally financed through a
process further promoted the company’s company was able to qualify local and combination of equity and External
decision. Since the firm’s investment, this regional suppliers for majority of its Commercial Borrowing (ECB), which
cluster has further enhanced and counts requirements including sterilization, lowered the cost of capital and aided
domestic and international companies improve manufacturing process flow, in breaking-even faster.
such as Becton Dickinson, Baxter, Abbott reduce freight costs and bring few of 5. The firm also devised a robust HR
Labs, Ranbaxy, Hindustan Syringes, its high quality products closer to the Strategy very early on to attract,
Narang Medicals, Poly Medicure, BL market place. develop, and retain human resources
Lifesciences and others within its aligning with the company’s global
boundaries.
Critical Success Factors culture, coupled with effective internal
communications worldwide. This
The firm’s success in India lies in
Thorough Planning, unlocking benefits from each variable in
was very critical for the company to
manage its operations successfully
Effective Execution a systematic and well-planned manner.
in a foreign territory. Its attrition
The company was allotted land Servicing global demand at competitive
rate remains the lowest in that
at an attractive price by the State costs without any compromise on
geographical region.
government in the vicinity of the NCR quality, often exceeding and pushed the
region (Delhi area) which is easily product margins to an acceptable level Make no mistake, the project of this
accessible from a major airport under for the company as a whole. magnitude had its share of challenges.
the Special Economic Zone (SEZ) / However, overall it was a huge success
To ensure success, the firm implemented
Export Oriented Unit (EOU) schemes and validated over time. At the macro
a systematic step by step plan that
with zoning requirements that allowed level, the company’s business case was
enabled learning and minimized
for at least 200,000 plus square feet sound. The company could realize all
mistakes and mitigated major risks, as
of manufacturing facility including the gains and more with a significant
envisioned in the business plan. Some
future modular expansions. Primarily amount of control owing to its thorough
of its critical success factors are listed
set up as an export unit, the products preparedness and effective execution
below:
manufactured at the Haryana facility of its strategy. It also provided a new
complement and support the company’s 1. They entered the new locale and platform for the firm’s growth in an
global operations. In the eight years gradually unlocked other variables earlier unchartered territory.
since it commenced manufacturing in such as the sourcing of materials and
India, the company has produced and services. This phased approach was a
exported well over hundred million major contributor to the company’s
units of urinary catheters and other successful track record in India
continence care products. as it minimized RA and FDA-QSR
qualifications all at one time, and gave
This plant has expanded considerably them time to leverage each of the
over the years and today has other variables.
approximately 500 employees on direct
payroll and generates several hundreds
of indirect jobs, not including many more
51 Medical Device Industry in India
Case Study
InnAccel
Driving Affordable Innovations for
Emerging Markets
Case Study
Narayana Health
Revolutionizing Healthcare Delivery in India
Process Innovation: A bypass surgery is USD1,500 (INR 90,000) graft procedure are as good as that of
compared to USD 144,000 in the US, US hospitals. The incidence of bedsores
Model that tied Quality USD 27,000 in Mexico and USD 14,800 after a cardiac surgery globally lies
with Affordability in Indian in Colombia. Interestingly, NH’s cost of anywhere between 8% and 40%. At NH, it
Healthcare cardiac surgery is significantly lower than has been close to zero for many years.
what it was in India 13 years ago. Larger
India boasts 750,000 doctors and 1.1 volumes of open-heart surgeries and
million nurses, but practitioner density is Economies of Scale
catheterization procedures every day
about one-fourth of what it is in the U.S. allowed the medical team to decrease The model conceptualized by Dr. Shetty
and less than half that of China. Hospital the cost of each surgery. At NH, each leverages economies of scale by building
beds are in short supply and many surgeon performs anything from 400 mega hospitals and attracting huge
medical facilities are dated, cramped, to 600 procedures a year, compared volumes of patients. The aim was to
and often unhygienic. In a country where with 100 to 200 by surgeons in the U.S. target well-off patients so that the quality
the nominal per capita income is around Doctors go from one operating table to of care is not compromised. But at the
USD 1,500 a year, patients typically the next with an assembly line precision same time, they aspire to serve every
have to pay 60% of their healthcare that is rare in the Indian healthcare patient irrespective of their economic
expenses from their own pockets. While system. Given the numbers, one would status, thus enabling a low-cost model.
discussed earlier, these statistics provide assume that the entire process would This model works because high volumes
a perspective on the unmet needs be chaotic. However, NH has ensured ensure that the enterprise is profitable,
of Indian patients for good medical a high-quality systematic process while although the unit economics might be
treatment. scaling up the capacity. It has ensured otherwise. As a result, NH has never been
focus on the following to enable dependent on government subsidies,
Dr. Devi Shetty founded Narayana insurances or reimbursements. NH
Hrudayalaya (later renamed Narayana quality healthcare to be provided in an
affordable manner. has also institutionalized a number of
Health or NH) in 2001 in Bangalore. His aspects of healthcare delivery, some of
mission was to successfully tie affordable which are as follows:
healthcare delivery with quality. NH, Commitment to Purpose
which started with humble beginnings • Facility use was increased through a
Commitment to purpose is the shift system wherein the operation
with a 280 -bed hospital has transformed most crucial success factor in
into an organization with 24-hospitals, theatres are occupied for long
achieving exemplary execution. A hours providing higher utilization of
seven heart centers and a center in lot of organizations state their vision
the Cayman Islands. Today, NH has a expensive hospital capital equipment.
and mission but rarely follow them
network of 5,600 operational beds that stringently. NH is steadfast in pursuing • The large numbers of patients that
offer care in 30 specialties. its vision and encourages employees to come for treatments enable doctors
work towards its purpose to do collective to focus on specific types of medical
problems. As volumes increase,
Heart Surgeries: Craft to good. Due to this single-minded
relatively rare conditions are treated
focus and commitment to execution,
Increase the Number of NH attracts the best medical service so often that doctors become world-
Procedures providers who are inclined to provide the class experts in those areas. This
best care possible, irrespective of their explains how NH has become a global
Dr. Devi Shetty believes that hands that
means. leader in pediatric open-heart surgery,
service is more sacred than lips that
attracting patients from across Asia
pray. Dr. Shetty is sometimes described
and Africa
as the Henry Ford of heart surgeries Uncompromising Quality
because his hospitals have managed
The lower costs have not come at the
to achieve economies of scale due to
expense of quality. NH’s mortality
the sheer number of procedures they
rate (1.27 %) and infection rate (one
undertake in a day. NH’s average cost of a
percent) for a coronary artery bypass
Medical Device Industry in India 54
• From the beginning, NH has focused Expansion Through Other Cross Border Expansion
on upskilling its staff. It encourages
general physicians to become Models Recently, the Directorate General of
Medical Services of the Bangladesh
specialists and specialists to become NH has looked at all kinds of Armed Forces entered into a MoU with
super-specialists. It trains nurses to collaborations, associations, and tie-ups NH to cooperate on patient care, medical
advance to the higher-skilled position to achieve the kind of scale it is looking education, research and training in
of nurse intensivist, akin to a nurse to build: exchange for healthcare professionals.
practitioner in the US. NH is also already running a tertiary care
Management Contracts
• NH encourages its doctors to be hospital in a JV with Ascension Health in
prudent in providing healthcare. It The company is taking over poorly run the Cayman Islands.
shares P&L information on a daily hospitals. For example, NH manages the
basis with doctors to make them MMI Hospital in Chhattisgarh. Since it
understand the costs, and suggests took it over, it has increased the number Conclusion
cost cutting measures to reduce of beds and upgraded the radiology, NH is revolutionizing in its own way
overall cost incidence to patients. emergency and trauma centers. It healthcare in India by bringing together
further manages the cardiac centers quality, affordability, and profitability
attached to medical college hospitals with success. They have demonstrated
Task Shifting such as SS Medical College, Davangere that the healthcare delivery sector can
Private healthcare institutions like and SDM Medical College, Dharwad, to use process innovation to improve
NH in India have taken task-shifting a name a few. quality and dramatically lower costs for
notch higher by creating new layers of patients, process improvements, better
healthcare workers that are relatively Selective and Joint Investments manpower and capital productivity,
inexpensive. NH has teams consisting thereby significantly improving patient
of a specialist, junior doctors, trainees, Working with organizations interested
affordability and access. These benefits
nurses, and paramedical staff. It restricts in partnering with them, who are willing
are further multiplied through scale.
specialists to conducting the critical to build hospitals in locations that are
part of the surgery and expects the underserved. While the organizations/
junior doctor to carry out the rest of individuals make the investment in land
the procedure, thereby freeing up the and building, NH invests in the medical
specialist to conduct more surgeries in assets.
a day. The high volume of procedures
allows NH to reduce the costs of Speciality Tie-ups with Other Private
individual procedures, thereby attracting Hospitals
more patients. Through the setting up of embedded
heart centers in other hospitals such as
Supply Chain Efficiency Chinmaya Mission, MS Ramiah Mission
High volumes of patients and procedures and St. Marthas on a revenue sharing
have enabled NH to have a stronger model, where the civil infrastructure
purchasing power for their medical is already present and the hospital
supplies. An interesting aspect of its infrastructure specific to heart and
purchasing practice was to: specific specializations need to be set up.
AdvaMed and SKP would like to acknowledge the valuable contribution and participation of various industry personnel who
shared their point of view, insights and guidance.
Guljit Singh Deepti Ahuja Ravi Menon For any questions/feedback related
Executive Chairman Vice President Senior Business Advisor to the paper, please contact
SKP Business Advisory and Global Sales Healthcare Sector
North America
SKP SKP
Nimish Shah
Nimish Shah Abby Pratt Harshal Choudhary nimish.shah@skpgroup.com
Vice President Vice President Manager
Rest of the World
North America Sales Global Strategy and Analysis Business Advisory
Ravi Menon
SKP AdvaMed SKP
ravi.menon@skpgroup.com
SKP’s Healthcare
Practice
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