India is the 4th largest market of medical devices in Asia and counted amongst the top 20 markets in the world. In 2020, the total market was estimated to be US$5.2 billion and is projected to reach US$50 billion by 2025. However, most demand for medical devices in the country is currently met through imports, comprising ~80% of the total sales. This high import dependency offers an attractive proposition for domestic manufacturers. At present, the Indian companies are largely involved in manufacturing low-end products for local as well as international consumption.
Impact of COVID-19
The ongoing COVID-19 pandemic has exposed the medical devices sector to several challenges as well as opportunities. In addition, the industry is also coping with disruptions to businesses caused by the outbreak. Some challenges include disruption to supply chain and adverse impact on financial expectations, operations and crisis response plans. The need for an adequate volume of products has put manufacturers to test; with rising cases of COVID-19 and limited capacity, the industry was forced to swiftly advance to combat the crisis. These disruptions have outlined the perils of high import dependency of this sector.
However, this ongoing crisis has also presented immense opportunities that were unexplored before. For example, previously, the use of advanced and complicated medical devices was limited to bigger multi-speciality hospitals, but due to COVID-19, limitations on treatment and patient movement have led to the adoption of these devices in even smaller healthcare institutions.
Further, the transmissible nature of the virus has led to more people preferring home care, resulting in the increased demand for medical devices, which can be used at home.
As a result of the pandemic, several new manufacturers started production in the country. For example, before COVID, there were only 20 firms manufacturing 62 lakhs PPE kits per year, but within 2-3 months, the number of manufacturers has increased to 140 with annual capacity of 25.55 crores. Similarly, the number of Indian manufacturing firms, including ventilator manufacturers went up from 8 to 17, mask manufacturers from 30 to 108, swab manufacturers from 0 to 5, sanitizer manufacturers from 35 to 49 and RT PCR kit manufacturers from 0 to 8.
The medical devices industry in India not only offers opportunities by its size, but the regulatory environment is also favourable to set up a manufacturing unit in this field. In 2017, the government implemented ‘The Medical Device Rules, 2017’ (MDR) and overhauled the regulatory framework for the medical devices sector to bring it at par with international norms. The govt. introduced the concept of ‘risk-based’ regulation and issued regulatory licences to import, manufacture, or sell medical devices. This has significantly reduced the effort and time on unnecessary and time-consuming paperwork.
The Indian government also allowed 100% automatic FDIs, i.e., FDIs do not need any prior regulatory approvals into the sector and have started setting up MedTech Parks—dedicated industrial areas to encourage manufacturing at lower costs.
Though the govt. is simplifying regulations for medical devices, the slow pace is a concern for the industry. By 2021, only 29 medical devices would be under the purview of MDR, while there are over 1,700 types of medical devices in the global market.
The key challenges mentioned by healthcare companies in manufacturing medical devices in India include lack of adequate infrastructure and logistics, concentrated supply chains and high cost of finance.
While the government is trying to simplify regulations and paperwork, the landscape is still complex; marked by the presence of many high-level government bodies at the state and central levels. Also, India’s per capita expenditure on health is among the lowest in the world.
The government’s focus on self-reliance is appreciative but the changes need sustained financial as well as policy support from the government. However, the recent announcement of awarding production-linked incentives for domestic manufacturing, which is slated to provide financing to the tune of US$425 million, and an additional US$52 million infrastructure financing in medical parks are expected to boost domestic production in the Indian medical device industry.
The Way Forward
While opportunities in the medical devices sector are immense, but to be able to position itself strongly in the post-pandemic world, India needs to continue its efforts to create an encouraging environment for domestic manufacturing of medical devices. It will be vital for India to re-strategize a long-term roadmap to promote this industry. The first focus should be on enhancing competency of the Indian medical devices sector through skilling, upskilling and reskilling, in alignment with the medical and technological advancements. The second target should be expanding access and opportunities through collaborative policy support for both demand and supply side of the medical devices industry.
Though the govt. has taken some initiatives and policy measures to lift the medical device industry, there is more room to boost this industry. An ecosystem of key stakeholders including stalwarts from medical device industry, the government and academia, is imperative for the effective use of resources and scalability. Finally, the roadmap should focus on innovation and research & development as a strong pillar of the medical device manufacturing ecosystem.
To sustain innovation and develop medical devices industry in a post-COVID era, the government should continue working with private sector, investors and academia and chart out necessary incentives and supportive action.
It was noted that COVID-19 brought in financial challenges for buyers and suppliers and hence, a robust funding mechanism to nurture an innovative ecosystem will have to be prioritised.
At present, the medical devices industry is at a nascent stage, which can be accelerated by creating an efficient ecosystem, developing skills, and supporting ease of doing business and growth enablers. These goals can be achieved through introducing regulatory and policy reforms, fostering research & innovation, offering funding opportunities and facilitating testing and certification to scale up manufacturing.
India will emerge as a trusted partner for the world for medical devices and is poised for exponential growth through a futuristic and collaborative approach.