Why Medical Devices Firms Seek Lifelines

ON APRIL 27 LAST YEAR, Centre cleared the National Medical Devices Policy 2023. The move was part of plans to help the sector grow from $11 billion in 2022 to $50 billion in 2030 with six broad areas of policy intervention — regulations, infrastructure, R&D, investments, human resource and branding. That would mean 15%-plus growth every year for next seven years. Both Indian and global medical devices industries grew just over 9% in 2022.

The policy was a long-awaited booster for the ₹90,000 crore medical devices sector in India, the 4th largest in Asia after Japan, China and South Korea. The initial draft of the policy was formulated way back in June 2014, but not implemented due to various reasons, says Rajiv Nath, forum coordinator, AiMed (Association of Indian Manufacturers of Medical Devices). But is it enough?

MNCs Investing In R&D

Thanks to policy initiatives in recent years, global medical device makers are now investing in India, especially in research and innovation. A recent KPMG and industry body APACMed's research report says foreign direct investment (FDI) in medical device sector was $3.4 million in first three quarters of FY23, up from $1.9 million in FY22 and the highest since FY17. FDI in medical and surgical appliances sector was $280 million between April 2000 and March 2023, according to an India Brand Equity Foundation analysis.

Within a month of the announcement of the policy, Medtronic, a global medical device major headquartered in Dublin, Ireland, announced an investment of ₹3,000 crore ($350 million) to expand its Medtronic Engineering & Innovation Centre in Hyderabad, its largest R&D centre outside the U.S. The investment will support areas such as robotics, imaging and navigation, and surgical and implantable technologies. In May, Japan-based Omron Healthcare, a global personal healthcare product player, announced it would set up a medical device plant in Tamil Nadu at a cost of $15.5 million (₹128 crore).

''Partnerships among stakeholders — industry, academia and government — will be central in pivoting innovation efforts towards breakthrough research and commercialisation of high-end devices,'' says Vijay Chawla, partner & head, Life Sciences, and head, Risk Advisory, KPMG in India. That has already started happening. German multinational Siemens Healthineers, which in August tied up with Manipal Academy of Higher Education (MAHE) for a Master Research Collaboration in medical field, plans to invest $179.7 million by 2025 to set up an innovation hub in Bengaluru. The centre will focus on data analytics, artificial intelligence, cybersecurity and immersive technologies. French diagnostics specialist multinational bioMérieux, which launched an Antimicrobial Stewardship Centres of Excellence initiative in partnership with hospitals and laboratories worldwide in 2022, is collaborating with MAHE to establish a laboratory in Kasturba Medical College in Manipal. Another U.S. major, Boston Scientific, opened its second R&D centre in India in Pune last year after the first facility in Gurugram in 2016. R&D facilities in India are the company's second largest outside the Americas. Another medical device major, Stryker, recently inaugurated a neurovascular research lab at Stryker's Global Technology Centre in Gurugram to develop solutions for brain stroke.

Med-Tech Attracts PE/VCs

Experts say innovations are happening primarily in digital therapeutics and wellness solutions, especially diabetes and cardiovascular diseases. These are areas that have attracted a big chunk of private equity (PE) and venture capital (VC) investments over last couple of years. PE/VC investments in first six months of 2023 (till June) exceeded annual pre-pandemic levels. In 2022, value of PE/VC investments in healthcare devices and supplies was a record $628.5 million, highest in five years.

Recently, Warburg Pincus invested $210 million in Meril Life Sciences and Samara Capital invested $150 million in molecular diagnostics company Sahajanand Medical Technologies. Temasek Holdings and Oswal Alternates invested $85 million in Goa-based molecular diagnostics company Molbio Diagnostics. Other PE/VC investors in medical device start-ups include Leapfrog Investments ($61 million in molecular diagnostics company Redcliffe Genetics), Lightrock Venture ($32.8 million in glucose monitoring device maker BeatO), Sony Innovation Fund ($8.5 million in AI-based cardiac monitoring device maker Tricog), and Amicus Capital and other PEs ($7.3 million in molecular diagnostics firm Rivaara Labs).

Supporting Policies

Apart from National Medical Devices Policy, government has taken a number of steps to boost the sector as India has only 1.5% share of the global market. It has announced an outlay of ₹3,420 crore for Production Linked Incentives (PLI) Scheme for Medical Devices. Another is "Promotion of Medical Device Parks" programme from FY21-25 with financial investment of ₹400 crore and maximum support of ₹100 crore for each medical device park. Government is also planning to set up an export promotion council for medical devices under Department of Pharmaceuticals. In September 2022, it reconstituted National Medical Devices Promotion Council.

Long Way To Go

Globally, the industry is controlled by a handful of enterprises. Among top 30 companies in 2020, more than 60% (19) were from U.S., followed by four from Japan, three from Germany and one each from Switzerland, U.K. Sweden and the Netherlands. They command around 58% of the global medical device market, according to a study by Deloitte. India's import dependency is 70-80%. Imports were about $8.5 billion in FY22, growth of 36.8% over previous financial year.

In such a scenario, it is not easy for small- and medium- medical device companies to enter high-end manufacturing. It will require years of big investments, R&D, skilled human resources and an ecosystem with a robust supply chain, say industry sources. "Industry stakeholders need to contribute towards creating a sustainable ecosystem of innovation. This will require creation of a job-ready workforce and supportive regulations to improve ease of doing business and promote innovation," says Nikhil Patil, partner, Business Consulting, Lifesciences, KPMG in India.

Experts say investment-friendly regulations and policies, research-linked incentives, robust digital infrastructure, mainstreaming of public-private partnerships, conducive ecosystem and upskilling are required to make Indian medical device makers globally competitive.