The common refrain in India in the aftermath of the COVID-19 pandemic was - ‘to take the future of our country’s wellbeing into our own hands, we must become self-reliant in healthcare and med-tech devices’. Consequently, a slew of measures were rolled out to encourage the journey of self-reliance.
Those that could be potential tailwinds were, a PLI (product linked incentive) schemes to invite multinational medical device players to make in India so that they could get an incentive of 5-7% of revenue generated from those devices. A comprehensive, forward-looking regulator, who understands the needs of multinational players who operate in 150 plus countries and dispense with quick decisions. And approval for setting up four medical device parks with a financial outlay of INR 400 crore in Himachal Pradesh, Tamil Nadu, Madhya Pradesh, and Uttar Pradesh with an objective to reduce manufacturing cost, optimise resources, build economies of scale, and create requisite infrastructure.
However, the headwinds that were generated by various arms of the Government of India were, and are, far greater than the tailwinds, and hamper the progress towards self-reliance. Some of these headwinds are:
Interfering measures like price capping and trade margin rationalisation discourage multinationals from bringing new and innovative treatments or devices to India by making them economically unviable to operate. Additional burden to adopt India specific standards on players aspiring to use India as a manufacturing base for global supply (thereby minimising the benefits of operating in India). Restrictive strategies like PPOs (Public Procurement Orders) that preclude multinationals from participating in state procurement and a de-facto interpretation of ‘Aatma Nirbhar’ campaign as import substitution by most of the functionaries of the Government block patients’ access to modern technology.
When you consider these signals from the government, the message that gets generated becomes ‘India is not a reliable partner for the global value chain’ and it then becomes very difficult for Indian management of multinationals to make a convincing case for transformative investments in India.
This begets the question, ‘why is a country with a population of 1.3 billion not an attractive market in the first place?’ This is a million-dollar question (or shall we say a billion-dollar question) and the answer lies in the way we pay for healthcare.
In India, the insurance penetration for in-patient care is estimated at a meagre 35%, with nearly 60% of all healthcare expenditure paid by patients out of their own pockets. As a result, patients more often than not choose ‘just enough care’. This forces the healthcare providers (practitioners) to choose ‘what is affordable for their patients’ instead of ‘what is best for them’. Besides preventing patients from accessing best-of-class healthcare, it also disincentivises companies from bringing their most modern technologies to the Indian market. This also explains why despite a similarly sized population, India’s medtech market is roughly 1/5th of China’s.
Considering the same situation through the lens of a decision-maker sitting in an MNC HQ, if they only have a single dollar to invest, they will choose the most optimal return location by taking into consideration all the factors like ‘price attractiveness for technology’, ‘growth opportunity’, ‘government interference’, ‘ease of operations’, ‘insurance coverage’ et al. To sum up, India already has a very small med-tech market with practically minuscule innovation system; (only 15% of medical devices consumed are even Made in India much less innovated in India) and in conjunction with restrictive government rules and poor prices, we are further aggravating the situation. However, it’s not an impossible task to plug this.
Few suggestions to consider based on various factors highlighted above, include – an ncreased focus on strengthening the demand side equation of India’s healthcare ecosystem thereby making it attractive for both MNCs and domestic players to invest for attractive and competitive returns vis-a-vis other sectors like FinTech, FMCG, technology to name a few.
Bringing efficient metrics to evaluate government spending in healthcare. Irrespective of the size of our healthcare spending, we need to standardize how we spend whilst standardising what we buy. We need to move from the lowest cost to ‘the best outcomes for patients’ basis. This will offer economies of scale and transparency to med-tech players. This might require the eventual moving of healthcare as a legislative subject into the Centre’s ambit, away from the state list and into the concurrent list.
Actively facilitating a culture of innovation by establishing a supportive industry ecosystem with inputs from academia, research and government systems. The way to do this is innovation adoption by the government health system first which will ensure Indian innovators have a home in India first before looking at global markets.
Work on ensuring ease of doing business in India. The following solutions will benefit in this endeavour: single window approvals for regulatory clearances, as opposed to multiple government bodies involved in the due process before a license to operate, can be obtained.
One nodal officer for prompt resolution of bottlenecks working in tandem with the industry
Harmonisation of Indian standards and regulations with the rest of the world as opposed to creating a moat around India.
As critical as healthcare is for citizens and a country, it is also a complex subject from a policy perspective. In such a scenario, an attempt to improve access and standards of healthcare for patients through arbitrary or excessive measures is akin to trying to fit a square peg in a round hole. No amount of force or coercion can make it work, if anything, it could do more damage than good. So, the need of the hour is a careful, considered and collaborative approach between the government, med-tech players and other stakeholders to mould the industry in a way it benefits patients in the long run.
(The writer is Managing Director - India / South Asia, Becton Dickinson India Pvt Ltd Views are personal.)