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Ups & Downs for Medical Devices Industry in 2014 and Expectations from 2015

New Delhi: The year 2014 has been an eventful year with medical devices industry throwing up surprises all the time. Medical device research and innovation made a remarkable progress with a continued zest for innovation in everything from Swasthya Slate to 3nethra to high-end medical devices. While prominent companies presented India as a promising medical devices manufacturing country on the world stage by successfully commercialising technology, the small and medium sized companies and startups created ripples by presenting out of the box ideas and creating novel devices out of little investment.

The sunrise industry recently got a shot with an automatic 100 per cent FDI (foreign direct investment) that is expected to see high number of mergers and acquisitions (M&As) among medical device companies in the coming year. The increased demand of indigenous medical technology has resulted in an exponential growth in the appetite of the industry. The Medtech players are all set to grab the opportunities and even diversify their portfolio in the coming year. The Medtech startup viral is expected to continue in the coming year as well. The country expects to see some unconventional innovations and breakthroughs in the coming year while overcoming some pressing challenges.

Let us take a look at what these industry experts have to say about the year that was and the year that will be.

GSK Velu
GSK Velu

GSK Velu, Founder and Managing Director, Trivitron Group of Companies

“Compared to the last few years, this year (2014) has seen a predominant growth in the Medtech sector, especially with the ‘Make in India’ initiative, an excellent scheme for manufacturing in India. This initiative builds scope for Indian companies to play a vital role in the development. We are hopeful that with this initiative Indian Medtech industry will witness growth trends in the next couple of years. Although, the Medtech industry is still booming in India, compared to other countries like China and USA. China, on the other hand, is seven times larger than the Indian market. India must focus and be on par with the growth as treatments or diagnosis cannot be conducted without innovative technology. Giving prominence to Indian technology players will certainly uplift the current conditions as the Indian manufactures can understand budget dimensions and other various aspects of common man in India and make healthcare affordable.

“While the Honourable Prime Minister is keen to have a ‘Make in India’ Policy for Medical Devices, however, this is not being the case and India is moving from 50 per cent import dependency five years ago to over 70 per cent currently and if corrective steps will not be taken we will soon be 90 per cent import dependent and wiping out what little industry we are left with to foreign investors and competitors under the proposed changes to the FDI Policy, by the DIPP (Department of Industrial Policy and Promotion) asking for brownfield 100 per cent investment by automatic route. First and foremost, there has been no recognition or relevant policy structure for the Medtech industry. The market of medical devices is estimated at over Rs 30,000 crore and there is a huge manufacturing potential for import substitution for catering to domestic demand as well as for tapping the huge potential of the export market (as has been done by Malaysia and China).

“Medtech startups can bring in innovative methods to be successful and play effective part in the Medtech growth

“We can streamline the above mentioned concerns and have a transparent and clear policy agenda. Well-planned budget strategies for medical devices will make healthcare affordable in India. During the last 15 years, Trivitron has striven hard, talk about the pleasures and pains of starting small; the genesis of a value-based organization culture; personal goals turning into company milestones; caring for society; learning and educating; building infrastructure for one and all; refusing to compromise on quality; and above all, believing in a vision and leading by example to see it become reality. We anticipate good growth in the year 2015!”

Siraj Dhanani
Siraj Dhanani

Siraj Dhanani, Founder and CEO, InnAccel Acceleration Services

“2014 has been a good year for the MedTech sector. Early stage funding for the sector grew at a fast clip through innovative programmes like Biotech Ignition Grant (BIG) managed by BIRAC (Biotechnology Industry Research Assistance Council — a Department of Biotechnology entity), and increased interest by private donors. Investors have also shown increased interest in this sector. Finally this year has really seen serious discussion on how the government and private players can build an ecosystem to support MedTech innovation — which is required if this sector is to thrive.

“I think the regulatory environment has been a bit of a disappointment. India needs a comprehensive regulatory framework for medical devices, which have been in the draft stage for a couple of years. A progressive regulatory framework can bring clarity to different players, and more importantly, incentivise indigenous MedTech innovation. I hope we see progress on this front in 2015. Clarity in regulations, progress on building an ecosystem to support innovation, and increased early stage funding by venture capitalists in this sector — this is more a hope than an expectation, but it’s the season to be hopeful!”

Manoj Singh, Chief Executive Officer, Divlabs Healthcare

“In 2014, positive government policies have setup an ‘upbeat mood’. Global acceptance of Indian products has increased. With the increase in dollar rate the acceptance of domestic produce among the domestic market has increased. Because of huge allocation of funds in the healthcare sector — both the central and state level upgradation of hospitals is in the process and hence the demand has increased. Big business houses, who were earlier active in consumer sector, have entered in medical equipment and devices manufacturing sector (like Meril, Dabur etc) and thus now we have Indian multinationals into manufacturing.

“On the downside, corporates purchased 95 per cent imported brands so local produce felt major setback. Indian manufacturers could not inject much funds into marketing like sponsoring huge medical equipment conferences etc because of large costs involved — actually in these conferences the rates of booths/stalls etc are influenced by pharma companies who have huge marketing budget. The equipment manufacturers could not stand up to this — the cost of the booths in India are much higher than in Europe (Medica), Dubai (Arab Health), US (FIME) etc. Indian manufacturers started focussing on the export market — which is much easier — whereas there is huge demand in India. Conservative ‘labour laws’ cannot give results like China (where labour laws are open ended). Also, lack of government funding into research and development (R&D) and very discouraging and time consuming methodologies adopted by government agencies have been some of the other bottlenecks.

“In 2015, as manufacturing is cheaper in India because of cheap labour and electricity so 100 per cent FDI will invite many foreign manufacturing units but they might be 80 per cent EOUs (export oriented units). Conventional Indian manufacturers will be more focussed on exports because of assured payments and forex (foreign exchange) — Indian market is discouraging for Indian manufacturers at the moment. There will certainly be big boost in Medtech in India — enormous growth is expected.”

Anand Madanagopal
Anand Madanagopal

Anand Madanagopal, Managing Director, Cardiac Design Labs

“During the year 2014, the engineering talent was keen to explore this difficult and high precision sector. The Indian ecosystem for medical device development and testing was very promising. It’s been a good year, we completed trials of our device MIRCaM (Mobile Intelligent Remote Cardiac Monitor) and we got very good cooperation from the medical community. Since the product involved algorithms for real-time analysis of conditions and clinical analytics, it required close working of the doctors in the field, our engineers and our expert backend. A lot of things came together in 2014 to make this happen. A lot of innovation was attempted at all facets of the design.

“The government opening the sector for 100 per cent FDI is very good news and this will encourage better investments into this sector. The government should encourage this sector with more options in accessing labs for testing, give incentives to hospitals and startup companies to co-operate in innovative device development and going to market. This will help because in medical device development the process is tougher and longer. The government should also invite the stakeholders in the system and formalize the certification process.

Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AIMED)

Positives

“With new government taking over mid-year, a lot of hope has been generated within the Indian Medical Device Industry. On the ground, we witnessed things moving on both the policy front as well on procedural front – a positive change from years of inertia and policy paralysis and ever increasing import dependency. There have also been increased interactions between the government and the industry to correct this trend, which has a bearing on India’s healthcare security.

“The new government in its wisdom has correctly identified medical device industry as one of the five key sectors which could propel Prime Minister Modi’s vision of ‘Make in India’. The Rs 30,000 crore Indian medical device market is on a buoyant growth path and is expected to grow at least four folds in the next 10 years which would take India as one of the top 4-5 medical device markets in the world from our present ranking of number 4 in Asia.

“There has also been a growing realization within the government that medical device industry needs a separate and distinct focus from that of drugs and cosmetics as till date this industry is largely governed by the provisions of Drugs & Cosmetics Act, 1940. For a long time now, we have been demanding a separate regulatory authority to oversee the medical device sector. Only in India, medical device industry is clubbed together with drugs and cosmetics. Nowhere else in the world this happens. So, we are happy that there have been movements on this front too and there are definitive indications from the government that medical device needs to be treated as a distinct category in itself and changes in the D&C Act are in the offing. When that happens, this will greatly boost faster decision making and development of this sector.

“Overall, the year has been that of hope and activity and we do hope that government stakeholders are able to fully appreciate the concerns and demands of Indian medical device industry and act on our recommendations.

Setbacks

“The country remains heavily import dependent with nearly 70 per cent overall import dependency and in some device segments like medical electronics nearly 90 per cent. In this context, the biggest setback has been government’s decision to permit 100 per cent FDI in brownfield projects. We are not against 100 per cent FDI in greenfield projects but 100 per cent FDI in brownfield is short-sighted and will only increase the distress level of Indian medical device manufacturers by making them easy target for cherry picking by MNCs and will also defeat the very purpose of reducing import dependency or encouraging manufacturing of medical devices within the country.

“Last time, when FDI was permitted in this sector but without putting conditions to achieve the end objective i.e. encourage manufacturing within country, the whole idea got defeated as MNCs simply put up marketing and trading shops in India without creating manufacturing bases. They simply imported goods and sold it here increasing the country’s import dependency. This time too, such things are going to happen. In a letter to the Union Minister for State, Department of Commerce & Industry, Smt Nirmala Sitharaman, we have demanded a blanket ban on 100 per cent FDI in brownfield projects.

“Even for greenfield projects, there has to be a condition that at least 60 per cent of overall goods being sold by a foreign company in India have to be manufactured within the country. Unless this is done, we firmly believe that manufacturing of medical devices within the country will never take off and we will continue to be heavily import dependent.

“Other areas of concerns (we will not call them setbacks simply because the present government has been in office for only six months now and they definitely need time to take decisions) where we would like the government to take quick and firm decisions soon include:

a) Rationalization of Tax Structure: Due to myopic import taxation policy we have a situation where import duty on raw materials and semi-finished goods (which goes into making of medical devices) is higher than import duty on finished goods. This means, it is cheaper to import medical devices rather than manufacture it in the country. So, why would anyone invest in manufacturing or continue to be manufacturer when they will never be able to match the price parity with imported items. If the government really wishes to encourage ‘Make in India’, it has to remove this anomaly at the earliest.

b) Export Substitution Policy: Because of export substitution policies being followed by countries, especially China, Indian manufacturers/products are simply unable to compete on lowest price criteria alone in any public tender. We have been demanding an encouraging export substitution policy along with domestic preferential public procurement policy (explained below) to create a level playing field between imports and domestically manufactured goods.

c) Domestic Preferential Public Procurement Policy: Countries such as China and US are not only leading manufacturers of medical devices but they also follow a ‘Domestic Preferential Public Procurement Policy’ whereby they give 15-20 per cent price preference to domestically manufactured goods in public procurement. India follows no such policy. We have petitioned the government through a representation to Mr V K Subburaj, Secretary, Department of Pharmaceuticals, Government of India to formulate a 15 per cent price preferential ‘Buy Indian Procurement Policy’ in Indian Public Healthcare System which will also be in sync with policies followed in countries such as US and China and will also be in line with Prime Minister Modi’s vision of ‘Make in India.’

d) De-clubbing of Medical Device sector from Drug and Cosmetics Sector: Currently, medical device industry in India is governed under the provisions of the Drugs & Cosmetic Act 1940 & Rules 1945 and nodal regulatory authorities are Drugs Controller General (India) and Directorate General of Health Services, Ministry of Health and Family Welfare! At present, there is no nodal or separate body for regulating or supporting medical device industry. So, this sector is nobody’s baby but everyone’s business! World over this does not happen as medical device industry is different from drugs and cosmetics. We have demanded changes in the Act and the creation of a separate regulatory authority for medical device industry. Medical device sector should never have been and should not be clubbed with drugs and cosmetics.

Expectations

We definitely hope that government realizes that 100 per cent FDI in brownfield is not sustainable in the interest of domestic industry or for realization of PM’s vision of ‘Make in India.’ We also hope that the government takes a quick decision on the various issues I have outlined above. We have great expectations from the current dispensation and we are hopeful that the government’s long-term vision of making India a great manufacturing powerhouse is not lost at the cost of short-term superficial gains!

by Vidhi Rathee

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