STRATANALYSIS

A STRATEGIC ANALYSIS OF THE INDIAN MEDICAL DEVICES SECTOR

Team: Inebriated Souls

Arun Maithani
Navneet Sharma
Nitesh Singh
Sahil Taneja
Shobit Mahajan

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

SWOT

PORTERS

GLOBAL

DRIVERS
During 2010-2018,
Indian Medical Device Market isANALYSIS
expected SCENARIO
to
grow at a ~16% CAGR compared with a 10-12% Growth of The
Entire Healthcare Sector
The
The Indian
Indian Medical
Medical Device,
Device, part
part of
of the
the Healthcare
Healthcare market,
market, comprises
comprises equipment
equipment used
used
Market
for
specific
purposes
such
as
diagnosis,
prevention,
monitoring,
treatment,
or
for specific purposes such as diagnosis, prevention, monitoring, treatment, or
Definition
alleviation
alleviation of
of disease
disease

Although a
small portion of
Indian Medical Devices Market
the overall
Indian Healthcare Market Segments
Segments
healthcare
(%, 2012)
(%, 2012)
market, it is one
100%
=
$3.2
100% = $50.1
of the key
billion
billion
constituents
Medical Appliances
that is
15%
22%
Orthopedic goods
25%
witnessing
Syringes/Needles
8%
5%
higher growth,
Electromedical
10%
primarily due to
X-Ray Apparatus
73%
10%
20%
increased
Bandages and
12%
Medical Devices
awareness
supplies
Healthcare
amongst
Others
services
people, higher
Source: Economic
Unit (EIU),
India
but
has
India has
has 17%
17% of
of the
the world's
world's population,
population,
but Intelligence
has
per capita
March 2013
one
one of
of the
the poorest
poorest healthcare
healthcare infrastructures
infrastructures and
and
spending,
and
Indian Medical Devices Market Size(in $ billion, 2010-2018F1)
also
the
lowest
annual
spend
(~$2
per
capita)
on
also the lowest annual spend (~$2 per capita) on
govt. initiatives
healthcare
healthcare among
among developing
developing economies
economies

India
7.7
India only
only spends
spends 44 %
% of
of GDP
GDP on
on healthcare,
healthcare, compared
compared
CAGR:
CAGR: 15.7%
15.7%
6.7
with
with an
an ~8.3
~8.3 %
% globally;
globally; this
this is
is even
even lower
lower than
than other
other
5.7
emerging
emerging countries
countries such
such as
as Brazil
Brazil and
and China,
China, and
and thus
thus
4.9
4.3
presents
a
huge
opportunity
for
the
industry,
especially
presents a huge opportunity for the industry, especially
3.2 3.7
with
with the
the current
current govt.
govt. focus
focus
2.4 2.7
Indian
Indian medical
medical devices
devices market
market is
is currently
currently the
the fourth
fourth
largest
largest market
market in
in Asia,
Asia, after
after Japan,
Japan, China,
China, and
and South
South
Korea
2010 2011 2012 2013 2014 2015 2016 2017 2018
Korea
Source: Economic Intelligence Unit (EIU),
About
About 75%
75% of
of the
the products
products are
are manufactured
manufactured by
by MNCs,
MNCs,
March 2013
with
with limited
limited presence
presence of
of domestic
domestic players
players

Medical Devices Market Overview

Source: Medical Equipment & Devices- Galore of Scope & Opportunity, March 2913 (Black Soil); Medical Equipment and Supplies Report

MARKET
OVERVIEW

OPPORTUNITIE
S AND
CHALLENGES

GROWTH

EMERGING
TRENDS AND
WAY FORWARD

PORTERS

SWOT

GLOBAL

DRIVERS
ANALYSIS
SCENARIO
Demand is
expected to grow rapidly owing to favourable
changes
in demographics; increasing awareness; rise in income levels; and
greater awareness amongst consumers

Increasing lifestyle related issues and increasing

Increasin
Increasin
ggDemand
Demand
2

Growth
Growth
Drivers
Drivers

Favourabl
Favourabl
ee
Governme
Governme
nt
ntPolicy
Policy

population

Medical tourism & improving health insurance

penetration, increasing affordability

Improvement in healthcare infrastructure, with

increased investments and new hospitals

Reduction in custom duty on imports and full

exemption on assistive devices and rehabilitation
aids

Lucrative M&A Opportunities

Increasing
Increasing
Investment
Investment

Rising Foreign Direct Investment

Reduction of Custom Duty on Medical Devices,
especially joint replacement and surgical
equipment

Favourable Macroeconomic and Demographic Factors

Household
Household incomes
incomes are
are

Healthcare Expenditure
Composition (%, 2011)
Govt. Spending
Private Spending

68
32
India

61

39

Global

increasing
increasing and
and thus
thus spending
spending
on
on healthcare
healthcare is
is expected
expected to
to
grow
grow up
up
Population
Population is
is expected
expected to
to
increase
with
increase with demographics
demographics
showing
showing an
an increase
increase in
in the
the
older
age
population
as
older age population as well
well
India
India is
is an
an under
under penetrated
penetrated
healthcare
healthcare market
market with
with
spending
spending primarily
primarily driven
driven by
by
private
private sector;
sector; however,
however,
increasing
increasing govt.
govt. focus
focus on
on
improving
improving healthcare
healthcare
infrastructure
infrastructure

Income wise Indian

household break-up
(2011)

Chart Title

>200K

14
31
55
2012

<200K

<100K

26
36
38
2017E

Break up of Indian
population by age group
(%)
60+ 45-59 30-44 0-29

Chart Title

8
12
20

9
14
20

10
15
21

60

58

57

2007

2012

2017E

Source: CRISIL Hospital

Source: CRISIL Hospital
Source: CRISIL Hospital
Review
Review
Review
Source: Medical Equipment & Devices- Galore of Scope & Opportunity, March 2913 (Black Soil); Medical Equipment and Supplies Report

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

SWOT

PORTERS

DRIVERS
ANALYSIS
While lower
penetration, low indigenous manufacturing
are
expected to curtail growth detailed regulation, increasing
awareness and government initiative to drive growth

Opportunities
Government welfare schemes such as NRHM1and

GLOBAL
SCENARIO

Challenges

Low Penetration Despite the strong growth of

RSBY2are expected to increase the market
the Indian medical technology market in the last
opportunity
few years, the industry is plagued by low
Current dormant markets of Tier II and Tier III
penetration primarily due to:
that have relatively lower spending power in
Affordability
comparison to their Tier I counterparts will
Accessibility
become growth drivers for future
Availability
Further, increasing number of joint ventures and
Ambiguous regulatory environment The
agreements between MNCs and domestic
regulatory environment for medical technology
companies to setup base in India due to lower
and manufacturing, although improving, is
labour costs and supportive policy of the
ambiguous, complex and lacks transparency; key
government to increase market
issues pertaining to regulation of the medical
Recent deals include Trivitron-DiaSorin,
technology industry in India include
Manipal Group Everist Genomics, Trivitron
No distinct status for the industry
Hitachi, acquisitions by Philips, J&J, GE, etc.
Complex rules and guidelines
Increasing focus on preventive care will spur
growth for the diagnostics market
Absence of quality standards
Health insurance coverage is increasing thereby
Low indigenous manufacturing While there
providing impetus to the industry
has been increasing trend towards setup of base
Overseas companies investing in India to set up
by MNCs and domestic players, India has still not
been able to develop itself as a strong
R&D units will also increase exports
manufacturing base; it still relies on imports for
Government has provided tax reliefs, import
meeting its domestic requirements primarily due
tax relaxation and has implemented major
initiatives to boost this sector in India
Lack of incentives due to small, albeit
growing domestic market
Rise in the number of hospitals and the increased
requirement for healthcare facilities are expected
High capital requirement
to create a need for sophisticated devices and
4 Source:
Medical Equipment & Devices- Galore of Scope & Opportunity, March 2913 (Black Soil); Current status and potential for medical
equipment;
according to EY, the hospital sector is

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

PORTERS

SWOT

GLOBAL

ANALYSIS
There areDRIVERS
certain expectations from both the government
as SCENARIO
well
as the industry in order for the medical devices industry to
achieve sustainable growth

Medical Technology Industry Landscape

Telemedicine on mobile

Government

Create a separate regulatory

framework

Provide incentives for domestic

manufacturing, like tax holidays
and low customs duties on
imported goods

Establish medical technology

clusters that will include industry
members, R&D centres,
educational institutes etc

Encourage relevant R&D through

financial support to companies
for product development and
commercialisation

EMERGING TRENDS

Remote monitoring Cardiac

RECOMMENDATIONS

Industry

Partner with government and

healthcare providers to reach out
to the masses Engage with the
government and academia to
develop relevant courses that will
develop required skill base for
the industry, develop training
institutes etc.

Maestros
Mediline,
a
medical
equipment manufacturer has launched
an application in collaboration with
Blackberry, where doctors can check
their patients ECG on their mobile
handsets. This application of mobile
ECG would enable the doctors to
monitor the heart performance of their
patients accurately even from a
distance.

INNOVATIVE BUSINESS
MODELS
Financing
options like
pay in
instalments
and lease

Medical
technology
company takes
on
the role of a
service
provider as
well.

Continue to
offer
low end
version
of products
which
may not have
latest
Technology.

Devices
Sorin Group, a global medical device
company and a leader in the treatment
of cardiovascular diseases, and Orange
Business Services, the leading global
communications solutions integrator,
entered into an agreement in 2009 to
develop
and
service
a
remote
monitoring
solution
for
patients
implanted
with
cardiac
rhythm
management (CRM) devices

Growing Medical Tourism

With the increasing healthcare costs in

developed countries like the US and the
Engage with insurance providers
UK, India remains attractive for low-cost
to expand health insurance
medical and surgical procedures. The
coverage
emergence of India as a destination for
medical
tourism
leverages
the
Collaborate with ICT companies
countrys
well
educated,
Englishto bring
to
fruition frugal
speaking medical staff, state-of-the art
approaches to innovation
private
hospitals
and
diagnostic
facilities
Source: Medical Equipment & Devices- Galore of Scope & Opportunity, March 2913 (Black Soil); Medical Equipment and Supplies Report

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

PORTERS

SWOT

GLOBAL

DRIVERS
ANALYSIS
SCENARIO
Indian medical
device industry is characterized by foreign
companies commanding a majority share; further, companies are
focusing on innovation to differentiate themselves

Recent Company Specific

Updates Impacting Industry
Medical
Device
companies
are
undertaking a lot of innovations out
of India, both, for the domestic as
well as the overseas markets
Transasia Biomedicals has developed in-

Strengths

Weaknesses

Medical device industry is

growing at a compounded
annual growth rate of
~15%

International companies
such as 3M have started
manufacturing in India,
thereby reducing reliance
on imports

vitro diagnostic equipment through its R&D

base in Mumbai

One of the lowest per

capita health expenditure
of $61 in India

With a per capita income

of $1,570, Indian
consumer faces
affordability barrier

Complex and outdated

rules and guidelines
governing the industry

Increased penetration of
health insurance with
annual growth of ~27%
SWOT
SWOT

The Sushrut Adler Group has developed

an external fixator for the Indian market

Johnson and Johnson has developed a

knee implant suitable for the Indian market
as well as a reusable stapler for use in
surgeries at price points, which are amenable
to the Indian market

Roche Diagnostics has developed a

screening device for cardio-vascular diseases,
which is suitable for use in rural settings

GE Healthcare has developed a low cost

ECG machine and a low cost Ultrasound
machine for the Indian market

Philips Healthcare is using its recent

6

acquisitions in India to develop and launch a

low cost Cath Lab for the Indian market

Source: ExpressPharma

Opportunities

Threats

Medical Tourism is
witnessing a CAGR of
20.8% over the next
decade

Quality standards
compared to Global
products still a matter of
concern

Growing urban population

along to increase spending
on healthcare

The hospital industry in

India is growing at CAGR
of 12%

Regulatory environment
is nascent and any
exhaustive policy
document is yet to be
released

Higher import duties on

Raw Material than
finished goods create
unfavorable trade
environment

Companies both local and

MNCs are increasingly
setting up R&D base in
India

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

SWOT

PORTERS

GLOBAL

DRIVERS
ANALYSIS barriers
SCENARIO
Indian medical
device industry is characterized by high
to
entry and low rivalry due to product differentiation and
increasing focus on safety, quality, and reliability issues

Rivalry in the Industry

Barriers to Entry

Consolidated market due to

High Research and Development

Costs (+)
Regulatory restrictions on reliability,
quality, safety, and legal issues (+)
Patents of major implants act as
deterrent (+)
High Capital Expenditure (+)
Device manufacturers have tie-ups
Hig
h
with health insurance companies (+)
Bargaining
Power
of (-)
Supplier
Low switching
cost

Low chance of forward integration due

Industry
Competito
rs

to scale of operations of device

Intensity
manufacturers and patents (-)
of Rivalry
High switching costs due to
differentiated product offering (-)
Large device manufacturers provide
volumes to suppliers (-)
Requirement of niche products (+) Lo
w
Threat of Substitutes

each large players with some

technological patents,
differentiated offering (-)
Growing Industry (-)
Consumers are not price
conscious due to govt. focus,
awareness, and penetration of
health insurance (-)
High exit costs due to R&D (+)
Lo
Existence of some niche smaller
w
domestic players
Bargaining
Power (+)
of Buyer

Govt. procure in higher volumes

(+)
Differentiated product offerings
(-)
High switching costs (-)
Focus on safety, quality, and
Lo
reliability (-)
w
Largely consolidated market with
limited suppliers due to patents
Largely driven by innovation
with companies having
Lo
patents technologies (-)
w

MARKET
OVERVIEW

GROWTH

OPPORTUNITIE
S AND
CHALLENGES

EMERGING
TRENDS AND
WAY FORWARD

PORTERS

SWOT

GLOBAL

DRIVERS
ANALYSIS
SCENARIO
The US with
highest share is expected to witness higher
growth
driven by ageing baby boomer population, high unmet medical
needs, and Obamacare legislation

The global medical device industry was

Global
Market
valued at $273.3
billion
in 2011; further, it
Overview
had witnessed a 5.3% CAGR during 20062010

In 2012, the sector saw only marginal revenue

growth due to market volatility caused by a
range of factors including a decline in private
insurance, the public funding squeeze, and
reduced demand as individuals and authorities
tried to support non-surgical strategies prior to
any surgical procedure intervention

The five largest global markets for medical

devices (the US, Japan, Germany, France,
and Italy) accounted for 13.1% of global
population and 76% of global medical device
usage
On the other hand, the five most populous
countries (China, India, Indonesia, Brazil and
Pakistan) accounted for nearly half of the
global population but only 4.4% of global
medical device usage
Economies typically follow a similar
trajectory during transition from being
underdeveloped to developing to developed,
with healthcare spending rising significantly
with every transition., thereby presenting
huge opportunity for growth of medical device
In recent times, there have been increased
global M&A activities; The 10 largest
transactions contributed to around $34 billion
(77.6%) of total deal values in 2012

Worlds Medical Devices Sector Size (in $

billion)
CAGR:
CAGR: 5.3%
5.3%
222

243

276

300

FY06

FY08

FY11

FY12

373

FY16E

Global Market Share (%)

FY2012
0%

20%

40%

60%

80%

100%

North America Asia Pacific

Europe
ROW
With an ageing baby boomer population,
high unmet medical needs, focus of govt.
through Obamacare, and an increase in
lifestyle diseases, the US medical devices
industry is expected to continue to retain
largest share

Examples
include
Johnson
Johnsons
Source:
Medical
Equipment
& DevicesGalore of&
Scope
& Opportunity, March 2913 (Black Soil)

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