Powering up India’s medtech industry

Medical technology is a nearly ₹40,000 crore market in India, growing at over 12 per cent. Of this, imported products account for about 70 per cent. The domestic industry mostly focuses on consumables, test kits and lower-value equipment. As a result, most local medtech companies are medium and small enterprises; only a few have an annual revenue of over ₹100 crore.

The opportunity for indigenous solutions and domestic medtech production is huge. The market can grow into an estimated over ₹1 lakh crore in seven to 10 years. But it needs efforts on multiple fronts to realise the potential. Right products, models and partnerships can do the job.

Can the low-cost manufacturing model that has been successful in India’s growth in vaccines and generic drugs, leading to global leadership, be replicated in medtech? Economies of scale, and volume-price dynamics that has made this model successful in vaccines and generics, is absent in medtech.

Here, the cost of manufacturing is typically 15-35 per cent of the selling price. A large part of this is components (typically imported), with a small share of that being domestic components, assembly, packaging, etc.

For a typical hospital equipment, the domestic manufacturing value added would not be more than 5-10 per cent of the final value of the product. As a result, pure-play ‘low cost manufacturing’ alone cannot give impetus to indigenous medtech development, given India’s weak manufacturing ecosystem for technology-driven hardware.

So, what contributes the rest of value? The key activities that retain the bulk of the value are innovation/IP, design, engineering, and commercialisation.

While cost is a well-known parameter, there are other key factors that existing medtech products are not tailored for.

To list a few, limited availability of trained and skilled personnel, space, infrastructure and operational constraints in hospitals and clinics, maintenance and servicing burden of equipment, growing aspirations of smaller institutions and doctors to earn higher revenues, option to add features in a modular manner over time as business grows, travel distance and time for patient and caretaker, paying capacity of patients and families, are some of the contextual elements that today’s imported medtech products do not cater to. This is an untapped opportunity and requires innovation and R&D driven product development.

While, medtech doesn’t have the scale and homogeneous nature of vaccines and drugs, it has an advantage that makes it more amenable for R&D, innovation and entrepreneurship in a practical and affordable manner. Compared to larger investments required in drugs and vaccines to support discovery based research that need extensive clinical trials, majority of medtech products take a problem-solving R&D approach using engineering techniques.

Development budget and time of a mid-value medtech equipment at a price point of, say, ₹5 lakh, with a potential market of around 1,000 pieces annually, is typically less than three years and ₹5 crore. To fill in the funding gap, government agencies such as BIRAC are supporting startups in this area at various stages towards commercial products.

The long gestation period in medtech projects, from concept to market success, is often cited as a barrier for developing new products. While it is indeed true that medtech product development takes five to seven steps, from concept to manufacturing, including animal and human trials in certain cases, this technical complexity of medtech product development is still much lower (and less expensive) than drug or vaccine development. Market success and scale takes longer than developed markets, and is a function of product fit with market needs, access to early adopters and thought-leaders, and a viable business model involving hospitals and doctors to encourage uptake of the product.

To mitigate these gaps, R&D and product development should be done through partnerships with as many stakeholders as possible. These partnerships should include collaborations with R&D institutions, hospitals, government health agencies, component vendors, OEMs, and, even other medtech companies.

With the current ecosystem, one could target such products at a 3-5-year time frame in hospital instruments, diagnostic devices, health monitors, and surgical equipment. R&D, engineering and manufacturing for such products is possible as established companies and startups in this area have demonstrated in recent years, albeit in small number. More complex platforms and products such as active implants, minimally invasive surgery systems, high-end equipment need long-term R&D at the level of 5-7 years. Development of such complex technologies should be led by our R&D institutions with government support, in partnership with industry with goal of market-ready products.

One of the weaknesses in our industry, R&D and innovation efforts, is lack of deep knowledge of the healthcare process and detailed mapping of interplay between the medtech product, user, support personnel, beneficiary, revenue earner, associated processes and infrastructure. This is a crucial exercise and should be one of the core elements of product development. Medtech being only 5 per cent of overall healthcare market, industry needs to articulate its position and demonstrate value to the healthcare provider in order to create space and appetite for new products.

Another key missing piece for strong R&D-driven medtech is lack of high quality medical research. This is constrained by the limited number of research and teaching hospitals. Current clinical workload and patient care priorities in both public and private institutions do not lend space for technology oriented medical research. Preclinical testing, animal labs, and requisite knowledge, skills, facilities to offer such services are very few in number. These would require longer-term efforts from the Government and will gain attention as medtech industry gains traction.

Overall, we should set out a short- to medium-term goal of developing products in chosen categories that are affordable and targeted at specific problems. This should be done through partnerships between industry, academia and the Government. As the ecosystem and support structures mature, we should aim to develop products that have a large-scale impact and higher value products. On a longer term, we should aim to shape and position medtech as a strategic tool and industry that would help improve Indian healthcare and serve as a global innovation engine for medtech for emerging markets.

Sivaprakasam is head of Healthcare Technology Innovation Centre (HTIC), a joint initiative of IIT Madras and Department of Biotechnology, Ministry of Science and Technology. Joseph is Chief Technologist, HTIC

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