Medical devices market in India to reach $1.7 billion by 2010: NIPER

Dignostic kits become a high growth segment 

Medical devices and supplies market in India is expected touch USD 1.7 billion in 2010, growing at the rate of 23% annually in the coming years from the current Rs. 5750 crores, says a sector report by National Institute of Pharmaceutical Education and Research by (NIPER), Ahmedabad.

Affordability by patients, increased awareness on health care, improved hospital infrastructure and the increased disease patterns are listed as the primary drivers boosting the growth medical devices industry.

Free market environment, a developed industry and investment in health infrastructure are amongst other factors that the growth of high quality medical devices industry.

Among the segments in the medical devices market diagnostic equipment leads with Rs. 2000 crores, surgical equipment supplies worth Rs 1300 crores comes second and imaging and electronic treatment devices follow with Rs 1300 crores and  Rs. 1000 crores respectively.

The Indian medical equipment market is dominated by the medical instruments and appliances used in specialties such as ophthalmic, dental and other physiological classes. This segment accounts for 26% of the total market followed by orthopedic/ prosthetic goods segment accounting for 19% of the total market.

Medical supplies such as bandages and disposables such as syringes, needles and catheters together constituted 21% of the total market. The other equipment which are in demand are high end speciality electro medical equipments that accounted for 11% of the total market. X-ray apparatus accounted for 10% of the total market.

Another high growth segment in the medical devices industry is diagnostic kits. Diagnostic kits has a growth rate of 30% and a market size of USD 133 million in 2005. They include the reagents and the medical kits. With over fifty companies operating in diagnostic kits, the market has seen several interesting trends.

Roche Diagnostics is the leading player followed by Transasia, Bayer and others such as Span Diagnostics, Piramal Healthcare, Orchid, Tulip Diagnostics, Zephyr Biomedical, Biorad, Liliac etc.

The NIPER report submitted to the Department of Pharmaceuticals under the Ministry of  Chemicals and Fertilizers , Government of India also highlights certain trends outsourcing laboratory services by large private sector hospitals have started to outsource their laboratory services and raising of private equity funds.

Mumbai-based Metropolis Health Services, for instance,  manages the laboratory of Chennai based Malar Hospital. Metropolis also manages the laboratory services of the Dubai-based Gulf Medical College in Ajman.

Healthcare organizations in India raise funds through private equity to invest in their aggressive expansion and infrastructure upgradation plans.

High import dependency

Imports constitute over 50% of the market. Most imported products have high gross margins. Currently, the high value imported products include cancer diagnostic, medical imaging, ultrasonic scanning, plastic surgery equipment and polymerase chain reaction technologies.

However, the market is becoming increasingly competitive due to low entry barriers (for MNCs), an increasing number of players and an expanding consumer base.

The medical devices market for exports from India is estimated around USD 509 million with a CAGR of 22.15%. The exports mainly consist of dental instruments, surgical items and other laboratory equipment.

Prominent MNC’s operating in the Indian market include B Braun, Becton, Dickinson and company, Bayer, Johnson and Johnson, Phillips ,Roche, Siemens and GE. Some of the domestic players hat have consolidated their market position include, BPL Healthcare, Godrej Healthcare, Nicholas Piramal India Ltd., Opto Circuits India Ltd. and Advanced Micronic Devices Ltd.

Despite strong growth rates, the market remains disproportionately small, ranking among the top 20 in the world, but with a very low per capita spending.

Major issues and constraints found to cripple the industry are India’s dependency on imports for supply of medical devices, strict industry regulatory environment, low level of healthcare insurance and low levels of healthcare facilities and awareness especially in rural areas.

Indian medical devices supply is heavily dependant on the imports from other countries like the US, Japan, the UK, France, Finland, Germany, etc. It is estimated that around 50% of India’s medical devices sales is through imports.

Domestic production consists primarily of low technology products (like surgical textiles and other medical supplies), whereas the demand for high technology devices is met predominantly by imports

High cost of obtaining the required documentation for these regulatory submissions continues to be a matter of concern for medical devices importers. The importer has to pay USD 1500 towards the registration of the manufacturer from whom he is importing. A fee of USD 1000 is paid for registration of a single medical device and an additional fee of USD 1000 for each additional device. The high fee could become a burden for smaller manufacturers and also affect the available range of products in India as the sales per device are usually quite small.

Anomalous tariff structure

A 4% Special Additional Duty for medical devices and instruments announced in the Union Budget 2006-07, is contributed to increase the cost of diagnostic scans and high-end tests.

As a result of this new levy, medical instruments such as CT Scanners, MRI machines, Cathlab and ventilators which was earlier under the 5% customs duty slab will now attract 9% duty while ultrasound machines, patient monitors, defibrillators and blood cell counters will be charged under the 26.8% customs duty category. All these taxes and duties caused a10-20% increase in costs for the patients in diagnostics.

The duty exemption for diagnostic kits used to detect life threatening diseases is another area of contention. The duty waiver continues to only apply to basic techniques that are increasingly replaced by newer and more precise methods like the Polymerase Chain Reaction (PCR) test. At present only tests like the ELISA and CLIA enjoy the duty waiver while the PCR kits attracts 37%. Customs duty in spite of applications in the diagnosis of diseases like TB, hepatitis or bird flu, increase the cost of tests done using the advanced technique.

These budgetary tax measures coupled with an already anomalous customs tariff structure are expected to escalate the cost of treatments and burden the patients and ultimately constraint the delivery of modern healthcare, the report noted.

As a measure to tackle the increasing duty structure and dependency on imports, Indian companies are looking forward to having alliances with foreign companies either to import and distribute their products in the Indian territory or become licensed manufacturers and distributors of the foreign companies.

The level of R&D spending in the medical device and diagnostics industry, as a percentage of its sales, has been consistently increasing from 5.4% in 1990, to 8.4% in 1995, to 12.9% post 2000.

NIPER recommends creation of more academic centers to meet the technological and regulatory demands; interdisciplinary and combinatory research projects; testing facility for devices and pre-clinical and clinical studies for medical devices as some of the measures to assist the sector.