This is a blog post from
When PM Modi lauded India’s potential as a multi-trillion investment hub in the latest Independence Day speech, the world gaped in awe. This speaks volumes for the exciting investment market India is becoming. Promises are fragile. Especially, when the roadmap to fulfilling them is packed with potholes. There’s no denying that India has made a mark on the global map. In fact, after a record jump of 30 places in the World Bank’s ease of doing business ranking, the country is all set to leapfrog into the top 50.
But are we quite ready to make the next jump? While the aim is laudable, the process is debatable. How is global innovation to enter the domestic market without an environment to prosper? Price caps are creating market distortions in a country which relies heavily on imports in medical devices. Decisions like a blanket price on coronary stents are a disincentive to future investment in India.
India’s healthcare sector is expected to be $280 billion in size by 2020, growing at a compound annual growth rate of 16%, and medical devices form a significant share of this infrastructure. The total import of medical devices into India is more than 75% of its total medical devices sales.
The government decided to regulate the prices of medical devices with the aim of increasing access for patients who are not able to afford them. These benefits seem lucrative in the short term but may not work as effectively in the coming years. Sure, it is time to make health care affordable and accessible, but these steps cannot be executed in silos. When you bring critical medical devices like heart stents, diagnostic equipment and orthopaedic implants under regulation, it impacts the importing of high-end state-of-the-art medical equipment.
On the one hand, we talk about the investment hub that India is and, on the other, specific policies are discouraging these companies from investing. To deal with the healthcare roadblocks that prevail in India, we need the market to be open to foreign investments — technology is making health care better around the world, and why should India be left behind?
For instance, fixing the price of stents below their cost of production does not offer an economic incentive for firms to continue production. No wonder many reliable multinationals that supply stents in India have debated on pulling out of the market — some refused to bring their latest innovations to India. The concept is simple — investors judge the attractiveness of an investment based on its expected return compared to other investments. Thus, for as long as price caps affect relative returns, they will affect the urgency and amount of investments that bring new products into the market. These returns are needed for companies to maintain business sustainability and focus on new research and innovation.
When we talk about accessible healthcare, what about all those who are looking for the latest technology to improve their condition?
Today, India is one of the top 20 global markets for medical devices and the fourth-largest in Asia. India’s medical value travel market is expected to grow at a Compound Annual Growth Rate of 30% from $2.8 billion in 2014 to $0.6 bn in 2019. When we talk of medical tourism and Make in India, we cannot ignore the influx of quality healthcare services that foreign players bring.
Make In India, which started as a dream to build India by creating a robust manufacturing sector, also came with a promise to “represent important opportunities for foreign investors”. The strategy included 25 target sectors, including pharmaceuticals and wellness among others. India’s murky medical devices market needs innovations and because “Make In India” is now becoming all about creating everything in the local market, it can impact the health market negatively.
It is time for India to take on the innovation curve as the healthcare sector has substantial unmet needs that need to be addressed. We need pro-innovation policies that propel the development of high quality and innovative medicines for Indian patients. It is critical that innovative thinking walks hand in hand with the social and economic evolution of the nation. As I had mentioned earlier, we need to look beyond price-capping. What India needs is a solution like Trade Margin Rationalisation, which allows for market-based differentiation of product prices. That too, from the First Point of sale, so that the margins are fairly decided. For India to sustain the ranking in the Ease of Doing Business, it is imperative that we have the right policies in place to invite investments from global research-based companies.