For a long time, India was closed to many foreign markets through government protectionism and a nationalistic tariff system. Today, however, India is ripe for market entry for many industries, including medical devices. Entering soon (or expanding one’s business there) will help keep Western enterprises from being left out of India’s exponential growth.
India is a country of 1.1 billion people, with its $4 trillion GDP (adjusted for purchasing-power parity) making it the fourth-biggest economy in the world. After being stuck at a low rate of growth for many years, it has been booming since the 1990’s. From 1996 to 2006 GDP grew at an average rate of 7%, and is still not slowing down. Within that picture, the $1.75 billion India medical device market is a strong sector, with 8% growth in 2005 and double-digit growth foreseen for coming years.
To understand the India medical device market, the first thing to remember is that, for foreign market entrants, the consumer base is not one billion people. Even today, a majority of Indians are too poor to afford more than the most rudimentary health care. Rather, the market is the middle and upper classes in the teeming cities, numbering around 150 million and counting. With no comprehensive national health insurance, and an inadequate public health network, it is mostly the private sector fulfilling their new demands for quality health care. About 75% of medical expenditures in India are paid privately. India is home to a number of large, modern private hospital chains (Apollo, Wockhardt, Fortis, and many others). These groups purchase high-end medical equipment to serve both their demanding local customers and India’s more than 100,000 annual “medical tourists” from other countries.
The device categories poised for the highest growth in India are those connected to its changing disease profile. As Indians increasingly lead sedentary lifestyles, smoke, and eat more, lifestyle diseases such as cardiovascular disease and cancer are on the rise. Imaging, diagnostic, and surgical devices to treat these diseases are well-situated. Cardiological equipment currently makes up about 20% of the total India medical device market, while imaging equipment is about 15%. Other growth sectors include ophthalmological equipment, general surgical devices, orthopedics, and plastic surgery equipment. Imports make up over 60% of all devices by value and dominate the high-end market, with foreign devices seen as more effective and reliable.
Though India’s business environment has improved markedly over the last 15 years, in some ways it is still a difficult country to work in. Assistance on the ground by experts with medical device experience is indispensable.
India’s regulatory system is complex and can be difficult to navigate. Up until very recently, there were no regulations for medical devices as a class. Today, though, various devices (i.e., hypodermic syringes, cardiac stents, and orthopedic implants, among others) are designated as needing registration as drugs under the Drugs and Cosmetics Act. A few specific devices, such as diagnostic X-ray equipment, have individual registration requirements instead. The government has drafted a law for the India medical device market, which may streamline the process but include many more medical devices (requiring registration) within a year or two.
For devices that need it, registration may take up to a year, and will require a regulatory professional prepared to spend a significant amount of time in New Delhi following up. The manufacturer may authorize the importer to apply for registration, or may designate an independent third party (in-country) to make the application and hold the license, which helps keep distribution options flexible. Obviously, if your company has its own office there, direct registration is possible.
As noted above, India has no comprehensive national reimbursement system. However, a patchwork of different government programs sometimes reimburses for devices, but more to public hospitals than to private ones. However, private health insurance will soon become a part of the landscape. In 2004, only 1% of Indians had private healthcare coverage, but with high demand and aggressive marketing, this figure is expected to rise to 10% by 2010.
Finally, while tariffs have been eliminated altogether for some types of medical devices, many still have tariffs ranging from 5-36%. These are expected to go down further in the future.
Market entry strategy
Distribution networks in the India medical device market are extremely dense, layered, and difficult to penetrate without connections and experience. Therefore, it is recommended to find distribution partners or set up a joint venture, not jump in and set up your own operation at first.
Large Western medical companies often choose to create a joint venture with similarly large local companies. One of the best-known examples is the long association of GE with Wipro, which put in a great deal of expertise and capital to make and market diagnostic equipment in India.
Smaller companies, on the other hand, usually work through distributors. They may also set up a small representative office to do advertising and market research, as well as keep tabs on the distributor. Finding the right partner is essential, and lack of due diligence can doom the whole process. Both parties should also try to align their mutual expectations as much as possible, since cultural differences make strategic disconnect hard to fix.
In crafting a marketing strategy for India, it is vital to think regionally. Is it really “all one country”? India’s billion citizens speak 24 major languages, practice 6 major religions, and are divided into thousands of ethnic groups. To market to multiple regions of India, you may need multiple distributors. Any pressure to sign an exclusive distribution agreement should be resisted, since very few distributors have the capacity to sell to the whole India medical device market satisfactorily.
You should not assume that just because India has a large middle class (per capita income $3,000-20,000), they will snap up your high-end products quickly. Brand recognition in the US will not necessarily carry over in India. Market research is a must, and you may find you need to adjust a device’s features or pricing. Some hospitals may be after advanced equipment, but their budgets are still smaller than hospitals in the West. A key way to stand out in the India medical device market is through offering excellent after-sale service, which domestic competitors are often poor at.
Some companies combine market entry with starting up manufacturing operations in India, since it should enhance sales due to significant cost-cutting. Clinical trial and R&D outsourcing are also becoming more popular, helped by India’s huge patient base and relatively cheap scientists.
India is not a place to get rich quick. Preparations take time and money, and there will be bumps on the road. But with a good product, the right partners, and a locally-adapted strategy, capturing part of its market will pay off for decades to come. Finally, when doing business in the India medical device market, it is extremely important to remember their business culture is more aligned with the Middle East and East Africa as opposed to East Asia.
Ames Gross – President and founder. Mr. Gross is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross founded PBM in 1988 and has helped over 200 medical companies with business development and regulatory issues in Asia.
Pacific Bridge Medical is a leading independent consulting firm dedicated to assisting medical companies in Asia. To learn more, please visit our website at www.pacificbridgemedical.com.