Opportunity to Build a Billion-Dollar-Revenue MedTech Platform in India

At 11 billion US dollars, India is the fourth-largest MedTech market in the APAC region. Despite per capita spend being low compared to other APAC markets, positive news is that per capita healthcare spend in India has grown rapidly, especially in recent years. Compared to the present figure of US$74, average healthcare spending per capita was US$49 as recently as 2012, implying a CAGR of nearly 4%. Rising affordability and expanding insurance coverage are primary contributors to the growth in healthcare spending. IN addition, growth of the MedTech sector can further fuel growth in healthcare spending.

Rising affordability

Rising affordability for quality healthcare is driven by India’s rising per capita disposable income, which reached US$2,900 in 2023-24, growing by 8% in FY24 and 13.3% in FY23. In line with rising affordability, growth in India’s household spend per capita at 7.8% Y-o-Y, is forecasted to outpace that of fellow developing Asian economies such as Indonesia, Philippines and Thailand.

Besides rising income, other factors contributing to rising affordability are a) large youth population — the median age in India is 29.8 years in 2024, as per The World Factbook, compared to 40.2 in China and 49.9 in Japan, and b) ongoing urbanization.

Rising insurance coverage

The proportion of India’s population not covered by any form of health insurance has fallen considerably from 63% in FY2014-15 to 30% in FY2021-22. This has mainly been due to expanding health insurance, both public and private. Among government schemes, where population coverage has increased from 25% to 51% during the same period, Pradhan Mantri Jan Arogya Yojana (PM-JAY) has been a key contributor. With 550 million identification cards issued, it is the world’s largest government-sponsored healthcare program. The latest government data shows that the scheme has facilitated 71 million hospitalizations. In a significant move, the Union Cabinet has approved expansion of the AB PM-JAY, ensuring all senior citizens aged 70 and above receive health coverage, regardless of income. Meanwhile, private health insurance coverage has also increased by 4%, registering a 23% CAGR over the past decade.

The growth in overall healthcare spending, driven by rising affordability and better insurance coverage, is expected to spill over into the Indian medical devices market and support in its expansion.

Primarily, a) increasing focus among Indian MedTech manufacturers on R&D and innovation to develop high quality products that meet market needs in both domestic and international markets, b) supportive MedTech manufacturing ecosystem, driven by supportive govt. policies, talent availability and infrastructure that has the capability and capacity to serve both Indian demand and international markets via exports, and c) capital infusion by public and private sector to aid companies to expand capacity, diversify portfolio and strengthen marketing efforts, have the potential to create multiple $billion revenue MedTech companies in India.

We will touch upon each of these key points in detail in the sections below:

A. MedTech innovations

Overview of the MedTech market in India

The MedTech market in India can be divided into five broad categories:

1. Invitro diagnostics (IVD) that revolves around disease diagnosis and preventive care using human tissue/fluid sample
2. Procedure-specific devices that are used for medical intervention specific to a therapeutic segment (e.g., cardiology, ophthalmology, dentistry, etc.)
3. A wide range of non-procedure-specific devices that are used to perform surgeries and medical interventions across multiple therapeutic areas
4. Imaging and monitoring devices designed either to visualize structures and organs within the body for diagnostic/therapeutic purposes or for patient monitoring
5. General infrastructure and supplies that pertain to an extensive list of essential products used for the overall functioning of healthcare facilities, supporting routine and emergency medical care

Out of these, invitro diagnostics used by diagnostic laboratories, hospitals, research institutions, clinics, and POCT providers, is the largest and fastest-growing segment, followed by surgical instruments and consumables (see figure 1).

Indian MedTech manufacturers are increasingly focusing on R&D and innovation, in turn developing high quality products that meet market needs in both domestic and international markets. To this end, Indian MedTech OEMs have focused on innovation and collaboration with research institutions to foster the design and development of high-end devices. Several examples of innovation can be seen across cardiovascular, orthopedic, IVD and imaging segments (see Figure 2).

Innovation observed in the MedTech sector in India is to a) address unmet clinical needs, b) suit consumer needs or c) develop a low-cost product that matches MNCs in quality, safety and efficacy. An apt example here would be innovation in a high-maturity, low-growth segment like bracing to develop low-cost products that compare favorably with MNC products in quality, safety and efficacy (see Figure 3).

On its part, the government of India has adopted several strategic measures and policies to promote R&D and innovation in the country, which have contributed to the growth of the MedTech sector. These include establishing national R&D, innovation and medical devices policies, building seven centers of excellence for the pharmaceutical and MedTech sectors, and providing financial assistance for developing common infrastructure facilities at existing medical device clusters. What is noteworthy is that MedTech companies have been high on the innovation scale even before these government initiatives were implemented.

This research ecosystem is well supported by a manufacturing ecosystem that meets domestic and international demand for medical devices.

B. Building MedTech manufacturing capabilities for domestic and export markets

India’s potential as a manufacturing hub is underscored by its skilled workforce and participation in manufacturing employment, with scope for improvement in labor productivity (see Figure 4).

The Indian government has been offering economic incentives to make the country an attractive market for greenfield and brownfield investments in domestic manufacturing. The oldest among these is the “Make in India” initiative of 2014, a government-led campaign to transform India into a global manufacturing hub and attract foreign investment. Under Make in India, 100% FDI for both brownfield and greenfield setups is permitted. In addition, tie-ups at the country level are encouraged to boost tech transfer.

The production-linked incentive (PLI) scheme for manufacturing is another government scheme applicable to large-scale medical device manufacturing focusing on cancer, imaging, implants and anesthetics. With a net value of over US$ 2.2 mn, the scheme is exclusive to greenfield investments and covers equipment, implants and consumables. In early 2024, PLI 2.0 scheme has been introduced to cover diagnostics including IVD.

Medical device parks are also being created nationwide to ease raw material sourcing and mitigate supply chain challenges to make medical device manufacturing feasible in India. The government has financed four medical device parks in Himachal Pradesh, Madhya Pradesh, Tamil Nadu and Uttar Pradesh, with a total outlay of US$ 50 mn. These parks will strengthen the manufacturing ecosystem and provide necessary infrastructure and services in one place for MedTech OEMs, in turn aiding in the development of complex multicomponent and high-end medical devices.

India’s first premier MedTech park, AMTZ, was established in 2016 in Andhra Pradesh; a year later, one of the largest MedTech Zones was set up in Telangana (see Figure 5).

Subsequent facilities in North and Central India have expanded the medical device park capacity in India (see Figure 6).

In addition to medical device parks, India houses 21 medical device clusters with presence of both domestic and multi-national MedTech OEMs. These are present across nine states, with Uttar Pradesh having the highest share at 29%; 736 units are currently in operation in these 21 clusters. The attractiveness of a location or cluster is driven by the presence of a favorable manufacturing ecosystem supported by the availability of infrastructure, land, talent, distribution and logistics, and tax incentives.

Overall MedTech manufacturing ecosystem in India is supportive, driven by favorable Govt. policies, skilled talent availability and high-quality infrastructure.

The MedTech manufacturing capacity is used to serve both domestic and international markets. India exported MedTech devices worth US$ 3billion in 2022, driven by compliance to international standards, high-quality products at competitive prices, manufacturing scalability and comprehensive documentation support. U.S. and Europe have emerged as key export destinations. Indian medical device exports to the US have grown at 16% CAGR between 2017 to 2022. Netherlands and UK at 23% and 10% CAGR respectively during the same period, have served as top export destinations in Europe. Indian MedTech OEMs have demonstrated device exports across several key segments, including IVD, imaging and general consumables (see Figure 7). Further scope for exports exists in several other device categories as well.

A primary tailwind for Indian MedTech exports is the increasing value-consciousness among otherwise primarily quality-conscious Western markets. India’s high quality at value pricing fits in well with this need and is reflected in the growth in exports across key destinations. India is capable of manufacturing devices of equivalent quality to FDA approved products at competitive prices due to a) support by the Govt. under the “Make in India” initiative that provides export flexibility and assistance for new factories, especially in discounted biotech zones, and b) availability of cheap raw materials in certain device segments like cheap titanium for screws and plates in orthopedics segment.

Investor outlook

Liberal government investment policies and a comprehensive manufacturing ecosystem have resulted in US$ 2.80 billion in FDI inflows in the medical and surgical appliances sector between April 2000 and March 2023, reflecting confidence among global players. The outlook is suggestive of further upside.

Favorable macroeconomic environment, supportive government policies and a high- potential export opportunity have made the Indian MedTech sector an investment magnet (see Figure 8). This infusion of private capital is aiding companies in expanding capacity, diversifying their portfolios and strengthening their marketing efforts in the pursuit of growth.

In the more mature Chinese market, several MedTech companies on the back of supportive regulations and increased focus on R&D and tech development, have scaled to US$1 billion+ in revenues over the past 10-15 years. These include Shinva, United Imaging, Wego and Mindray, among others.

With similar market and regulatory tailwinds, multiple Indian MedTech OEMs exist that too show the promise of being able to scale across diverse segments (see Figure 9).

The opportunity to build multiple billion-dollar MedTech businesses in India clearly exists, and the Chinese precedent validates the prospect. With rising healthcare spending, technological advancements, expanding infrastructure, growing domestic demand, supportive manufacturing ecosystem, a proven track record of execution and international reputation for quality, the MedTech industry puts forth significant opportunities in one of the world’s fastest-growing economies.

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