Affordable medical equipment and consumables
Affordable medical equipment and consumables
Business Model Description
Low-cost manufacturing and distribution of consumables and equipment for hospitals and care centres to increase the penetration of and democratize healthcare delivery at last mile. This will reduce the imports of medical devices and cost of manufacturing disability and improving quality of care.
Expected Impact
Increase penetration of and democratize healthcare delivery at last mile by improving domestic manufacturing and distribution of consumables and key hospital equipment.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- India: Countrywide
Sector Classification
Health Care
"Development need
India ranked 145 among 195 countries in a Lancet study measuring Healthcare quality and access. (2.1) India's progress on SDGs 3 (Good Health and Well-Being) was given a score of 61 on 100 on the SDG India Index as many States still lag behind on their health-related targets (2.2)
In 2017, India's Government Health Expenditure on healthcare was just 0.96% of GDP compared to the world average of 5.9% (2.5) While the expenditure increased to 1.28% of GDP in 2018, it still lags behind comparable countries (2.6) As a result, the private sector is the dominant healthcare provider in India (2.2)
Due to low government healthcare expenditure (2.5), and low insurance penetration (total insurance penetration in India was 3.69% in 2017 according to Insurance Regulatory And Development Authority Of India) (2.7), out-of-pocket expenditure accounts for 62.4% of healthcare expenditure in India compared to the world average of 18.2%. (2.8)
According to the NITI Aayog's State Health Index Report 2019 (Healthy States, Progressive India), the overall health index score of India's best-performing state is more than two and a half times as that of the bottom-most performer (2.2)"
"Policy priority
National Health Policy 2017 was introduced to lay out specific targets to increase life expectancy, reduce mortality rates and disease prevalence, ensure universal coverage of health services, increase healthcare financing, infrastructure and human resources and improve disease prevention and health information management efforts (2.11)
The Government of India (GOI) approved the continuation of National Health Mission with a budget of USD 4.88 billion under Union Budget 2020-21 (IBEF) The Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (PMJAY), the largest government-funded healthcare programme targeting more than 500 million beneficiaries, was allocated USD 919.87 million (2.12)"
"Gender inequalities and marginalization issues
A lack of clear regulations has led to variation in quality and costs of private sector services. (2.2) As a result, out-of-pocket medical expenses were estimated to have pushed 55 million into poverty in 2011-2012 (2.9)"
Investment opportunities introduction
Impact of COVID-19: COVID-19 has further highlighted the inadequacies of the healthcare system with respect to a lack of delivery capacity. As a result, healthcare has emerged as a priority area for the country is likely to remain a policy priority for the Government. Global disruptions in supply chains have also impacted the sector. As the country looks to "Make in India", there are likely to be a number of opportunities for local companies (2.13)
Key bottlenecks introduction
Low purchasing power among target communities and lack of insurance penetration
Medical Technology
Development need
c.75% of the current demand for medical devices is met through imports, increasing the cost of healthcare delivery. (6.1) 20-25% of healthcare costs for patients is on medical technology (6.2) Affordable devices can reduce the cost of delivery and help democratise healthcare delivery.
Policy priority
NITI Aayog Strategy for New India @ 75 recognizes access to drugs and medical devices at affordable prices as an essential ingredient of Universal Health Coverage and highlights "access to affordable drugs and medical devices" as a target (6.1)
Gender inequalities and marginalization issues
High cost of healthcare delivery and low spending power has driven lower-income groups to poverty and limited access to healthcare models to urban areas with affluent populations. Out-of-pocket medical expenses were estimated to have pushed 55 million into poverty in 2011-2012 (2.9) Further, Nearly 75% of dispensaries, 60% of hospitals and 80% of doctors are located in urban areas, serving only 28% of the Indian populace (2.10).
Investment opportunities introduction
The medical devices market is expected to reach USD 11 billion by 2022, backed by rising geriatric population, growth in medical tourism and declining cost of medical services (6.11)
Key bottlenecks introduction
Cumbersome regulations with approval standards that are not consistent with international standards, adding complexity. Further, there was no clear cost advantage compared to other emerging markets (6.24)
Medical Equipment and Supplies
Pipeline Opportunity
Affordable medical equipment and consumables
Low-cost manufacturing and distribution of consumables and equipment for hospitals and care centres to increase the penetration of and democratize healthcare delivery at last mile. This will reduce the imports of medical devices and cost of manufacturing disability and improving quality of care.
Business Case
Market Size and Environment
> USD 1 billion
15% - 20%
The medical devices market is expected to reach USD 11 billion by 2022, backed by rising geriatric population, growth in medical tourism and declining cost of medical services (6.11)
Medical devices market in India which was valued at USD 4 bn as of 2016 and is likely to cross USD 11 billion mark by 2022 thereby registering a CAGR of 15% (6.12) As per industry estimates, the Indian medical devices market will grow to USD 50 billion by 2025 (6.13)
Indicative Return
20% - 25%
Investors typically expect a return of 20-25% in this space (6.7) (6.8) Investors have been estimated to have made a 3-3.5x return in a 6-year horizon (20-25% IRR) based on benchmark deals (6.9)
Currently, India has about 750–800 medical device manufacturers in the country, with an average investment of USD 2-3 million and an average turnover of USD 6-7 million (6.10)
Investment Timeframe
Medium Term (5–10 years)
Product development and building manufacturing capabilities require a gestation period. Since equipments are sold to hospitals, adoption is gradual as the hospital may not be looking to adopt a new equipment if the old one is still working, unless significant improvements are being offered (6.8)
Companies have taken c.6 years to break even in the past (6.14)
Ticket Size
For the healthcare sector, data from Praxis Global Alliance, 2019 shows that early stage investments stood at USD 41 million, growth stage investments stood at USD 359 million and late stage investments stood at USD 1,486 million. (7.7)
Market Risks & Scale Obstacles
Market - Highly Regulated
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
c.75% of the current demand for medical devices is met through imports, increasing the cost of healthcare delivery. (6.1) 20-25% of healthcare costs for patients is on medical technology (6.2) High cost of healthcare delivery and low spending power has driven lower-income groups to poverty and limited access to healthcare models to urban areas with affluent populations. Out-of-pocket medical expenses were estimated to have pushed 55 million into poverty in 2011-2012 (2.9) Further, Nearly 75% of dispensaries, 60% of hospitals and 80% of doctors are located in urban areas, serving only 28% of the Indian populace (2.10). Affordable devices can reduce the cost of delivery and help democratise healthcare delivery.
Non-communicable diseases (NCDs) such as heart disease, diabetes and respiratory diseases expected to comprise of 75% of all diseases by 2025 (6.3) Treating such diseases will increase the cost of healthcare and require sophisticated medical equipment.
Gender & Marginalisation
Nearly 75% of dispensaries, 60% of hospitals and 80% of doctors are located in urban areas, serving only 28 per cent of the Indian populace. (2.10)
Expected Development Outcome
Reduce the cost of healthcare delivery thereby enabling service providers to reach lower-income groups.
Increase efficiency of hospital management and quality of care by e.g., reducing costly misdiagnoses.
Gender & Marginalisation
Primary SDGs addressed
3.8.1 Coverage of essential health services
3.8.2 Proportion of population with large household expenditures on health as a share of total household expenditure or income
Secondary SDGs addressed
Directly impacted stakeholders
Gender inequality and/or marginalization
Indirectly impacted stakeholders
Corporates
Outcome Risks
While B2C medical devices have traditionally scaled faster due to high pricing, B2B affordable devices will have to compensate through volumes.
Impact Risks
While a few such companies have been successful, the model has not yet been proven at a large-scale.
The risk is medium to low since affordable healthcare equipment is already started being adopted by a number of hospitals.
Impact Classification
What
Affordable healthcare equipment (which comprise 20-25% of the healthcare delivery cost) reduce the cost of healthcare delivery (6.2), thereby making itaccessible to underserved communities.
Who
Underserved communities who cannot afford the cost of healthcare.
Risk
While a few such companies have been successful, the model has not yet been proven at a large-scale.
Impact Thesis
Increase penetration of and democratize healthcare delivery at last mile by improving domestic manufacturing and distribution of consumables and key hospital equipment.
Enabling Environment
Policy Environment
NITI Aayog Strategy for New India @ 75 recognizes access to drugs and medical devices at affordable prices as an essential ingredient of Universal Health Coverage and highlights "access to affordable drugs and medical devices" as a target (6.1)
India is looking to improve self-sufficiency in MedTech as a part of the “Make in India” initiative (6.15) To this end, the National Medical Device Policy 2017 was introduced to strengthen the Medical Devices sector. Under this Policy, a single-window mechanism will be provided to the industry to not just focus on self-reliance, but also work towards making India a global hub of production in medical devices.
In March 2020 the GOI approved 2 schemes to promote the Domestic Manufacturing of Medical Devices: The scheme on Promotion of Medical Device Parks for financing Common Infrastructure Facilities in 4 Medical Device Parks with financial implications of USD 53 million and The Production Linked Incentive (PLI) Scheme for promoting domestic manufacturing of medical devices with financial implications of USD 450 million (6.16)
Financial Environment
Financial incentives: The National Medical Devices Policy envisages interest subsidy for MSMEs, concession on power tariffs, seed capital and minimum or zero duty on raw materials, among others (6.18)
Fiscal incentives: The GOI is offering a reduction in customs duty and other taxes on life-saving equipment and income tax exemption for 15 years for domestically manufactured medical technology products (6.16)
Other incentives: The GOI approved a production-linked incentive (PLI) scheme for promoting domestic manufacturing of medical devices in March 2020 (6.19) The Scheme aims to boost domestic manufacturing by attracting large investments in medical device sector. Under the Scheme, incentive @ 5% of incremental sales over the base year 2019-20 will be provided on the segments of medical devices identified (6.16)
Regulatory Environment
In India, at present notified medical devices are regulated as Drugs under the Drugs and Cosmetics Act 1940 (6.17) Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers, GOI is the primary department handling affairs related to medical devices.
The Ministry of Health and Family Welfare, GOI notified the Medical Devices Rules, 2017 to provide clearer guidelines for the industry. The Rules clearly separate medical devices as being distinct from drugs, clearing some hurdles for the industry (6.3) The Government aim of the guidelines was to enhance ease of doing business and ensure the availability of quality medical devices (6.18)
100% Foreign Direct Investment is now permitted in Medical devices through the automatic route (6.18)
Marketplace Participants
Private Sector
Investors: TPG, Apax Partners, Samara Capital; Morgan Stanley Private Equity Asia, Straumann Holding AG, Lighthouse Advisors India, Accel Partners, Chiratae Ventures India, Trifecta Capital Advisors, Axilor Ventures, Endiya Partners, Pi Ventures, VH Capital, Mitsui Sumitomo Insurance Venture Capital, Rebright Partners, Kois Invest, Healthquad Advisors, Trusted Insight, Omidyar Network, Rnt Associates, Dream Incubator Inc., Inventus Capital Partners; The University of Tokyo Edge Capital Co., Blume Venture Advisors, Aflac Corporate Ventures; TeamFund, Evolvence Capital, Konark Capital, Endiya Partners, VH Capital invested in some of the largest deals in the Health Care Equipment and Supplies vertical (6.9) A number of foreign companies have invested in this segment. During the period between April 2000 and March 2017, USD 1.57 billion worth FDI came into the country (6.18)
Private Sector
Corporations: There are 750–800 domestic Medical Devices manufacturers in India, with an average investment of $2.3–2.7 mn and an average turnover of $6.2-6.9 mn (6.20) An increasing number of MNCs are setting up their manufacturing bases in India. Some of the leading Medical Device and Medical Electronics MNCs operating in India include 3M, Medtronic, Johnson & Johnson, Becton Dickinson, Abbott, Bausch & Lomb, Baxter, Zimmer, Stryker, Boston Scientific, GE Healthcare, Philips Medical. Homegrown brands include BPL Healthcare, Sushrut Surgicals, Trivitron Diagnostics, Accurex Biomedical, Biopore Surgicals, Endomed Technologies, HD Medical Services (India), Medikit, Harsoria health care, Nidhi Meditech System, (6.21) Meril Life Sciences, Sahajanand Medical Technologies (SMT), Hindustan Syringes & Medical Devices (HMD), Polymed Medical Devices, Trivitron Healthcare, Transasia Biomedicals, Sutures (6.22) IT companies such as Wipro Technologies, HCL Technologies are also active in medical devices. (6.21) Some emerging start-ups include InAccel, (6.2), Forus Health, Remidio and Sattva Medtech (6.23)
Non-Profit
Industry Associations include Association of Indian Medical Device Industry (AIMED), Association of Diagnostics Manufacturers of India (ADMI), Indian Medical Association (IMA), Nathealth - Healthcare Federation of India. The Indian Certification of Medical Devices (ICMED) is the country’s first indigenously developed quality assurance system for medical devices.
Target Locations
India: Countrywide
References
- (2.1) https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(18)30994-2/fulltext#seccestitle190
- (2.2) https://niti.gov.in/sites/default/files/2019-12/SDG-India-Index-2.0_27-Dec.pdf
- (2.3) https://in.one.un.org/page/sustainable-development-goals/sdg-3-2/
- (2.4) https://data.worldbank.org/indicator/SH.MED.PHYS.ZS
- (2.5) https://data.worldbank.org/indicator/SH.XPD.GHED.GE.ZS?view=chart
- (2.6) https://www.financialexpress.com/economy/india-spending-more-on-healthcare-now-but-yet-not-as-much-as-others-heres-how-much-us-china-spend/1922253/
- (2.7) https://data.worldbank.org/indicator/SH.XPD.OOPC.CH.ZS
- (2.8) https://www.irdai.gov.in/ADMINCMS/cms/whatsNew_Layout.aspx?page=PageNo3729&flag=1
- (2.9) https://bmjopen.bmj.com/content/8/5/e018020#DC1
- (2.10) https://www.indiaoppi.com/wp-content/uploads/2019/12/Report-on-healthcare-access-initiatives-For-web.pdf
- (2.11) https://www.nhp.gov.in/nhpfiles/national_health_policy_2017.pdf
- (2.12) Stakeholder Consultations
- (2.13) https://www.ibef.org/industry/healthcare-india.aspx
- (6.1) https://niti.gov.in/writereaddata/files/Strategy_for_New_India.pdf
- (6.2) https://www.livemint.com/companies/start-ups/startups-seek-a-cure-for-costly-medical-devices-1567363624718.html
- (6.3) https://www.advamed.org/sites/default/files/resource/medical_industry_in_india_-_the_evolving_landscape_oppurtunities_and_challenges_white_paper.pdf
- (6.4) https://www.investindia.gov.in/sector/medical-devices
- (6.5) https://niti.gov.in/sites/default/files/2019-12/SDG-India-Index-2.0_27-Dec.pdf
- (6.6) https://www.meity.gov.in/content/greenfield-electronic-manufacturing-clusters
- (6.7) https://www.financialexpress.com/industry/healthcare-fund-ii-tata-capital-aims-to-raise-200-million/1390924/
- (6.8) Stakeholder consultations
- (6.9) S&P Capital IQ data
- (6.10) https://www.makeinindia.com/article/-/v/sector-survey-medical-devices
- (6.11) https://www.ibef.org/industry/healthcare-india.aspx
- (6.12) https://www.assocham.org/newsdetail.php?id=6618#:~:text=India's%20healthcare%20market%20may%20see,an%20ASSOCHAM%2DRNCOS%20joint%20paper
- (6.13) https://indiainvestmentgrid.gov.in/sectors/healthcare/medical-equipment-devices
- (6.14) https://www.business-standard.com/article/companies/bpl-medical-tech-to-scale-up-global-presence-aims-to-break-even-in-fy19-118123100930_1.html
- (6.15) https://www.assocham.org/newsdetail.php?id=6813
- (6.16) https://pib.gov.in/Pressreleaseshare.aspx?PRID=1607485
- (6.17) https://cdsco.gov.in/opencms/opencms/en/Medical-Device-Diagnostics/Medical-Device-Diagnostics/
- (6.18) https://www.makeinindia.com/article/-/v/sector-survey-medical-devices
- (6.19) https://www.thehindu.com/news/national/cabinet-approves-promotion-of-domestic-manufacturing-of-medical-devices-in-country/article31129011.ece
- (6.20) https://www.investindia.gov.in/sector/medical-devices
- (6.21) http://ficci.in/sector/76/Project_docs/Medical_Devices_and_Equipment_Sector_profile.pdf
- (6.22) https://www.makeinindia.com/six-homegrown-medical-devices-manufacturers-of-india
- (6.23) https://economictimes.indiatimes.com/small-biz/startups/indias-medical-devices-startups-grabbing-the-worlds-attention-with-advanced-and-affordable-technologies/articleshow/51640537.cms
- (6.24) https://www.skpgroup.com/data/resource/skp_advamed_medical_device_industry_in_india_.pdf