National Medical Devices Policy Is Step In The Right Direction, But More Needed, Says Industry
Around 80% of the medical devices are imported at present in India, the fourth largest market for medical devices in Asia.
The single-window clearance system for licencing of medical devices, proposed under the National Medical Devices Policy announced last week, could be a revolutionary move to boost the industry, but a lot more needs to be done, according to stakeholders.
The Union Cabinet had approved the National Medical Devices Policy, 2023, in its meeting on April 26. It aims at helping the sector grow from the current $11 billion—or 1.5% of the global market—to $50 billion, or around 10–12% by 2030.
The Indian medical devices industry had been demanding reforms, policy measures and regulations for several years now, according to GSK Velu, chairperson and managing director of Trivitron Healthcare—a multi-product medical devices company. "We finally have a policy with blessings and support of the government," he told BQ Prime.
Currently, for making a high-tech medical device—such as a CT-Scan—in India, various ministries have to be approached to get certifications and approvals, including the Bureau of Indian Standards, Central Drugs Standard Control Organisation, and Indian Council of Medical Research, he said.
All of them are part of different ministries and such approvals take a long time as each of them needs to be approached sequentially one by one, said Velu.
Therefore, it is easier to import than to go through these phases for introducing a top-end medical device locally manufactured, he said. "But now, with the proposal of a single-window clearance, these issues will ease out and manufacturing will become easier and more attractive, slowly but steadily in this space."
More investments in research and development, and skill development programmes and job-oriented courses will give a boost to this space. "Currently, we do not have a workforce with the requisite skill-set," Velu said.
Biomedical engineering courses with a focus on design and development of medical devices will aid growth and enable more innovations, he said.
Leo Mavley, chief executive officer of Axio Biosolutions Pvt., a medtech company, described the new policy as a step in the right direction. The policy addressed certain issues and provided a lot of clarity around others, he said.
The establishment of medical device parks and clusters with logistical support—in addition to the regular pharma clusters that exist in various states—will encourage new companies, Mavley told BQ Prime. "It may, in fact, lead to a huge influx of startups in the med-tech space."
India is at a nascent stage of biomedical devices manufacturing. "It is probably at the same phase as the automobile industry was in the 1990s and the biopharma industry was in the early 2000s," Mavley said. "So, a lot more support is required."
Around 80% of the medical devices in India are imported at present. Even the disposable medical device segment, which constitutes 15–20% of the total medical device market, is 40% dependent on imports, according to a recent report by Systematix.
India is the fourth largest market for medical devices in Asia after Japan, China and South Korea. The market size of the sector in India is estimated to be $11 billion, or approximately Rs 90,000 crore, as of 2020 and its share in the global medical device market is estimated to be 1.5%, the Systematix report said.
Velu emphasised the need to do more to take the contribution from the current 1.5% to 12–12.5%, and said it would take time.
"China pushed the medical devices policy 25 years ago to get to where it is currently," he said. "But with concentrated efforts, we can make significant progress in the next 10 years."
Issues Demanding Attention
According to Velu, the industry and tariff structure currently was more "import-friendly".
Tariffs on imports are currently low, so it's cheaper to import these products than manufacture them indigenously, he said. "Hopefully, in the next five years, we have an ecosystem to support local manufacturing."
Mavley echoed the view, and said the current duty structure was making it unviable to innovate and indigenously manufacture. "Innovations need to be supported at a commercial stage. Commercialising new products is always difficult and the government must help in that direction."
Export revenues for most med-tech companies in India are larger than domestic sales. The companies earn over 60% of their revenue from exports, according to Mavley.
As an example, he mentioned government hospitals, which have massive budgets for purchase of medical devices but choose to import. This is because the government has not mandated them to source from local manufacturers, which have the requisite quality standard certifications accepted globally, he said.
And this is despite the fact that Indian companies are preferred overseas due to their competitive pricing, Mavley said.
According to Velu, Chinese companies get a lot of support from local authorities in the form of the government buying locally manufactured products, with special preference given to home-grown companies.
But, in India, there seem to be implementation issues since health is a subject in the state list, he said. "'Buy in India' must be encouraged."
PLI Pump Up
The Cabinet said that under the Production-Linked Incentive scheme for medical devices, 26 projects had been approved, with a committed investment of Rs 1,206 crore and an investment of Rs 714 crore has been achieved so far.
However, Mavley highlighted that the current products covered under the scheme were already commercialised. "New segments are required and the list for PLI inclusions must be extended."
Potential Listed Winner
India's listed medical device manufacturing company, Poly Medicure Ltd., could be a potential beneficiary of the new policy and any new regulations or initiatives that come in the space.
It has already forayed into the dialysis category under the medical devices PLI scheme—which involves manufacturing dialysis machines, dialyzers and other medical consumables used for dialysis, according to a Systematix report.
The brokerage has a hold rating on the stock with a target of Rs 990, implying a limited upside of 2% from the closing price on Thursday.
The company is a leader in disposable medical devices.
It is gradually transforming the portfolio to build a presence in categories that have high entry barriers and growth potential.
Potential opportunity size of the dialysis market is large—Rs 10,000 crore—and is growing at almost 30% annually.
The dialysis market faces limited competition and is dominated by multinational players.
This segment alone can potentially help double its existing revenue base.
It estimates 19%, 25% and 25% compound annual growth rate in sales, Ebitda and net earnings, respectively, over fiscal 2022–2025, underpinned by three factors.
a) Entry into the dialysis segment.
b) Ramp up in the U.S. market.
c) Volume growth in base portfolio via higher market share and market expansion.
Key risk stems from the company's ability to effectively execute and compete with players at a global scale.
Poly Medicure is in the quiet period due to its quarterly results on May 9, and has hence, refused to share views on the story.