Confederation of Indian Industry

Since 1895

Medical technology
industry in India
Riding the growth curve

July 2010
2
Contents

Foreword from CII 4

Preface from Deloitte 5

Introduction 6

Market size and structure 9

Key growth drivers 10

Key challenges 12

Burning need: Frugal innovation 15

The four pillars of innovation 18

Collaboration – a key success factor 20

The way forward 22

Appendices 23

About CII 24

About Deloitte 25

Contacts 26

Medical technology industry in India Riding the growth curve | 3

Foreword from CII

The opening up of the Indian economy during the early crust of society but has also helped the poorer lot e.g.
nineties heralded an era of unprecedented industrial reduction in IMR/MMR due to usage of right technology
growth in India. The growth rates seen match those e.g. incubators, warmers, better OT equipments.
of the fastest growing economies. A confident and
resurgent Indian Industry is making forays into almost all The Confederation of Indian Industry (CII) being a
the sectors of economy. Lately, the huge opportunities stakeholder in the growth of the Indian economy, has
for growth within the domestic and global healthcare taken some major initiatives in the field of Healthcare
sector have attracted the attention of Indian industry. and Medical Technology. CII has formed the National
Committee on Healthcare and CII Medical Equipment
The Indian Healthcare system has notched up several Division which give a sharper focus to the Sector since
significant achievements over the last 50 years particu- last several years.
larly in terms of life expectancy, infant mortality rate
and success in dealing with various dreaded diseases. CII, through its Medical Equipment Division, works
However, easy accessibility of quality healthcare and towards the development of the Medical Technology
affordability to the citizens at large are key concerns. Industry by providing a nodal point of reference for
the Industry, providing a forum for dialogue with the
Technology in the last two decades has revolution- customers & government and formation of appropriate
ized the way healthcare is delivered worldwide. It has regulatory structure.
greatly aided patients and providers alike by enhancing
the quality of delivery, reduction in turnaround time of We hope that this report will enable the domestic and
workflows and thus the overall cost, besides bringing in the global Medical Technology companies to understand
higher accountability into the system. Advancements in the emerging business opportunities and the health-
medical technology are playing a positive role in saving care ecosystem in India. Further, this will help major
lives. The influence of medical technology is all pervasive companies to understand the Indian capabilities for
- its positive impact is not only limited to the upper making investments in India in this sector.

4
Preface from Deloitte

The Indian healthcare market was estimated at US$ 35 The foremost among these is the lack of - affordability,
billion in 2007, and has been witnessing double digit accessibility, awareness and availability. A key question,
growth rates in recent years. However, this growth is therefore, is how to increase penetration of medical
largely fuelled by demand from major cities. India’s technology to improve health outcomes in India?
healthcare system is paradoxical - on the one hand, it
boasts of ‘best in class’ healthcare delivery attracting The answer lies in innovation. Medical technology
medical tourists from across the world, and on the innovation can be the tool to make modern care acces-
other, it is characterised by a near absence of accessible, sible, available and affordable to all by lowering the cost
affordable quality health services for a large part of its of the product or delivery. Innovation need not only be
population. Existing infrastructure, especially in smaller restricted to products. Business model innovation across
towns/ rural areas, is inadequate to meet the ever- the value chain (manufacturing, distribution, marketing
growing needs of the Indian population. Less than 10% etc.) and frugality can often generate significant benefits
of the population is covered under health insurance, and to all stakeholders, including patients/end users.
India has less than 1/3rd doctors per capita compared
to China, and almost one hundredth compared to that For innovation to make an impact, collaboration
of USA. between the stakeholders in the medical technology
ecosystem is a key success factor. The industry must
Adding infrastructure and medical professionals alone move from ‘company-centric’ innovation, towards
will not be able to solve India’s huge unmet needs in ‘co-creation’. All stakeholders – government, industry,
healthcare. It needs to be supported by technology. academia, healthcare and insurance providers - need to
An effective and innovative use of medical technology, co-ordinate/ strategise and move in step for their actions
supported by ICT, has the potential of increasing access, to resonate and bring about lasting change. Apart from
significantly reducing the burden of disease and the load this, there is also what can perhaps be the biggest
on healthcare delivery services through early diagnosis, opportunity for improvement - an ambiguous regulatory
better clinical outcomes, less invasive procedures and framework with no distinct legal status for the medical
shorter recovery times. technology industry, which has been acknowledged as a
key constraint for the industry.
Currently, the market for medical technology in India
is small, but rapidly expanding. It is nascent and highly CII’s 3rd Medical Technology Conference is an ideal
fragmented with limited indigenous manufacturing - forum to discuss the way forward in addressing these
imports constitute over 75% of the estimated US$2.75 challenges, and Deloitte is privileged to collaborate as
billion market. the knowledge partner for the conference.

A transforming medical technology landscape,

improving healthcare delivery and financing mecha-
nisms, and changing patient profile are driving growth in Charu Sehgal
the medical technology industry. However, the industry Lifesciences and Healthcare Leader
has been stifled by some key impediments to growth. Deloitte in India

Medical technology industry in India Riding the growth curve | 5

Introduction

Medical technology extends and improves life, alleviates

pain, injury and handicap. Incessant medical technology
innovation enhances the quality and effectiveness of care.
Billions of patients worldwide depend on medical
technology at home, at the doctor’s, at hospital and in
nursing homes.
What is Medical Technology? medical technology industry association) “Medical
There are varied definitions of what constitutes ‘medical technology extends and improves life. It alleviates pain,
technology’. For the purpose of this report, the term injury and handicap. Its role in healthcare is essential.
medical technology encompasses a wide range of Incessant medical technology innovation enhances the
healthcare products (devices, equipments as well as quality and effectiveness of care. Billions of patients
consumables/ supplies) that are intended by its manu- worldwide depend on medical technology at home,
facturer to be used specifically for diagnostic and/or at the doctor’s, at hospital and in nursing homes.
therapeutic purposes. It encompasses any instrument, Wheelchairs, pacemakers, orthopaedic shoes, specta-
apparatus, appliance, implant, in vitro reagent, software, cles and contact lenses, insulin pens, hip prostheses,
material or other article, which is condoms, oxygen masks, dental floss, MRI scanners,
pregnancy tests, surgical instruments, bandages,
• used, alone or in combination, for the following syringes, life-support machines: more than 500,000
purposes: products (10,000 generic groups) are available today.”
– diagnosis, prevention, monitoring, treatment or
alleviation of disease With the convergence of many scientific and tech-
– diagnosis, monitoring, treatment, alleviation of or nology breakthroughs, the pace of medical invention is
compensation for an injury accelerating, resulting in better clinical outcomes, less
– investigation, replacement, modification or
support of the anatomy or of a physiological
process Better clinical
– supporting or sustaining life outcomes
– control of conception
– disinfection of medical devices
– providing information for medical or diagnostic
purposes by means of in vitro examination of
specimens derived from the human body Medical technology Less invasive
• and, which does not achieve its primary intended inovation procedures
action in or on the human body by pharmacological,
immunological or metabolic means, but which may
be assisted in its intended function by such means.

Medical technology improves health outcomes Shorter

Medical technology plays a strategic role in fostering recovery time
the change of health care delivery towards better health
outcomes. According to EUCOMED (the European

6
 invasive procedures and shorter recovery times, and thus improving overall health of people. Heart disease and its
consequence, heart attack, is a good example of how new technology has changed the treatment and prevention of
a disease over time. The following exhibit depicts the advancements in medical technology pertaining to cardiac care
in the U.S:

Innovations in Medical Technology – Cardiac Care in the U.S

1970s 1980s 1990s 2000s

• Cardiac care units were • Angioplasty (minimally • Bare-metal stents used to • Cardiac troponin immunoassay
introduced invasive surgery) was used keep blood vessels open tests provide more specific and
• Coronary artery bypass after heart attack patients • Cardiac defibrillators were sensitive diagnosis of heart attack
surgery became more were stable used in certain patients with • Drug-eluting stents significantly
prevalent irregular heartbeats reduce the rate of re-blockage of
clogged arteries

From 1980-2000, the overall mortality rate from heart attack fell by almost half,
from 345.2 to 186.0 per 100,000 persons

Source: AdvaMed, The Value of Investment in Health Care: Better Care, Better Lives (January 2004)

Another example of how advances in technology have to one-third its 1950 level, with an overall increase in life
changed health outcomes over time is in the treatment expectancy of about 12 years per low-birth-weight baby.
of pre-term babies, for which very little could be done
in the U.S in 1950. But by 1990, changes in medical Need for Medical Technology in India
technology, including special ventilators, artificial There can be no better example than India to illustrate
pulmonary surfactant to help infant lungs develop, the need for medical technology for improving health-
neonatal intensive care etc., helped decrease mortality care delivery. In the second most populous country
of the world, the supply of healthcare services falls
significantly short of the demand. Existing health care
delivery mechanisms are inadequate to meet the ever-
growing needs of the Indian population, especially
At the high end, India has world- in smaller towns/ rural areas. The limited healthcare
facilities available in the country are skewed more in
class doctors, clinics and favour of the affluent category of population. At the

technologies, and attracts high end, India has world-class doctors, clinics and
technologies, and attracts international medical tourists

international medical tourists in in growing numbers. However, even today, the majority
of India’s population cannot afford anything better

growing numbers. However, even than the most basic healthcare. Low health insurance
coverage (estimated at less than 10% of population)
today, majority of India’s population makes matters even worse. Accessibility is restricted
by shortage of healthcare facilities and professionals.
cannot afford anything better than For every 10,000 Indians, there are 6 doctors while
China has 20 doctors for every 10,000 people, Australia
basic healthcare. has 249, UK has 166 and US has 548. Further, while

Medical technology industry in India Riding the growth curve | 7

 majority of the population resides in rural areas, doctors
and hospitals are largely concentrated in cities. Poor
healthcare infrastructure, along with a large population
and high poverty levels has resulted in a dismal status of
people’s health. This is illustrated by the following facts:
• Of the 536,000 women who died during pregnancy
or after childbirth in 2005 globally, India accounted
for 117,000 (or 22%).
• IMR (Infant Mortality Rate) for India is 58 per 1000
births, which is more than double that of China (23
per 1000 births) and even higher than Bangladesh
(54 per 1000 births).
• India has the highest burden of communicable
diseases in the world, with malaria and tuberculosis
among the leading causes of death.
• Growing non-communicable diseases (NCDs) -
highest number of diabetics in the world.

Good quality private healthcare is out of reach for

majority of India’s people. Government support/
subsidies alone are not enough to cater to the health-
care needs of this segment of the population. There
is a need to use medical technology effectively to
address the yawning gap between demand and supply
of healthcare services in India. Innovative products
and business models are needed to make healthcare
affordable and accessible to a larger percentage of the
population.

Demographics Healthcare infrastructure

• 2nd most populous country • 80% of doctors, 75% of dispensaries
• 70% population in rural areas and 60% of hospitals situated in urban
• 27.5% of population below poverty line Need for innovative areas
medical technology • Number of beds, nurses, and doctors
Health status solutions to bridge per 1,000 people in India, is the lowest
• High MMR and IMR the demand-supply in the world
• Highest burden of communicable gap – 0.8 beds / 1000 people
diseases in the world – 0.6 doctors/ 1000 people
• Growing NCDs - diabetes capital of the
world

8
Market size and structure

A nascent market with double digit growth rates Estimated growth rates for the key market segments
The medical technology market in India was valued at during 2008-12 range between 14-20%*, with the
US$2.75 billion* in 2008, a growth of approximately ‘other’ segment witnessing the highest growth.
14% over 2007. The market is estimated to reach US$5 Though not identified as a separate segment in the
billion* by 2012 with an annual growth rate of nearly above pie chart, diagnostic kits represent one of the
15%. However, this industry has not been well docu- fastest growing segments of the medical technology
mented in the Indian context, and estimates of industry industry in India, enjoying an annual average growth
size and growth vary significantly across different rate of over 30%.
sources. Other estimates of the market size range from
US$1.9 billion in 2009 to US$3 billion in 2010. While Competitive market- presence of MNCs as
a wide range of medical products are covered under well as domestic firms
the medical technology industry, classification of key The Indian medical technology industry is highly
segments differs widely across the industry. The key competitive and fragmented, with domestic firms
segments based on product application are depicted in primarily manufacturing low technology products such
the chart given below. as disposables/ medical supplies, and MNCs primarily
importing high end medical equipments. However,
Majority of the Indian medical technology market is in recent years, some domestic firms have expanded
dominated by medical instruments and appliances used local manufacturing operations to produce cost
in specialties such as ophthalmic, dental and other effective, medium end, medical devices. Most MNCs
physiological classes. This segment accounts for 25% of are involved in distribution of medical technology
the total market, followed by orthopaedic / prosthetic products, though some of them have set up manufac-
goods segment accounting for 20% of the total market. turing operations in India. MNCs seeking to enter the
The ‘other’ segment includes endoscopy equipment, industry typically form joint ventures with local manu-
cardiovascular control equipment and healthcare IT facturers, establish subsidiaries or employ local agents
equipment etc. to distribute their products. However, increasingly
these companies are moving away from the practice
Indian Medical Technology Industry – Key Segments* of importing through local agents and setting up
subsidiaries. According to industry sources, in 2007,
over 25 foreign medical device companies received
licenses to import medical devices in India through
their subsidiaries.
Others, 15.3%
High imports
Medical instruments & High end medical technology products are largely
appliances, 25.1%
imported into India. Infact, imports constitute about
Bandages &
other medical
75% of the Indian medical technology market. Key
supplies, 7.6% categories* of items that are imported into India
include imaging equipment, pacemakers, orthopaedic
and prosthetic appliances, breathing and respiration
X-ray apparatus, 9.5% apparatus, and dental equipment.

It is interesting to note that while India’s medical tech-

Orthopaedic/ Prosthetic nology industry is primarily import dependent, at the
Electromedical, goods, 20.0%
same time, nearly 60% of what’s being manufactured
10.2% Syringes,
needles is being exported. In fact some companies derive as
and catheters, much as 75% of their revenue from exports. However,
12.4%
the exports of high quality, high tech Indian products
are very low compared to other developing countries.

* Source: Cygnus

Medical technology industry in India Riding the growth curve | 9

Key growth drivers

The rapid growth of the medical technology industry in India has been driven by the changing medical technology
landscape, improving healthcare delivery and financing, and changing patient profile.

Key Growth Drivers for Medical Technology Industry in India

Changing Medical Technology Improving Healthcare Delivery & Changing Patient Profile
Landscape Financing

Faster upgradation of existing Increasing competition with the

technology and global new Increased life expectancy and
advent of large private sector
product innovation aging population
healthcare providers

Evolution of India as a medical Increasing trend of seeking

Increasing incidence of lifestyle /
tourism hub leading to demand accreditation leading to rise in
non communicable diseases
for world class equipments technology investments

Growing awareness amongst

providers & consumers on Rising health insurance leading to Rising purchasing power /
advancements in medical increased coverage of high cost disposable income
technology treatment

Changing medical technology landscape tourists coming to India for medical treatment demand
high quality care and world class devices/ equipments.
Faster upgradation of existing technology and This has also driven private care providers to upgrade
global new product innovation their medical technology infrastructure.
Availability of advanced and sophisticated medical
technology has created new markets/ applications, Growing awareness among providers and
which have expanded demand. For instance, new consumers on advancements in medical technology
implant materials and improved surgical techniques for The Indian consumer, especially in the urban areas, is
joint replacement (e.g. hybrid replacement technique increasingly becoming more aware about latest medical
used in hip replacement surgery) are driving growth in technologies available in the market, and consequently
the orthopaedic segment. Advent of new and reliable demanding the same. At the same time, awareness
diagnostic technology has also forced the medical among providers is also increasing due to training and
community to increase their reliance on diagnoses. education workshops/ seminars etc. being conducted by
Further, introduction of latest techniques also lead to industry members. This has driven up demand for new
rapid obsolescence of existing medical technology, medical technologies.
thereby creating demand for replacement/ upgradation
of these products. Improving healthcare delivery and financing

Evolution of India as a medical tourism hub Increasing competition with the advent of large
Medical tourism is being promoted by the government private providers
and stimulated by the corporate boom in medical care. Industry estimates suggest that India will need as many
As a result, India is fast emerging as a medical tourism as 1.75 million additional beds by 2025, and the public
hub for patients from across the world. International sector is expected to contribute only 15–20% to this

10
investment. Several private providers are entering the personal disposable income and overall standard of
healthcare delivery space to cater to this huge addi- living. India’s per capita income doubled during 2000-
tional demand. For instance, the Medanta group has 2008, and the share of healthcare expenditure in
established the Medicity in Gurgaon. The Sahara group household consumption has increased. As a result, a
plans to set up a 1,500-bed multi super-specialty, larger number of people are now able to afford better
tertiary care hospital at Aamby Valley City, and some quality of healthcare services. An increasingly affluent
more multi-specialty hospitals across the country. population in major cities is driving up demand for latest
International healthcare providers, such as Malaysia and advanced medical technologies.
based Columbia Asia, are also entering India. Entry of
new players has made the private healthcare space Increasing incidence of lifestyle/ non-communicable
extremely competitive. As a result, demand for medical diseases
technology is coming not just from new entrants, but Non-communicable diseases (NCDs) have emerged as
also from existing providers such as Apollo Hospitals, a major public health problem in India. Aging popula-
Fortis Healthcare, and Max India who are upgrading tion, sedentary lifestyle, high stress levels etc. has led to
infrastructure and building new hospitals equipped to an increase in lifestyle/ non-communicable diseases in
Western standards to compete effectively in the market. India, such as diabetes (India has the highest number of
diabetics in the world), cancer, cardiovascular diseases
Increasing trend of seeking accreditation etc. The steep increase in non-communicable/ lifestyle
Private care providers in India are increasingly seeking diseases is driving demand in some key segments
accreditation of hospitals to cater to the booming of the medical technology industry. For example, a
demand for quality healthcare and growth of medical sedentary lifestyle, characterized by a lack of physical
tourism. This trend is further accelerated by expanding exercise, has led to a high incidence of back pain and
insurance penetration, and insurers requiring accredita- joint afflictions being recorded in India, driving demand
tion by hospitals. These factors have resulted in upgra- for spinal implants, joint implants and associated
dation of medical technology by hospitals to comply products. Similarly, rise in the number of cancer cases
with the accreditation requirements. is driving demand for cancer diagnostic and treatment
equipment.
Rising health insurance
Growth in health insurance in the country has led to
increased coverage of high cost medical procedures,
enabling a larger part of the population to demand
quality healthcare. This in turn has driven up demand for
medical technology.
India is fast emerging as a global
Changing patient profile:
medical tourism hub with
Increased life expectancy and ageing population
international patient base growing
Higher standards of living and technological advances in
medicine have led to a sharp increase in life expectancy
in double digits year on year. This
at birth from 58.2 years in 1990 to 63.7 years in 2008.
As a consequence, longer-lived individuals will pose
rising trend has resulted in an
demands for increased aggregate healthcare services
over a longer period of time. Additionally, the propor-
increase in investments by
tion of aged population is increasing, creating upward
pressure on demand for healthcare. It is expected that
healthcare providers in installing
the population above 65 years will increase from 5% of
the population in 2005 to 15% in 2030.
best in class medical equipments,
Rising purchasing power/ disposable income
upgrading technology and
A booming economy has resulted in an increase in seeking quality accreditation.
Medical technology industry in India Riding the growth curve | 11
Key challenges

Low penetration
Despite the strong growth of the Indian medical tech-
nology market in the last few years, the industry is
plagued by low penetration. The per capita spend on Affordability
medical technology in India is approximately US$2, as
compared to US$5 for China and US$231 for Germany.
One example to illustrate low penetration is sales of
pacemakers. At 18,000 units per year, India’s pacemaker
penetration is just 1% of western levels. According to
Dinesh Puri, CEO, MediVed, India should be selling a
million pacemakers a year, considering heart disease
is a major killer in India. The challenge is to expand
the market. While the medical technology industry is Low
Awareness Accessibility
growing rapidly in India, demand comes primarily from penetration
major cities. Penetration in smaller cities/towns/rural
areas remains low, owing mainly to lack of affordability,
accessibility, awareness and availability.

Affordability
Since most of the country’ population cannot afford
to pay for healthcare, providers in turn pay careful
attention to costs in making their purchasing decisions.
For example, while big hospitals in Tier I cities are Availability
typically driven by quality while purchasing medical
devices and equipments, most smaller hospitals, particu-
larly those in Tier II and III cities and rural areas, opt for
cheaper products. Many of them do not have high end Availability
products as they cannot afford it. Lack of innovation has resulted in scarcity of cost-effec-
tive products and solutions in the medical technology
Accessibility industry. At present, there are a limited number of such
Inequitable access to healthcare delivery has been a key options available, and that too in select pockets of the
issue with the Indian healthcare system. Public health country. There is a huge gap between the needs of the
infrastructure is inefficient and inadequate too, with low Indian consumer and what is available in the market.
investments in medical infrastructure, including devices
and equipments. As a result access to healthcare is Awareness
inadequate or absent in rural India. Consequently, distri- While there is growing awareness towards health
bution of medical technology in these areas becomes a related issues in the major cities, a large part of India’s
challenging task. population remains ignorant about the latest advance-

Indian medical technology sector is growing but the per capita spend
of US$2 is significantly lower than not just the developed countries
but also the other emerging economies. Demand in India is
predominantly driven from the major cities and penetration in
smaller cities/town/rural areas has remained low due to lack of the
4 A’s (Affordability, Accessibility, Awareness and Availability)
12
Medical technology industry in India Riding the growth curve | 13
 ments in medical technology. For example, the concept the same category of products. There have been some
of Self Monitoring Blood Sugar (SMBG) is still not cases of illegal/ counterfeit products also – e.g. illegal
well-known in India as compared to the West. In India reprocessing and re-packaging of used syringes for
a meagre 0.3% of diabetics use SMBG as opposed to re-sale. This creates significant risk for the consumer.
almost 22% in developed countries. Lack of awareness
regarding complication of diabetes and benefits of Low indigenous manufacturing
regular monitoring are key factors for this. India has not been able to develop itself as a strong
manufacturing base for medical technology. The
Ambiguous regulatory environment industry remains dependent on imports for meeting
The regulatory environment for medical technology in its domestic requirements. There are two key factors
India is ambiguous, complex and lacks transparency. contributing towards this trend, as described below.
There are two key issues pertaining to regulation of the
medical technology industry in India: Lack of incentives
The government has not been proactive in encouraging
No distinct status for the industry the development of a domestic manufacturing industry.
The medical technology industry in India has no There are no specific incentives in place to attract local
separate legal status. It is currently regulated by the drug or foreign companies to set up a production base in
controller general of India (DCGI) of the Central Drugs India. Further, the current duty structure for medical
Standard Control Organization (CDSCO), Department of devices and equipments favours imports, reducing
Health. The limited regulation that has been introduced the competitiveness and growth potential of the local
to date covers 14 medical devices (e.g. cardiac stents, medical technology industry. Unlike China, which
catheters, orthopaedic implants etc.) under the Drugs encourages manufacturing of medical devices and
and Cosmetics Act 1940 and subsequent amendments. equipments, Indian laws indirectly reward trading by
Application of the Drugs and Cosmetics Act has resulted charging higher duties on raw materials than on finished
in redundant rules for medical devices and equipments goods. For instance, titanium sheet/ rod imported for
in India. In certain cases, product registration and making implantable pacemakers attracts a total import
manufacturing standards intended for drugs are applied duty of 23.89%, while import of the pacemaker itself
to the manufacture of devices – e.g. it is insisted that an attracts a duty of 9.36%. As a result, in many cases, cost
expiry date be given on certain medical devices, whereas of a finished product manufactured within the country
this is not required for such products. remains higher than an imported product.

Complex rules and guidelines High capital requirement

Absence of specific regulation for the industry, and Medical technology is capital intensive, and setting
coverage under the Drugs and Cosmetics Act has up a manufacturing plant requires significant invest-
resulted in lack of clarity and transparency about the ment. While the industry is on a high growth trajectory
regulations. There are problems pertaining to multiple in India, the overall market remains small due to low
levels of government authority involved in enforcing penetration. As a result, volumes are low and do not
the guidelines, as well as inconsistent interpretation provide economies of scale for most manufacturers.
and application of the regulatory guidelines by customs Pune based manufacturer of catheterisation labs (where
officials at the ports, state drug controllers, and officials stenting is done), Alpha X-Ray (acquired by Philips) is a
within CDSCO. This results in a prolonged and cumber- case in point. Alpha X-Ray began making its own path
some regulatory pathway, especially for new products. labs from scratch less than seven years ago at less than
half the price of an imported one and expanded access
Absence of quality standards to many districts in Maharashtra. Yet Alpha’s promoters
Lack of regulation of the industry has resulted in sold out, since it was struggling for funds, according to
products of sub-standard quality being brought into the P.V. Gopal, a co-founder.
market, creating wider gaps of quality and cost within

14
Burning need: Frugal innovation

Innovation across the value chain in areas of product,

process, business model, service delivery, technology etc.,
keeping frugality in mind will help the medical
technology players create new markets in the lower
income segments and leapfrog to the next level of growth

The medical technology industry in India needs to

innovate in order to address the challenge of low pene-
tration and meet the healthcare needs of all income
segments. In a country like India, where resources are
scarce but needs are great, solutions have to be afford-
able, reliable, resilient, easy to distribute, and easy to
use. Consequently, frugal innovation is the way to go.
Companies need to squeeze costs so they can reach
more customers, and consequently exploit economies
of scale. Frugal approaches to innovation are particularly
critical in the Indian medical technology industry to
make modern care accessible, available and affordable
to all. Existing demand for medical technology in India
is concentrated in big cities. Innovation will help medical
technology players create a new market in the lower
income segments, primarily, smaller towns and rural
areas, and leapfrog to the next level of growth.

Tier I cities –
high penetration

Smaller towns/cities/ rural

areas – largely untapped –
disruptive/ frugal innovations are
required to improve access,
availability, and affordability

Medical technology industry in India Riding the growth curve | 15

In an emerging economy like India, disruptive and incre-
High
mental innovations that are capable of lowering the cost Proposed
of product/ delivery are more suited in the short-run, focus area
than radical innovations which introduce advanced tech-
Incremental
nologies that may be sometimes more than what the Size of Disruptive innovation innovation –
consumers need or demand. Indian medical technology population – introduction of low introduce no
impacted end technologies at frills version of
industry needs “low-end disruptions” which target
affordable prices existing
customers who do not need the full performance valued
products
by customers at the high end of the market, as well as
incremental innovations that make changes to existing
Radical innova-
products to launch no-frills or lower end versions. tion – introduction
These innovations have the capability to impact a larger of a superior/ new
segment of the population which is price conscious and technology

driven by affordability.

Low
In recent years some companies have developed cost-
effective products specifically for the Indian market. One High Investment required (relative) Low
such innovation is GE’s Mac series, an ultra-portable
electrocardiogram (ECG) machine. The device was
conceptualized, designed and manufactured in India customized and proprietary parts. The MAC 400 has
according to the requirements of the domestic market. been very successful, and has been sold in over 100
With the Indian market in mind, the MAC 400 is priced countries since its launch in India. Infact, in November
at one-third that of imported ECG systems of similar 2009, GE Healthcare India released its latest ECG device:
quality. To deal with power outages in many parts of the MAC I. Smaller than a laptop and with a price tag
India, the MAC 400 is battery-operated. Moreover of Rs 25,000 ($535), the MAC I will reduce the cost of
the device is designed to be easy to use so that it can delivering an ECG bill to just Rs 9 - six times lower than
be used by general physicians as well as cardiologists. prevailing ECG rates.
Customers in the health care field wanted the machine
to be portable so they could reach more patients; Some Indian companies are also channelling their tech-
hence, it is lightweight. To ensure easy serviceability nological and medical talent towards frugal approaches.
(especially in remote areas) and to lower costs, it comes A few examples are given below.
with commercially available components instead of

Company Product USP

MediVed Pacemaker • Cost is Rs. 20,000 to 25,000 below the comparable pacemakers
produced by international companies
Bigtec Labs MicroPCR • A miniaturized, no-frills and portable version of the bulky PCR (polymerase
chain reaction) machine
• Costs Rs 1 lakh compared to a conventional PCR’s price tag of Rs 15 lakh
Perfint Healthcare PIGA-CT • Uses robotics to make image-guided, soft-tissue biopsies simpler, safer
and more accurate
• At Rs 15 lakh a machine, it is less expensive than other imported alterna-
tives — such as fluoroscopes - which are double the cost
Skanray X-ray imaging • High-frequency digital X-rays with radiation leakage control
systems • Cost is a fraction of the imported equipment

16
 Given the criticality of ensuring safety and quality in the Communication, Technology) presents an opportunity
case of medical devices and equipments, appropriate for universal access to medical technology at very low
regulation and quality control processes will be a pre- cost, and it should be used in creative, new ways to
requisite for frugal innovation to foster and sustain. support innovation in medical technology. ICT also
aids in developing models that address the problem
However, innovations in products alone won’t suffice of physician/ technician shortage in the country For
to tap the unique needs of the growing Indian market. instance, Intel’s Active Management Technology allows
There is a need to rethink and redesign the entire IT professionals to proactively monitor remote medical
business model. Medical technology industry needs to equipment systems for issues and install software
evolve from merely supplying devices and equipments to patches and upgrades to keep the equipment operating
the healthcare industry, to providing integrated solutions under field conditions. Medical technology companies
for improving health outcomes. need to leverage the offerings of such providers to
create business processes and models that enable
efficient distribution of products in remote areas.
Innovative business models - some examples
Telemedicine on mobile
Maestros Mediline, a medical equipment manufac-
turer, has launched an application in collaboration
Financing options Medical technology Continue to offer
with Blackberry, where doctors can check their
which offer the company takes on low end version
patients’ ECG on their mobile handsets. This appli-
buyers an option to the role of a service of products which
cation of mobile ECG would enable the doctors to
pay in installments, provider as well and may not have latest
monitor the heart performance of their patients
or procure medical offers to operate the technology but
accurately even from a distance.
equipment on lease medical equipment for provide the required
a healthcare provider treatment/ diagnosis
Remote monitoring for cardiac devices
Sorin Group, a global medical device company and a
leader in the treatment of cardiovascular diseases, and
The examples stated above provide affordable options Orange Business Services, the leading global communi-
to healthcare providers for purchasing medical cations solutions integrator, entered into an agreement
technology and will increase market penetration. in 2009 to develop and service a remote monitoring
Another significant opportunity for developing inno- solution for patients implanted with cardiac rhythm
vative business models is to partner with technology management (CRM) devices.
and communication providers. ICT (Information,

Medical technology industry in India Riding the growth curve | 17

The four pillars of innovation

While innovation is the need of the hour for the Talent

Indian medical technology industry, there are certain While India has a large base of technical manpower
key enablers that will facilitate and drive the process with basic qualifications, it lacks trained and experi-
of innovation. These enablers, or the four key pillars enced professionals to undertake high end research
of innovation, together create the right environ- and development in the field of medical technology.
ment, including resources and incentives, needed for This is a result of the fact that medical technology has
companies to innovate. These four pillars of growth are not received enough attention as a field for higher
– funding, talent, supportive regulation and indigenous education. Medical and engineering streams have
manufacturing. been kept apart in India till now. The IITs, for example,
in their B.Tech curriculum are primarily mathematics
Funding driven. However, IIT is now expanding into medical
While many of the MNCs have access to sufficient programmes. A good example of amalgamation of
capital for investment in R&D, most Indian firms do not medical and engineering streams is the Stanford
enjoy such status and are unable to innovate due to Biodesign programme, as part of which AIIMS and IIT,
lack of funding. While several PE and venture capital Delhi are working together. The industry needs to work
firms have started taking interest in the Indian medical together with the government and academia to ensure
technology sector, access to capital for most domestic availability of the right talent pool for innovation.
firms remains restricted. The government can play a
key role here by providing some financial support to Supportive regulation
medical technology companies with innovative business A sound regulatory framework is a key enabler for
proposals and by encouraging private investment in the growth of the medical technology industry, and will
sector. accelerate the pace of innovation. The most immediate
need is to develop a regulatory environment which is

18
Four Pillars of Medical Technology Innovation

Innovation
Funding Talent Supportive Indigenous
financial relevant and regulation manufacturing
support to experienced distinct and Incentives
sustain the skill base for simplified for local
required carrying out regulation for manufacturing
research and design and the industry, to support
development development harmonized development
activities over of innovative with global of low cost
a long period products standards products

Medical Technology

not only pro-growth, but also harmonized with global Indigenous manufacturing
standards in medical technology. Some movement has Until the constraints to manufacturing are taken care
started on this front - the Government of India is in of, innovation will not yield the desired impact on the
the process of developing a separate legal framework industry. Local manufacturing will enable production of
designed to ensure the quality, safety and performance cost-effective devices and provide the volume needed
of medical devices. The framework will take into consid- to increase penetration. A few companies are already
eration international standards (e.g. GHTF – Global focusing on producing low-cost medical devices/ equip-
Harmonization Task Force). Approval of revised guide- ments for the Indian market. For instance, a GE baby
lines under Schedule M-III represents India’s first system- warmer that was imported at US$30,000 now sells for
atic attempt at regulating medical devices as a separate less than US$3,000 without “bells and whistles”. What
sector from drugs, and calls for stricter oversight on has helped keep the production cost low, apart from
both the manufacturing and import of medical devices. world-class research, is the company’s policy of manu-
Further, there has been a move towards more collabora- facturing not just the finished products in India, but also
tion and interaction between the DCGI and the industry many of the components that go into it.
in the recent past. However this needs to be institution-
alised and improved in order for a workable regulatory
system to be established.

Medical technology industry in India Riding the growth curve | 19

Collaboration –
a key success factor

While some isolated examples of frugal innovation can Medical Technology Ecosystem
be observed in the Indian medical technology industry,
the challenge is to develop and implement cost effective
and scalable models of delivering medical technology.
However, it is practically impossible for the industry to Government
achieve this alone. A collaborative approach towards
innovation in the industry will help in overcoming this
challenge and enable the medical technology industry
to be the game changer in transforming the Indian Four pillars
Talent pool
healthcare scenario. A coordinated effort is required of innovation
for R&D
from all stakeholders, including the industry, academia,
Private care
healthcare providers and the government to promote Academia
providers*
medical technology innovation in India. Each of these
stakeholders must contribute towards strengthening
Med tech
the medical technology ecosystem, which will in turn
industry
improve healthcare delivery in the country.
Reimbursement
Service delivery
for products
The industry needs a platform to promote and celebrate channel
innovations. Effective collaboration across the value
chain is essential for managing innovation and new
Technical
product introduction; managing the product portfolio;
support
lowering development and support costs; delivering
ICT Insurance
product to the marketplace faster; protecting the
industry industry
company’s intellectual capital; and effectively and effi-
ciently supporting the customer.

For instance, the academic research being carried

*Including diagnostic service providers
out in the country remains mostly theoretical, with
little practical application for product development in
the medical technology industry. Greater interaction
is required between the academia, government and
the industry to conduct research that is relevant. The dialogue needs to be started with insurance companies
government, on its part, needs to realize that medical as well, in order to design products for promoting sales
technology is a critical part of the healthcare delivery of medical technology and effectively expand in areas
value chain, and provide avenues for new product devel- like home care. Partnership with healthcare providers is
opment and commercialisation. undoubtedly critical since medical technology forms an
important part of the healthcare delivery value chain.
Similarly, collaboration with ICT companies is essential Care providers can offer the backbone for implementing
to develop innovative business models for micro-accessi- innovative business models of medical technology
bility of affordable healthcare and medical technology. A companies.

A case in point - Israel

A key lesson to be learnt from Israel is the excellent collaboration that exists between education, R&D institutions,
companies and entrepreneurs, both domestic and international. Israel is home to seven tech transfer organizations
(TTO’s) within the university system, and a further five from within its leading research hospitals. The TTOs provide a
valuable forum for connecting Israeli researchers and early stage projects with investment, sponsorship and part-
nerships from multi-national companies eager to benefit from Israeli innovation. This cross-fertilization has bridged
the once impenetrable gap between basic and applied science and has made it easier for innovative technology to
come to fruition.

20
 The government can play a pivotal role in stimulating addition, significant funding support is provided to local
growth of medical technology industry. For instance, manufacturers for carrying out R&D. Such proactive
China has set up high technology parks where duty involvement of the government is critical for the growth
exemptions are provided to the manufacturers. In of Indian medical technology industry and will go a long
way in strengthening the four pillars of innovation.

PPP (Public Private Partnership) route to

innovation
PPP in medical technology
One important way in which the government can
promote medical technology innovation is through PPPs.
GE Healthcare: In Madhya Pradesh B Braun: The company, in partner- Both the parties can leverage each other’s strengths
and Gujarat, GE Healthcare has set up ship with the state government of to bring affordable healthcare within the reach of
diagnostic centres at select govern- Andhra Pradesh, has set up 11 centres a large majority of the country’s population. While
ment medical colleges. The charges equipped with 111 haemodialysis such a model will provide good quality care to the
for the patients are unchanged, the machines within medical colleges masses, medical technology companies can gain by
centre and the equipment will be run and hospitals in the state to provide the increased patient volume and economies of scale.
by the company and its partners. treatment to patients suffering from GE and B Braun are examples of companies that have
chronic kidney diseases (CKDs). partnered with state governments under the PPP route
to provide affordable and accessible healthcare.

PPP- GE Healthcare, Government of Madhya Pradesh and Sanya Hospitals and Diagnostic Centre
Key terms • The company helped set up an advanced, diagnostic centre at the Netaji Subash Chandra Bose Medical College Hospital,
Jabalpur
Industry • The company installed a Lightspeed 16-slice CT and a Signa HDx1.5T MRI system
contribution • Sanya Hospitals and Diagnostic Center provided diagnostic imaging services at an affordable cost. The Centre invested Rs 80
million on equipment and training professionals including doctors, nurses and technicians to the medical college hospital
Outcome • The PPP model reduced diagnostic imaging costs for patients by approximately 30% and up to 50% for below poverty line
patients

PPP- B Braun and Government of Andhra Pradesh

Key terms • The company has committed to make an incremental investment of Rs 35 crores in a PPP project in Andhra Pradesh over seven
years
• The scheme is a part of the state government’s Arogyasri scheme meant to provide medical services at affordable rates for the poor
Industry • B Braun will set up 11 centres equipped with 111 haemodialysis machines within medical colleges and hospitals in the state to
contribution provide treatment to patients suffering from chronic kidney diseases (CKDs). Eight such centres were already operational as of
March 2010.
Outcome • The dialysis treatment given under Arogyasri programme of the State Government is rendered free of cost to patients, with the
state government paying Rs 1,080 per patient for treatment.

Medical technology industry in India Riding the growth curve | 21

The way forward

The government is the most important contributor in Way forward – Industry

developing a conducive environment for growth of • Increase R&D activity geared towards developing
medical technology industry in India. At the same time, products suited to the Indian market
the industry members need to work hand-in-hand with • Collaborate with ICT companies to bring to fruition
the government to encourage innovation. There are frugal approaches to innovation
certain expectations from both the government as well • Partner with government and healthcare providers to
as the industry in order for the medical technology reach out to the masses through affordable health-
industry to achieve sustainable growth. care delivery models
• Engage with the government and academia to
Way forward – Government develop relevant courses that will develop required
• Create a separate regulatory framework dealing with skill base for the industry, develop training institutes
specific requirements of the medical technology etc.
industry • Collaborate with healthcare providers to promote
• Provide incentives for domestic manufacturing, such training and education of physicians and other
as tax holidays and low customs duties on imported technical personnel in the area of medical tech-
raw materials nology through continuing medical education (CME)
• Create and enforce quality standards in tune with the • Involve healthcare providers in the innovation
relevant global standards for medical technology process – e.g. associate with physicians for obtaining
• Enter into public private partnerships with medical specific inputs on product development
technology companies and healthcare providers for • Strengthen industry network / association to promote
implementing cost effective models of healthcare awareness about innovations, share industry best
delivery practices and encourage of overall development of
• Encourage relevant R&D through: the industry
– Financial support to companies for product devel- • Engage with insurance providers to expand health
opment and commercialisation insurance coverage for medical technology products
– Development of local R&D capabilities – e.g.
establishment of research centres – and industry
participation in the same
• Engage with the academia to develop relevant
courses that will develop the required skill base for
the industry, develop training institutes etc.
• Establish ‘medical technology clusters’ that will
include not only industry members but also R&D
centres, educational institutes etc. and will foster
high levels of productivity and collaboration
• Create a central authority for holistic development
of the medical technology industry in India – the
authority should look at non-regulatory / commercial
aspects of the industry that will drive growth

22
Appendices

Appendix-I: List of People Interviewed

Name of Person Designation Name of Organization

Gautam Khanna Executive Director 3M Medical
Dr Vinod Kohli Managing Director Allied Medical
Jaideep Gupta Managing Director Indraprastha Apollo Hospitals
Arun Mudgal Business Unit Head- Pharmaceutical Projects B Braun
Navin Sharma Director, Government Affairs and Public Policy Baxter
Manoj Gopalakrishna Managing Director Becton Dickinson
Rekha Khanna Managing Director Biomerieux
Vijay Simha COO and Vice President BPL Healthcare
Sunil Saigal Managing Director Consolidated Products Corp.
Arjun Sarker Managing Director, Indian sub-continent Covidien
R Asok Kumar Head RA and QA, Indian sub-continent Covidien
Dr. S Eswara Reddy Assistant Drug Controller and Head of Medical Devices Central Drugs Standard Control
Organisation
Daljit Singh President, Strategy and Organisational Development Fortis Healthcare
A Vaidheesh Managing Director Johnson & Johnson Medical
Rohit Mehta General Manager & Head – Medical Equipment & Larsen & Toubro Limited
Systems
Uday Puri Business Manager MediVed
Dheeman Vaidya Head – Therapy Value Partnerships Medtronic
Anjan Bose Vice President Philips Healthcare
Himanshu Baid Managing Director Poly Medicure
Dhirajlal Kotadia Chairman Sahajanand Medical Technologies
D. Raghavan Cluster CEO of Healthcare Sector – South Asia Cluster Siemens Ltd.
Yashdeep Kumar Managing Director Stryker
Ajay Pitre Managing Director Sushrut Surgicals
Suresh Vazirani Founder Transasia Biomedicals Ltd.
Dr GSK Velu Managing Director Trivitron Healthcare
Pavan Choudary CEO and Managing Director Vygon India
Sanjay Banerjee Managing Director Zimmer India

Appendix-II: References
• Cygnus • International Trade Administration
• Espicom • Economist
• AdvaMed (Advanced Medical Technology • Business Standard
Association) • Economic Times
• Eucomed (European medical Technology Industry • Financial Express
Association) • http://medind.nic.in
• NIPER (National Institute of Pharmaceutical Education • Express healthcare
and Research)

Medical technology industry in India Riding the growth curve | 23

About CII

The Confederation of Indian Industry (CII) works to programmes. Partnerships with over 120 NGOs across
create and sustain an environment conducive to the the country carry forward our initiatives in integrated
growth of industry in India, partnering industry and and inclusive development, which include health,
government alike through advisory and consultative education, livelihood, diversity management, skill devel-
processes. opment and environment, to name a few.

CII is a non-government, not-for-profit, industry led CII has taken up the agenda of “Business for Livelihood”
and industry managed organisation, playing a proactive for the year 2010-11. Businesses are part of civil
role in India’s development process. Founded over 115 society and creating livelihoods is the best act of
years ago, it is India’s premier business association, with corporate social responsibility. Looking ahead, the
a direct membership of over 8100 organisations from focus for 2010-11 would be on the four key Enablers
the private as well as public sectors, including SMEs for Sustainable Enterprises: Education, Employability,
and MNCs, and an indirect membership of over 90,000 Innovation and Entrepreneurship. While Education
companies from around 400 national and regional and Employability help create a qualified and skilled
sectoral associations. workforce, Innovation and Entrepreneurship would drive
growth and employment generation.
CII catalyses change by working closely with govern-
ment on policy issues, enhancing efficiency, competi- With 64 offices in India, 9 overseas in Australia, Austria,
tiveness and expanding business opportunities for China, France, Germany, Japan, Singapore, UK, and
industry through a range of specialised services and USA, and institutional partnerships with 223 counterpart
global linkages. It also provides a platform for sectoral organisations in 90 countries, CII serves as a reference
consensus building and networking. Major emphasis is point for Indian industry and the international business
laid on projecting a positive image of business, assisting community.
industry to identify and execute corporate citizenship

24
About Deloitte

Deloitte provides audit, tax, consulting and financial Deloitte’s professionals are unified by a collabora-
advisory services to public and private clients spanning tive culture that fosters integrity, outstanding value to
multiple industries. With a globally connected network markets and clients, commitment to each other, and
of member firms in more than 140 countries, Deloitte strength from cultural diversity. They enjoy an environ-
brings world-class capabilities and deep local expertise ment of continuous learning, challenging experiences,
to help clients succeed wherever they operate. Deloitte’s and enriching career opportunities. Deloitte’s profes-
more than 168,000 professionals are committed to sionals are dedicated to strengthening corporate respon-
becoming the standard of excellence. sibility, building public trust, and making a positive
impact in their communities.

Medical technology industry in India Riding the growth curve | 25

Contacts

Confederation of Indian Industry Deloitte Touche Tohmatsu India Private Limited

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fmehdi@deloitte.com

26
Medical technology industry in India Riding the growth curve | 27
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