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Abby Pratt
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With over 62 million diabetics, India is fast becoming the diabetes capital of the world. One of every three adults here has high blood pressure. Hypertension kills nine million people every year.
Medical devices have been playing a tremendous role in mitigating India’s disease burden. While coronary stents have cut the number of patients dying from heart attacks in this country by half, implantable cardiac defibrillators have increased the chances of surviving a sudden cardiac arrest from five per cent to 98 per cent. Diabetics can now use glucose monitoring technologies to escape hypoglycemia, blindness and peripheral nerve damage, and patients in general can spend less time in hospital owing to the minimally invasive technologies used to conduct heart, spine, metabolic and neuro-surgeries.
Yet, despite the fact that medical technology is such an important pillar of the healthcare system, the medical device industry in India, valued at about $3 billion, contributes to only eight per cent of India’s $40 billion healthcare sector. It is somewhat startling that less than $2.50 (approximately Rs 155) is spent on medical technology per person.
The under-penetration of medical devices in India provides a compelling opportunity for medical device manufacturers to increase their presence in the country and expand access to healthcare. Established medical device manufacturers had traditionally focused on the development and marketing of devices in western markets but for some years now, companies have prioritised expansion in low and middle income countries. Medical device companies have realised over the years, that creating appropriate and customised solutions for countries like India, which have massive populations and high (and increasing) disease burdens would not only help serve their business interests but also help solve India’s healthcare challenges. As health insurance coverage increases and the burgeoning middle-class demands better healthcare services, India’s medical device market is projected to reach $6 billion by 2015.
However, the industry will still have to respond to a range of challenges – poor public health infrastructure, a staggering out-of-pocket healthcare spend of over 60 per cent, a weak regulatory framework, lack of adequate trained healthcare personnel and devise an India-specific strategy to realise its potential. I believe that for the industry to be successful and address the country’s healthcare challenges, it will be critical for companies to innovate and create shared value through partnerships and collaborations. It will be equally important for the government to reform the regulatory framework. Each of these factors are elucidated in turn.
Innovation for success
In a recent conference on medical technology organised by the Confederation of Indian Industries (CII), Dr Naresh Trehan, Chairman and Managing Director, Medanta, the Medicity, vociferously stated that medical device manufacturers in India need to innovate, it is not enough to simply reverse-engineer.
The ‘Medical Technology Innovation Scorecard’ prepared by Pricewaterhouse-Coopers finds that advanced economies in general do not face the dire need for innovation that emerging economies do. One of the main drivers of medical device innovation in India has been its distinctive disease profile – for instance, manufacturers have had to provide in-vitro diagnostics for malaria, dengue and other communicable diseases. Infrastructural constraints and climactic conditions have also led to the ‘tropicalising’ of medical technology. In this context, it is important to appreciate that medical device innovation refers not only to the invention of new devices but also to incremental improvements to efficacy and adapting devices to different settings. While GE through its healthymagination platform has developed an ECG machine suitable for portable use in challenging environments, Medtronic has created a leadless pacemaker that can be monitored remotely. Stryker by collaborating with Stanford’s Biodesign Group, the Sanjay Gandhi Postgraduate Institute of Medical Sciences and the All India Institute of Medical Sciences hired and trained indigenous R&D talent to develop and launch India-specific products at affordable prices.
Frugal innovation has been the buzz-phrase in the developing world as far as medical technology is concerned, with manufacturers realising that they need to cater to the increased demand for effective, safe and low-cost medical devices from emerging economies, particularly China and India. For instance, in 2009, GE launched the Lullaby Warmer in India, which provides direct heat in an open cradle to new-born babies, and priced it at $3000 per unit against its starting price in the US of $12000. Foreign players have set up centres to focus on medical technology innovation – GE and Stryker each have centres in Bangalore while Stryker, Covidien and Johnson & Johnson have centres in Gurgaon, Mumbai and Hyderabad respectively. Companies are becoming increasingly attuned to the needs of the patients they serve – 3M’s Customer Training Centers, for example, 3M’s Customer Training Centers serve as a platform for active engagement of customers in new product development through direct interfacing with 3M’s scientists in India and abroad.
Going forward, emerging economies are expected to spend more on R&D, have the human capital needed for research and see more support from the investment community, all of which will be triggers for innovation. The PwC report indicates that the epicenter of the innovation ecosystem for medical devices is shifting towards emerging economies in general and India and China in particular. To achieve this though, companies need to invest more in R&D, undertake collaborations to reduce cost, locally adapt sales and distribution to improve delivery and actively engage in skill development.
Creating shared value through partnerships
Michael Porter and Mark Kramer define ‘shared value’ as “enhancing the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates”. In low and middle-income countries like India, medical device companies could create shared value by engaging in collaborations and partnerships that would be beneficial for the collaborators as well as the patient population. Factors like low government spend on healthcare, poor doctor to patient ratio and the vast geography of the country make access difficult. These pain points can be addressed through partnerships at various levels.
By collaborating with the government, medical device companies can leverage the government’s strengths to expand access to affordable healthcare to a larger section of the population. This would help companies serve more patients and realise economies of scale. The government in turn would benefit from the companies’ ability to provide quality healthcare. As part of its ‘inclusive growth’ policies, the Government is paying close attention to healthcare and education. This would be the ideal time to position the medical device industry as a partner that will work towards strengthening India’s public health system. Companies like GE and B Braun are already partnering with state governments under the PPP route to provide affordable and accessible healthcare, while organisations like Johnson & Johnson have partnered with the Public Health Foundation of India (PHFI) to train thousands of physicians on managing gestational diabetes here. Through its PPPs, Siemens delivers tailored solutions for medical equipment – access to state-of-the-art medical systems and services with a duration of 15-40 years, full refreshment cycles and the possibility of varying equipment specifications over the contract period.
Companies can also create shared value by setting up alliances with other companies in the private sector, and mutually benefit from each other’s expertise through technology transfers, knowledge spillovers and skill development. When Medtronic realised that one of the major access challenges was diagnosing the need for a pacemaker, not in the provision of the device itself, it partnered with Maestros, a provider of telemedicine-based EKG interpretation services to improve access to cardiac screening.
Going forward, companies should consider ramping up their collaborative efforts. Partnering with pharmaceutical companies and hospitals, for instance, could provide advantages of size and strength while simultaneously filling gaps in companies’ offerings. Medtronic recently announced a collaboration with Apollo Hospitals to market an innovative, affordable and portable hemodialysis system in India to help improve access for End Stage Renal Disease (ESRD) patients who need Renal Replacement Therapy (RRP). Companies could set up teams to develop partnerships (for instance, Becton, Dickinson and Co. has a global health team for this) and collaborate with funders and implementation partners to increase their market shares while simultaneously improving India’s health outcomes. The vast geographies of the country make it difficult to have a skilled workforce in smaller cities. This provides the ideal opportunity for enhancing collaboration – a shared workforce for smaller cities with a focus on improving patient outcomes.
Improvements to the regulatory framework
Regulations play a key role in ensuring that the objectives of Universal Health Care (UHC) are met. They can also help provide an environment of innovation and growth for the industry. For the medical device industry to succeed and try to fill the critical gaps in India’s healthcare system, several external factors – a supportive regulatory framework, a supportive investment ecosystem, better health infrastructure and an expanded health insurance cover – need to come together.
Here, I will pick up on what would most significantly impact med-tech manufacturers’ ability to respond to India’s healthcare needs– an appropriate regulatory framework – and discuss some of the changes that could boost the growth of the industry.
The medical devices industry in India faces several regulatory challenges. Although there are over 14,000 types of medical devices (according to the Global Medical Device Nomenclature), only 22 are regulated in India. Under the Drugs and Cosmetics Act of 1940, these are regulated as drugs. This is problematic, to say the least, because medical devices are very different from drugs. In recognition of dramatic differences in diversity, industry composition, product development and patent structures, pharmaceuticals and medical devices are regulated separately across the world.
India has woken up to these differences by seeking to add a chapter on medical devices to the Bill. The Drugs & Cosmetics (Amendment) Bill 2013 that was tabled in this year’s Monsoon Session of the Rajya Sabha, recognises the industry as a distinct and crucial element in the healthcare delivery system. The Bill marks the beginning of the creation of an appropriate and robust regulatory framework for medical devices. Further, the draft provisions laid out are largely in line with standard international practices developed by the International Medical Device Regulators Forum (IMDRF). Even though it will be a while before the Bill becomes an Act, the move has infused great hope in the industry.
However, there is still plenty to do. To ensure that medical devices in India meet global standards of quality, safety and efficacy, the government should ensure that all regulations are harmonised with international best practices such as the International Organisation for Standards (ISO) and IMDRF and, perhaps, adopt a risk-based approach to the regulations. Also, industry consultation will be important in the aftermath of the Bill being tabled to ensure that the interests of all stakeholders are considered.
To help the industry reach its nascent potential, the government, which spends only one per cent of GDP on healthcare, a figure that is pitifully low compared to the spending of other emerging economies like Brazil and South Africa, must increase its overall expenditure. This in turn would help provide training to build capacity; promote disease awareness; increase insurance coverage and government spending on healthcare; promote public-private partnerships; and create incentives for R&D.
To elaborate this last point further (because the government’s role in providing an enabling ecosystem for innovation cannot be emphasised enough) the government needs to give companies adequate incentives to make products for India. At the same time of course, companies need to approach the Indian market differently and consider India’s unique needs in terms of access and affordability. The medical devices industry in India is poised for growth. As India’s burden of disease transitions from communicable to non-communicable diseases, driven by socio-economic advancements, medical devices will play a critical role in helping the government diagnose and manage these. However, for the industry to make this quantum leap, the industry itself needs to innovate and collaborate, while the government has to create a conducive environment.
With inputs from Gautam Khanna, the Executive Director of 3M and Sushobhan Dasgupta, Managing Director of Johnson & Johnson Medical India