It is time for India to take the innovation route as this crucial sector has substantial unmet needs which must be addressed. We need out-of-the-box initiatives that propel the development of high quality medicines for patients
When Prime Minister Narendra Modi lauded India’s potential as the multi-trillion investment hub at the recent Independence Day speech, the world gaped in awe. This speaks volumes for the exciting investment market India is becoming, doesn’t it? Promises are fragile. Especially, when the roadmap to fulfilling them is packed with potholes. There is no denying that India has made a mark on the global map. In fact, after a record jump of 30 places to rank 100th in the World Bank’s Ease Of Doing Business ranking, the country is all set to leapfrog into the top 50.
But are we 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.
Unintended consequences of price capping: India’s healthcare sector is expected to be $280 billion in size by 2020, growing at a compound annual growth rate of 16 per cent and medical devices form a significant share of this infrastructure. The total import of medical devices is more than 75 percent of total medical devices sales in India. The Government decided to regulate the prices of medical devices with the aim to increase access to patients, who were 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 healthcare 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 import of high-end state-of-the-art medical equipments.
On the one hand, we talk about the multi-trillion investment hub that India is, but on the other, specific policies are discouraging these companies from investing. To deal with the healthcare roadblocks that pervade in India, we need the market to be open to foreign investments, because technology is making healthcare better around the world. 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 multinationals that supply stents in India debated on pulling out of the market, with some refusing to bring their latest innovations to India. The concept is small investors judge the attractiveness of an investment based on its expected return compared to other investments. Thus, as long as price caps affect relative returns, it would change the amount and urgency of investments into bringing new products in the market. These returns are needed for companies to maintain business sustainability and focus on new research and innovation.
When we talk about accessible health care, what about all those who are looking for the latest technology to improve their condition? Today, India is one of the top 20 global medical device markets and the fourth largest medical device market in Asia. The medical value travel market in India is expected to grow at a Compound Annual Growth Rate of 30 per cent from $2.8 billion in 2014 to $10.6 billion 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.
Of what started as a dream to build India by creating a robust manufacturing sector, ‘Make In India’ also came with a promise to “represent important opportunities for foreign investor.” 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 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 in line with the social and economic evolution of the nation.
As 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, and 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.
(The writer is Director, Paediatric Gastroenterology & Hepatology Institute of Digestive & Hepatobiliary Sciences, Medanta: The Medicity