Revitalizing the Medical Device Industry by Focusing on Quality and Innovation

Rishubh Gupta, GM, Baxter India

In an exclusive interview with India Pharma Outlook, Rishubh Gupta, GM, Baxter India, share his insights on the Indian medical devices industry, government initiatives to support the market, logistics solutions for domestic manufacturers and more.

The market size of the Indian medical devices industry crossed USD 10 billion in 2020. In your opinion, what are some of the major factors that are driving the growth of the industry in India?

The medical devices market in India has the potential to increase at a 37% CAGR and reach $ 50 bn by 2025. Several factors including favorable policies such as 100% FDI in the sector, a reduction in regulatory burden and ongoing improvements contribute to expansion opportunities in the medical devices industry. Also, India has achieved great progress in healthcare, particularly during the pandemic when the government committed many investments to enhance the existing infrastructure. In addition, increasing insurance coverage through the private sector as well as government programmes such as Ayushmaan Bharat is one of the other important factors driving growth. According to current data released by the Ministry of Health, over 18 billion health cards have been issued under the plan, and over 3.2 billion people have utilized hospital services. To minimize the burden of chronic diseases and enhance the lives of people, this creates enormous opportunity for the healthcare industry to provide better solutions. With an increasing chronic disease burden, for example, a projected 69.9 million diabetics in India by 2025 and 200,000 people getting afflicted with end stage kidney disease every year, the Indian healthcare industry confronts both challenges and opportunities.

According to the Association of Indian Medical Device Industry (AiMeD), medical device imports rose by a record 41% to Rs. 63,200 crores in 2021–22. Why is this the case and how is this impacting the growth potential of domestic manufacturers?

Although medical device imports in the country have increased, it is important to analyze the specifics of such imports. It is highly likely that the demand for "high-end" imports has surged to compensate for the gap in the availability of technology required for the management of critical patients. However, for low-to medium-technology-based products that are manufactured locally, demand inflated multifold during the time of Covid's peak and is now normalizing, resulting in a lower offtake by the market. This, in turn, is impacting domestic manufacturing. It is therefore imperative for indigenous medical technology companies to upgrade their capabilities to manufacture medium-to-high technology products. For that to happen, the whole ecosystem, including design and validation, as well as the supply of ancillary and other materials, requires upgrading. In addition, it is necessary to encourage multinational corporations to bring their products and innovations to India.

How do you view the impact of PLI Scheme for medical devices manufacturing in helping Indian medical devices companies attract better investments and improving their manufacturing operations especially when it comes to implants, imaging and anesthetic devices?

Incentivizing medical technology manufacturing in certain targeted therapeutic areas, which have a high import dependency, is a good idea to attract investment in the local market. However, a minimum threshold of incremental annual sales of INR 60 crores in the first three years and INR 50 crores in the next two, to qualify for a 5% incentive, is a big challenge for most domestic and overseas investors. With little or no procurement guarantees from the government, coupled with slowdowns in the global supply chain and demand, the challenge seems further accentuated. As a positive sign, the Department of Pharmaceuticals (DOP) changed the PLI scheme in late August in response to the industry's concerns. They did this by splitting the 4 categories of products into smaller groups and changing the minimum threshold of incremental sales for one subset of products to 20 crore (FY 2022-23) with a 10% increase over the base year over the scheme period. Unless there is a significant increase in local demand and medium-to long-term predictability in the policy framework, industry investments will continue to be a challenge. To revitalize the sector, the current imperative is to emphasize quality and promote innovation.

Most Indian medical device companies face logistics challenges especially when it comes to inaccurate inventory data, delays in supplies, and lack of transparency. How can companies tackle this issue and what are the essential traits a medical devices company should know before choosing a logistics partner?

An effective logistics network is the cornerstone of every successful organization, and its significance cannot be disputed. Establishing an integrated digitalized supply chain network, complete with tracking and tracing analytics across the value chain in order to enhance the customer experience, is one approach for overcoming the difficulties resulting from inefficient logistics. It results in four tangible benefits for businesses: increased flexibility and agility, reduced operational risk, more informed decision-making, and the establishment of a standard that can be used to develop performance indicators and identify important bottlenecks. With good analytics, businesses will be able to adapt to disturbances rather than only respond to them. Identifying service providers who are focusing their investments on integrating blockchain technology into their business is an alternative solution. Innovations in the supply chain enabled by blockchain technology will have the ability to generate great business value by boosting supply chain transparency, lowering supply chain risk, and enhancing supply chain management overall.

Owing to the high cost of innovative medical devices, it is now largely the responsibility of manufacturers to help buyers secure sources of funding. How did this impact the operations of medical devices companies and what are the unique challenges that arose due to this?

In healthcare, there are two types of financial challenges: supporting the development of the innovation and determining who will pay how much for the product or service it produces. It is a well-known fact that technological innovations encounter several challenges. On the accountability front, an innovator confronts the difficult challenge of complying with governmental regulations, which increasingly require enterprises to demonstrate that new products not only perform what they claim but are also cost-effective in comparison to competitor's offerings. In terms of funding, the innovator must consult with insurers well in advance of the launch to determine whether the product will be reimbursed, which is usually easier if it is intended for treatment rather than diagnostics. To obtain this permission, the innovator will often seek assistance from industry stakeholders such as physicians, hospitals, and a variety of influential intermediaries such as group purchasing organizations (GPOs), which pool the purchasing power of thousands of institutions. GPOs often prefer vendors with diverse product lines over those with a single product. Innovators must address the economics of insurers and healthcare providers, as well as their interdependence. For example, insurers do not normally pay for capital equipment individually. A seller of a novel anesthesia technology, such as a vaporizer, must, for example, be prepared to assist its hospital customers in obtaining greater reimbursement from insurers for the increased price of the new devices, or to seek synergies with makers of anesthetic gases. Innovators must also take care to select the ideal parties for new technology adoption and then provide them with comprehensive medical and financial information. Traditionally trained surgeons, for example, may be skeptical of minimally invasive surgery (MIS) techniques. Finally, the government's role as the principal payer for health-care services can result in a unique dynamic.

Last year, the Indian Council of Medical Research (ICMR) collaborated with Indian Institutes of Technology (IITs) to establish ‘ICMR at IITs’ by setting up Centres of Excellence (CoE). The primary aim of this tie-up is product development and commercialization in the medical devices space. This is just one of the many unique initiatives introduced by the government. How do you view the impact of such initiatives when it comes to improving the medical devices industry in India going forward?

In addition to the launch of the Production Linked Incentives (PLI) plan, this is a positive move by the government for the selected medical technology sector. The indigenous industry, which is dominated by micro, small, and medium-sized enterprises (MSMEs) with an annual turnover of less than INR 250 crore, faces the greatest obstacles in product creation and development. However, much more must be done to improve the status of the Indian MedTech industry, beginning with predictable and stable laws, an increase in domestic demand for medical technology goods, pricing, taxation, skilling, and incentives for ancillary and material suppliers.