India’s Medical Market In Its Infancy but Growing Fast

With a population nearing one billion and growing at around 2% a year, India is the second-most populous country in the world. The Indian people defy generalization – the government recognizes 16 official languages, and at least 24 are spoken throughout the country. Significant religious differences exist between the regions, as well as radical economic disparities. This profile has been compiled using information from Ames Gross and an ABHI report on India.

Source: US Dept. of Congress Market Research Reports

India’s GDP should exceed $250,000 million in 1994 and is expected to grow at approximately 4% annually. Direct overseas investment and trade are on the rise as the Indian government liberalizes trade and investment policy and works towards a fully convertible currency. In 1993, US firms invested more than $3,000 million in India, up from $2,700 million in 1991. Over the last three years, tariffs and import barriers have been falling. Import tariffs used to be as high as 300% – today, the highest tariffs are under 100% and dropping rapidly on many items. The rupee is now partially convertible and appears well on its way to full convertibility on the world market.

… healthcare stressed

Although many decisions about public health policy are left to the individual states, there is a degree of national uniformity. All Indians agree that their healthcare system needs improvement. The central government is committed to the WHO’s Health Care for All by 2000 goal and has implemented an ambitious program to achieve it. This initiative is designed to bring basic healthcare to all Indians by the end of the century and aims to upgrade public sector facilities, increase the number of hospital beds, improve the quality of care in rural areas and acquire advanced medical technology.

Although healthcare expenditure accounted for only 6.3% of the national budget in 1991, the government is expected to spend much more on this sector over the next few years. Increasing the number of medical centers is a priority of the Eighth Economic Plan (1992-1997) and at least 25,000 rural primary care clinics are due to acquire new medical equipment.

India’s increasingly affluent middleclass is demanding access to better healthcare. Some 50 years ago, the middle-class represented a mere 3% of the population or only ten million people. Today, the middle-class accounts for 125-150 million people or over 10% of the population. Many Indians are now choosing to purchase health insurance with either full or partial coverage, so growing segments of the population can now afford to receive high technology treatment.

… medical device market

India is one of the fastest growing markets in the world for medical devices and pharmaceuticals. In 1993 the market for medical equipment reached $532 million, including $341 million of imports. The market is very dynamic and is expected to grow around 23% annually up to the end of the decade.
In order to reach its healthcare goals, the Indian government acknowledges that increased foreign involvement is necessary, especially in high-technology and highly specialized areas such as equipment for plastic surgery, cancer diagnosis and medical imaging. Indian doctors favor foreign technology, particularly products from the US and Europe. The three largest medical device exporters to India are Germany, Japan and the US.

… how the system works

Until the 1980s, government-run hospitals and others operated by charitable organizations were the main providers of healthcare in India. However, during the last decade corporate and other private hospitals have begun to emerge as a significant part of the Indian healthcare system. Demand for the services of these hospitals is expected to rise dramatically in the next century.

Private hospitals normally employ more advanced technology than their government counterparts and perform more complex procedures such as open-heart surgery, which wealthy Indians previously traveled abroad to obtain. Domestic medical device manufacturers cannot currently produce the high technology equipment essential for these procedures. Consequently, private hospitals in particular rely on imports for their medical equipment supplies. As long as public hospitals lack the funds to upgrade their equipment and expand their services, private hospitals will be the main focus for growth.

India currently has nine hospital beds for every 10,000 people. One of the current healthcare goals is to increase hospital beds to a ratio of 1:1,000 by the year 2000, which translates into over 400,000 new beds by the end of the decade. Although the majority of beds in India today are in public hospitals, most of the future growth is expected to occur in private hospitals and clinics. Whether equipment is imported by public or private hospitals has significant commercial implications. Government-run, research and charitable institutions pay no import duties if they can prove that the product in question is essential and not produced domestically. Private hospitals pay import duties on most medical devices, although some lifesaving devices are duty-free. The system is complex with duties depending on a number of factors, including the country of origin and whether Indian manufacturers produce the same equipment. Most medical devices do not require an import license.

For purchases of capital equipment the government authorizes government-run and private hospitals to issue open global tenders. These are permitted even if a product is manufactured domestically. About 80% of these tenders are issued by government-run or research hospitals. Exporting to India by bidding for these tenders is time-consuming, as public hospitals often have extensive bureaucratic structures and decisions are sometimes hard to reach. Although private hospitals handle these decisions much faster, the process moves very slowly by Western standards. Many foreign companies employ a distributor to sell their products directly to hospitals and clinics. Whether companies use a distributor or not, most find it useful to have a local agent to investigate and negotiate sales opportunities first-hand.

… cancer diagnostic equipment

There are excellent opportunities for exporting cancer diagnostic equipment to India. In 1992 cancer was the sixth leading cause of death and in that year the market for cancer diagnostic equipment reached almost $13 million. In the past, cancer awareness was limited to a small urban population. Thanks in part to the education efforts of the Indian Cancer Association, however, more and more Indians, both urban and rural, are now concerned about cancer. The cancer diagnostic equipment market is dominated by overseas companies, with over 80% of the market accounted for by imports in 1992.

… local agreements

In order to facilitate market entry, many foreign companies are entering into agreements with Indian manufacturers to make their products locally. One of the most successful of these arrangements is between General Electric Medical Systems (US) and the Indian manufacturer Wipro.

In the three years since setting up, GE has achieved second position in the Indian equipment market and now plans to export its Indian-made products to the rest of South Asia, according to a recent ABHI report on India. Other companies are expected to follow suit, by using India as a low-cost manufacturing base for exporting to Asian and other third markets, the report says. Other overseas companies announcing plans to set up manufacturing facilities in India since 1992 include US firms Rusch International, Bio-Pace Technology, Cadiotron and Baxter International, and Labsystems of Finland.

Some of the leading Indian importers of medical equipment include:

• Blue Star – whole-body CT cardiovascular and general angiography systems; special purpose X-ray machines; MRI scanners; biochemistry, haematology and other analytical products; EEG monitors.
• Wipro-GE Systems – Hewlett Packard range of analytical instruments and equipment from Beckman, Bio-Rad, Becton Dickinson and Serono Diagnostics.
• Medical Coordinators Pvt – ultrasound scanners; cardiology equipment; endoscopes; CO and Nd:YAG laser equipment.
• Toshniwal Brothers – urology equipment; lithotripters; MRI and CT whole-body scanners; cobalt therapy units; angiography systems.

… India’s Future

India is working hard to join the global marketplace. Although trade and investment laws used to make it difficult for foreign businesses to penetrate this huge market, the current government is dedicated to opening India up to the world. Medical manufacturers which do not develop trade and investment contacts now will find future market entry costs prohibitively expensive.

The ABHI report predicts that there will be a continued high level of demand in the Indian market for the following items: ECG and EEG monitors; DC defibrillators; patient monitoring systems; radiography equipment; therapy equipment; surgical diathermy units; apnea/respiratory monitors; color Doppler ultrasound scanners; CT and MRI systems; digital subtraction angiography systems; laser and fiber optic devices such as endoscopes, colonoscopies, laparoscopes, laser lithotripters etc; linear accelerators; X-ray equipment, including dental and general purpose mobile C-Arm; ophthalmology equipment; radiotherapy equipment; simulators and treatment planning systems.

FACTS ABOUT INDIA

• Population 908.6 million (1993)
• Annual population growth 1.9%
• GDP per capita $380 (1992)
• Currency Rupee ($1 = R 31)
• Government Federal republic
• Average life expectancy 60.4 years
• Hospital beds / 10,000 popn 9 (1992)
• Doctors/10,000 popn 4 (1992)

Source: US Dept of Commerce Market Research Reports