India - HealthcareIndia - Healthcare

Overview
The Indian healthcare industry is experiencing a rapid change and has become one of India’s largest sectors, both in terms of revenue and employment.  Though this change has been underway for many years it has become significantly visible in the last decade, with a renewed thrust from both the government and a growing market for healthcare services and products.  Rapid economic growth, rising middle class incomes, and a surge in lifestyle diseases have created a booming life science market.

Healthcare in India comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.  The $150 billion market in 2018 is expected to reach $280 billion by 2022 due to increased demand for specialized and quality healthcare facilities.  The market is dominated by private players.  The industry is rapidly developing, fueled by large investments from existing corporate hospital chains and new entrants backed by private equity investors.  This growth will be driven by healthcare facilities, private-public projects, medical diagnostic and pathological laboratories, and the health insurance sector.  In addition, changing demographics, disease profiles, and the shift from chronic to lifestyle diseases in the country has led to increased spending on healthcare delivery.

The Indian population of over one billion is growing at a rate of 1.6 percent per year.  An ageing population of over 100 million, rising incidences of lifestyle diseases, growing incomes and increased penetration of health insurance are fueling industry growth.  Considerable challenges exist in terms of service accessibility and patient care quality.  Government support plays a significant role in the overall development and growth of the sector.

High upfront investments, long gestation periods, and rising real estate costs are compelling private players to innovate with business models and to expand into under-penetrated Tier II and Tier III cities.  As a result, these private players can capitalize on the opportunity to expand.  The private sector is likely to contribute 80-85 percent of the $86 billion healthcare investment required by 2025.

India presents both opportunities and significant challenges in the healthcare sector.  The medical device industry is a very attractive export sector for U.S. firms, despite many challenges.  Non-tariff barriers and the expansion of price controls to medical devices could further constrain market prospects.  Weak intellectual property protection and enforcement hinder exports for the biopharmaceutical industry.  While India’s market has undergone significant economic growth over the last twenty-five years, it remains difficult to navigate.  India should be a part of a company’s long-term business plan rather than a first-to-export destination.

The Indian medical device market is worth an estimated $9 billion and is expected to exceed $14 billion by the end of 2025.  The medical device industry is a very attractive export sector for U.S. firms, which account for one quarter of exports to India.  India imports nearly 75 percent of its medical devices and barriers to entry are low compared to other industries.  India remains highly dependent on imports for many types of medical devices, particularly higher end products that include cancer diagnostics, medical imaging, ultrasonic scans, and PCR technologies.  Imports are growing rapidly as world-class hospital groups such as Max, Hinduja Group, Fortis and Apollo build high-end infrastructure and open India to medical tourism, which now adds $2 billion to the Indian healthcare market.

Health insurance is gaining momentum in India. Currently, 15 percent of the population is covered by government health insurance companies and 2 percent by private health insurance. For the purpose of regulation, health insurance companies are classified as non-life companies.  General Insurance companies are called Non-Life companies in India.  The penetration of health insurance will significantly increase the affordability of healthcare services for the population. Several private insurance companies have entered the market and have empaneled hospitals to provide cashless treatment to subscribers of insurance companies.

In India, healthcare is provided through primary, secondary, and tertiary care hospitals. The first two categories are fully managed by the government.  While the tertiary care hospitals are owned and managed by either the government or private sector, the private sector’s contribution to healthcare has been growing at a faster pace than the government.  The medical infrastructure market is estimated to have a growth rate of 15 percent.  Both the government and the private sector are planning several new specialty and super-specialty hospital facilities, as well as modernization of existing hospitals.  India currently faces a chronic shortage of healthcare infrastructure, especially in rural areas and Tier II and Tier III cities, and it is expected that India will have a potential requirement of 1.75 million new beds by the end of 2025.  The opportunity also exists for overseas organizations to set up hospitals in India through Foreign Direct Investment.  The hospital services market, which represents one of the most important segments of the Indian healthcare industry, is currently valued at $80 billion and accounts for 71 percent of the industry revenues. 

The new specialty and super-specialty hospital facilities depend on the import of high-end medical equipment, accounting for over 65 percent of the entire market.  There is a need for sophisticated hospital equipment, especially operation theatre products and training through simulation labs.  In view of the relatively low customs duty rates (9.2 – 15 percent) combined with an increasing number of healthcare centers specializing in advance surgery, India offers opportunities for the direct supply of high-technology, specialized medical equipment, products, and systems.

Biotech is one of the fast-growing segments of the life sciences sector and represents a diverse opportunity for foreign firms.  The Indian biotech industry has an approximately 2 percent share of the global biotech industry.  The industry comprises of about 800 companies and is expected to grow from the current $5-7 billion to $100 billion by 2025.  India has emerged as a leading destination for clinical trials, contract research, and manufacturing activities owing to the growth in the bio-services sector.

The boom in medical tourism in the Indian healthcare sector is encouraging hospitals and hoteliers to strike alliances with each other. The presence of world-class hospitals and skilled medical professionals has strengthened India’s position as a preferred destination for medical tourism.  The healthcare industry is now proactively creating standards for the medical tourism industry with the help of credit rating agencies, insurance companies, and others involved in the self- regulation of the sector.  According to industry estimates, the medical tourism market is expected to grow from $3 billion to $7-8 billion by 2020.

E-healthcare/Telemedicine, though in its infancy in India, is beginning to take root. Most public hospitals (funded by state governments) and private single and multi-super-specialty hospitals have incorporated customized Hospital Management Systems and other medical based IT products.  Given the poor availability of quality healthcare facilities outside the large and second tier cities, telemedicine is expected to become viable business proposition.  Several major private players like Apollo, AIIMS, and Narayan Hrudalaya have adopted telemedicine services.  With increased private participation, the healthcare sector has also witnessed rise in FDI inflows.  The Government of India (GOI) has permitted 100 percent FDI for all health-related services under the automatic route. 

Refurbished medical laboratory instruments also find a ready market in India.  These instruments are used as back-up machines in top-of-the-line hospitals. Less sophisticated hospitals and district hospitals view refurbished medical laboratory instruments as optimal for their laboratories because the investment cost is substantially lower than for new instruments.  Some international companies operating in India also sell used medical laboratory instrument to their Indian customers. Also, Indian hospitals and agents demand continuous service support for these instruments and require spares when needed.  U.S.  companies in the used/refurbished medical instruments business may consider setting up liaison offices in India to promote their products.

There are several restrictions on the import of used equipment in India, prescribed by India's import-export policy.  Second-hand capital goods with a minimum residual life of five years can be imported by actual users of such equipment without a license.  The importer is required to furnish a self-declaration to the customs department specifying the residual life of the second-hand capital goods in a prescribed format.   The refurbished equipment shall not be transferred, sold or otherwise disposed of within a period of five years from the date of import, except with prior permission of the Director General of Foreign Trade (DGFT).  While selling, U.S. firms should remember that valuation of used equipment is a very technical area with frequent disputes between customs and the importer.   Spares, including accessories and tools for the maintenance and operation of such equipment, can be imported to the extent of 15 percent of the value of the equipment.   India is a high-cost economy for capital equipment, and Indian manufacturers and investors constantly seek to reduce their capital costs.  For this reason, demand for refurbished and reconditioned equipment is high across a range of industry sectors.  The best opportunities for U.S. firms to pursue are in the industry sectors of construction, mining, medical, machine tools, plastics, steel, oil refining, computers, printing, packaging and dairy equipment.  While rates of customs duty vary from product to product, generally it’s lower for used equipment as compared with new equipment.

To ensure quality healthcare, in October 2005 the GOI increased the list of medical devices covered under the Drugs and Cosmetics Act of 1940, bringing several categories of implantable devices under regulatory control. This list was further revised in October 2018, bringing several additional categories of implantable devices under regulatory control.  The New classification of Medical Devices: Device with lowest risk – Class A; devices with low-moderate risk – Class B, devices with moderate-high risk – Class C; and devices with high risk – Class D.

The new GOI Rules have eliminated the need for constant re-approval of manufacturing and import licenses and these licenses have now been made valid for perpetuity unless the license is suspended, terminated or surrendered.   An approved central licensing authority must license these devices for manufacture, sale, or distribution.  Hospitals are also seeking quality accreditations like JCI, NABH, and ISO.

Units: $ millions
 

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)
Data Sources:  Global Trade Atlas, and unofficial estimates from trade sources and industry.  As this industry has not been well documented in the Indian context, the estimates of industry size vary significantly across different sources.
Imports from the U.S.: United States Census Bureau

Sub-Sectors Best Prospects
The most promising sub-sectors in the healthcare and medical equipment sector are:
Medical Infrastructure
Medical and Surgical Instruments
Medical Imaging
Electro Medical Equipment
Orthopedic and Prosthetic Appliances
Cancer Diagnostics
Ophthalmic Instruments and Appliances
Orthodontic Equipment’s and Dental Implants
Point of Care Testing (POCT) Diagnostic devices

Opportunities
The growing demand for quality healthcare and the absence of matching delivery mechanisms pose a challenge and certainly a great opportunity. In Infrastructure – building, equipping, managing, and financing of super-specialty hospitals in India through the FDI route is another area for future growth.

A proper supply of equipment and medical consumables will also be an area with significant opportunity for U.S. companies.  Several leading U.S. purveyors of hospital equipment and supplies have opened Indian operations to cater to this growing market.  India has become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities.

Health insurance and hospital administration is another area in which U.S. companies can make a difference.  This opportunity includes introducing and maintaining industry standards, and also classifying and certifying healthcare centers. 

Other growth areas include diagnostic kits, reagents, hand-held diagnostic equipment, and simulation for operating rooms.  Imports constitute 50 percent of this market. Hand-held/portable diagnostic equipment (e.g. for blood sugar, blood pressure testing, etc.) is also a fast-growing segment since India has around 45 million diabetics, which is expected to swell to 70 million by 2025.

For more information about export opportunities in this sector contact U.S. Commercial Service Industry Specialist: Ruma Chatterjee at Ruma.Chatterjee@trade.gov 

Web Resources
Central Drug Standard Control Organization (CDSCO)  https://cdsco.gov.in/opencms/opencms/en/Medical-Device-Diagnostics/Medical-Device-Diagnostics/    
Ministry of Health and Family Welfare (MOHFW)  http://mohfw.nic.in/
Indian Medical Association  http://www.ima-india.org
The Medical Council of India (MCI)  http://mciindia.org
The Federation of Obstetric and Gynecological Societies of India  http://www.fogsi.org
The Association of Indian Medical Device Industry  http://www.aimedindia.com/
Invest India (National Investment Promotion Agency)  https://www.investindia.gov.in/sector/medical-devices