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Indian Healthcare Sector

December, 2013

The Indian healthcare industry, which comprises hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance and medical equipment, is expected to reach US$ 160 billion by 2017, as per Frost & Sullivan.

India's healthcare system is developing rapidly and continues to expand its coverage, services and expenditure in the public as well as private sectors. This is creating a large market for hospital information systems and other healthcare-related IT solutions.

The Indian medical device and equipment market is expected to grow to around US$ 5.8 billion by 2014 and US$ 7.8 billion by 2016, growing at a compound annual growth rate (CAGR) of 15.5 per cent, according to a report by Grant Thornton India. India’s medical device market is currently the fourth largest in Asia with 700 medical device makers, and ranks among the top 20 in the world, as per data from India Semiconductor Association.

Market Size

The hospital and diagnostics centre in India received foreign direct investment (FDI) worth US$ 2,057.29 million, while drugs & pharmaceutical and medical & surgical appliances industry registered FDI worth US$ 11,391.03 million and US$ 720.41 million, respectively during April 2000 to September 2013, according to data provided by Department of Industrial Policy and Promotion (DIPP).

The Indian medical device and equipment market is expected to grow to around US$ 5.8 billion by 2014 and US$ 7.8 billion by 2016, growing at a CAGR of 15.5 per cent, according to a report by Grant Thornton India. India’s medical device market is currently the fourth largest in Asia with 700 medical device makers, and ranks among the top 20 in the world, as per the data from India Semiconductor Association.

On the back of continuously rising demand, the hospital services industry is expected to be worth US$ 81.2 billion by 2015. In addition, the Indian hospital services sector revenue is expected to increase at a CAGR of 20 per cent during the period 2012–17, generating immense possibilities for players in the market, according to a RNCOS report titled, ‘Indian Medical Device Market Outlook to 2017’.

Trends and Investments

The Indian healthcare providers plan to spend Rs 5,700 crore (US$ 916.40 million) on IT products and services in 2013, a 7 per cent rise over 2012 revenues worth Rs 5,300 crore (US$ 852.09 million), as per a report by Gartner.

Initiating a new era of quality health facility, telemedicine services were launched by Mr Nitish Kumar, Chief Minister of Bihar, in Patna-based prominent hospitals and those in 22 districts and 82 primary health centres of Bihar.

The Amrita Centre for Nanosciences and Molecular Medicine has developed a nano-medicine that, it claims, will dramatically improve the treatment of drug-resistant chronic myeleogenous leukemia (CML, a form of blood cancer), when used in combination with ‘Imatinib’, the standard drug for CML.

The following are some of the major investments in the sector:

  • Trivitron Healthcare has joined hands with India Value Fund Advisors (IVFA) to finance its next phase of growth. IVFA has invested Rs 150 crore (US$ 24.12 million) for a minority stake in the company.
  • IDFC Alternatives has invested Rs 125 crore (US$ 20.10 million) in Medi Assist Healthcare, a development that continues to reiterate risk capital's strong focus on the sector.
  • Cadila Pharmaceuticals Ltd (CPL) has decided to invest another Rs 100 crore (US$ 16.08 million) on expansion, upgradation and modernisation of its manufacturing unit at Samba in Jammu district.
  • Apollo Hospitals and Medtronic Inc are to collaborate to bring an innovative, affordable and portable haemodialysis system in India that can help improve access to care for end stage renal disease (ESRD) patients who need renal replacement therapy. Medtronic intends to develop and manufacture key components of this haemodialysis system in India which will be ready for commercial launch in 2016, the companies said in a joint statement.

Medical Tourism

Health tourism is gaining momentum in India. While quoting from a McKinsey study commissioned by the CII, Mr Vayalar Ravi, Union Minister for Overseas Affairs, Government of India, highlighted that the health tourism industry in India could become a US$ 5 billion business by 2015.

With the finest and experienced specialists and technological edge along with latest equipment and state-of-the-art infrastructure, Indian health tourism industry is gaining momentum.

The industry in India is also expected to record revenue worth US$ 1 billion per annum, growing at around 18 per cent and is expected to touch US$ 2 billion by 2015. India has witnessed an influx of patients from Africa, CIS countries, Gulf and SAARC nations, Pakistan, Bangladesh and Myanmar, who mainly come for organ transplant, orthopedic, cardiac and oncology problems.

Kerala has the potential to become the hub and most preferred destination for health tourism with highly qualified doctors and some of the best hospitals and resorts in the country, highlighted Mr Oommen Chandy, Chief Minister, Kerala. Furthermore, Mr A P Anil Kumar, the State Tourism Minister, pointed that Kerala is the fastest growing tourism destination in India. Last year, 1 million foreign and 10 million domestic tourists visited the state.

Government Initiatives

The Republic of Hungary has signed a bilateral agreement with India for promotion and development of traditional systems of medicine. The memorandum of understanding (MoU) will boost bilateral cooperation between the two countries in the areas of traditional medicines, which will open new vistas for exploring the potential of economic, commercial and tourism development in both the countries.

The Government of India has allocated Rs 3,000 crore (US$ 482.32 million) in the 12th Five-Year Plan (2012–17) for development of the medical device sector, said Mr S Eswara Reddy, Deputy Drugs Controller of India. With medical devices to be brought under the ambit of the Drugs and Cosmetics (Amendment) Bill, 2013, the Government is looking to strengthen its infrastructure to oversee this sector.

Moreover, 100 per cent FDI is permitted for health and medical services under the automatic route. Also, the Department of Health Research has decided to set up a Medical Technology Assessment Board to evaluate all kinds of Medical Technologies.

Road Ahead

India is a land full of opportunities for players in the medical devices industry. The country has also become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of population. Besides, Indian medical service consumers have become more conscious towards their healthcare upkeep. The diagnostic lab services have been witnessing an increase in the number laboratory tests being outsourced to India. The coming years will see a rise in the share of the organised players in the diagnostic services market.

The favourable demographic virtues offer an attractive market for healthcare providers and investors in India.

Exchange Rate: INR 1 = US$ 0.01609 as on December 13, 2013

References: Department of Industrial Policy and Promotion (DIPP), Union Budget 2012-13, RNCOS Reports, Media Reports, Press Information Bureau (PIB)