sector analysis healthcare india

8/6/2019 Sector Analysis Healthcare India

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The healthcare industry in India

Prepared byThe Trade Council in IndiaNew Delhi

SECTORANALYSIS

Date November 2010File No.Our ref. VB

Case No.


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The Trade Council, Embassy of Denmark, New Delhi Page 2 of 6The Trade Council

Introduction

Indias healthcare sector has made impressive strides in recent years. The demandfor healthcare services in India has grown from US$ 20.6 billion in 2001 to aboutUS$ 38 billion in 2009 and is expected to touch US$ 75 billion by 2012. Thehealthcare industry accounted for 6.2% of Indias GDP in 2009 and this isexpected to go to 7.5% by 2012.

On the one hand, the Indian middle class, with its increasing purchasing power, ismore than willing to pay for better quality healthcare and on the other, the supplyto healthcare services has grown steadily, as the private sector becomes moreinvolved in healthcare industry in India. Most of the spending originates from theprivate sector which accounts for more than 80% of the total healthcare spendingin India. Currently, the Indian healthcare industry offers promising businessopportunities for foreign companies.

The Embassy of Denmark in India has got the relevant experience and expertise inproviding specialized services in the healthcare industry in India based on carefulinvestigations and neutral opinions. The Sector ExpertHealthcare, Vaneet Bansalis professionally qualified and has got substantial experience in the healthcareindustry in India and has worked for over 14 years with reputed multinationalcompanies in India before starting his association with Danish Embassy in NewDelhi. We invite Danish companies to explore the potential in this very interestingmarket.

Market Indicators and TrendsDrugs and Pharmaceuticals

The Indian pharmaceutical industry has carved out a unique place on the globalmap, not only as a manufacturer of generic drugs but also of new formulations,

with growing emphasis on research and development. With an annual turnover ofover US$ 8 billion, growing at the rate of over 12% per annum, the Indianpharmaceutical industry is globally ranked 4 th in terms of volume.

The growing population, demand for specialty healthcare and need for medicinesto combat lifestyle related diseases are leading to increased demand for quality

pharmaceuticals and new medicines. In March 2005, the Indian Patents Third Amendment Bill established patent protection for pharmaceutical products inIndia. This has and will continue to usher a change in this highly fragmentedindustry. Growing demand along with product patent regulations will make theIndian market an attractive proposition for international companies.

Biotechnology

After excelling in the IT industry, India is now shifting its focus to the mostpromising industry of the future, Biotechnology. With its large pool of scientifictalent, world class information technology industry and vibrant pharmaceuticalsector, India is well positioned to emerge as a significant player in the global

biotech arena. The Indian Biotechnology sector today comprises over 325companies generating revenues of over US$ 2.5 billion which is estimated to reach


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US$ 5 billion by 2012. The sector has been growing at between 30 per cent and 35per cent per annum for the last three years.

An Ernst and Young survey identifies India as one of the five emerging biotechleaders in the Asia-Pacific region. India is already the world's largest vaccine

producer as well as the largest cultivator of BT cotton.

Medical Devices & Equipment

According to the official statistics, the number of clinic and hospitals has increasedalmost four times in the last four decades in India. The rebuilding of Indiashealthcare infrastructure combined with the emergence of medical tourism hasderived strong demand for medical equipments and devices. The medical deviceindustry is today approx US$ 2.50 billion in size.

Even more alluring than the size of the market is its projected growth. Thedemand for medical equipments is rising annually at an impressive rate of 15 %

and will reach US$ 4.97 billion by 2012 (Source: E&Y). Currently over 65% of themedical equipments are imported and thus is a key area for forging partnershipsacross borders. Engineering excellence, cost-effective labour, increasing emphasison intellectual property rights and most importantly a fast growing domesticmarket are some of the key features that India offers. Foreign participation isrequired as there are immense opportunities for global medical device companies.

Knowledge Process Outsourcing

The success of business process outsourcing (BPO) related services in India haveprompted the companies to start off shoring high-end knowledge-based activitiesas well. These activities include clinical research, drug discovery, patent filing, and

insurance claims.

Indian clinical trials market in 2009 was US$ 250 million and has been growing at aCAGR of 40% for the last 3 years. India is fast emerging as a favored destinationfor clinical trials outsourcing, in view of the countrys advantages like large pool ofpatients, faster patient recruitment, well trained English speaking Physicians andIPR protection, besides lower costs.

Over 100 pharmaceutical companies, including Fortune 100 companies such asPfizer and Merck, are currently outsourcing clinical trials in the country. Also, thereis an increased awareness regarding ICHGCP (International Conference on

Harmonisation-Good Clinical Practice) guidelines for conduct of clinical research.Besides, Indias inherent advantage in IT skills helped in outsourcing of high -endactivities like data management. All these advantages will drive the growth ofClinical Trial outsourcing industry to scale up to US$ 1 billion by 2012.

Market Opportunities

Drugs and Pharmaceuticals

India has emerged as a major supplier of several bulk drugs, producing these at alower prices compared to many producers worldwide. The US Food and Drug

Administration (FDA) have already approved 85 Active PharmaceuticalIngredients (API) and formulation plants in India, the highest such number outside


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the US. India is all set to become a major exporter of pharmaceuticals, particularlygeneric and OTC drugs, to global markets. By 2012, India could be producing 15%of the worlds bulk pharmaceuticals and drug intermediates. However achievingthat level of growth will require an estimated US$ 1.2 billion investment inproduction capacity.

Many multinational generic companies have been sourcing products from Indianmanufacturers for some years. Some also use Indian contract manufacturers tomanufacture the finished product. Contract manufacturing, currently estimated atUS$ 350 million, is expected to reach US$ 1 billion by 2012.

Some companies encouraged by the relaxation of the rules on foreign ownershipand a favorable tax regime, have gone beyond contract manufacturing, setting uptheir own local manufacturing facilities. The financial incentive in such a case iscompelling: Goldman Sacs estimates that the cost of setting up and running a newmanufacturing facility in India is one-fifth of doing so in other developed

countries.

On the other hand, since many of the local players are generic producersspecializing in anti-infective, and as the illnesses of affluence and age continue toincrease in India, the demand for innovative and new pharmaceuticals is on rise,providing enormous opportunities to new and research products of foreignpharmaceutical companies.

Biotechnology

The Biotechnology industry has doubled in size within the last two years in India.Indian Biotechs are taking the path of global collaborations. The biotech industry

in India mainly consists of five distinct segments bio-pharma, bio-agriculture,bioinformatics, bio-industrial and bio-services. Out of the total of 325 companies,nearly 40% of the companies operate in biopharma sector, followed by thebioservices-21%, bioagri -19%, bioinformatics-14% and bioindustrial-5%. Theindustry in 2007 reached US$ 2.08 billion in revenues, registering a 31% growthover the previous year. Sustaining a 30% growth for five consecutive years,accounts for the fact that industry is maturing. The biopharma segment aloneaccounts for over two third of the industry71% of the total industry revenues.

Novozymes, one of the leading Danish Company and Biocon accounted for 50%of the total bioindustrial market. The bioinformatics is also growing in double

digits. The investments (both in R&D and infrastructure) in the biotech industryhave been on the rise over the past five years and offers great opportunities toforeign companies. The Indian government is also supporting the biotech industrythrough streamlined regulatory framework and policies and fiscal benefits.

Medical Devices & Equipments

The government has identified healthcare as a priority section and hence havetaken some measures to promote one of its most important segment MedicalDevice Market. The conditions for exporting to India have significantlyimproved since the economic reforms started in the middle of the nineties. Importlicense requirements have been modified, majority-owned subsidiaries are possible,

and dividends can be paid out abroad.


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Some other measures are:

Reduction in import duty on medical equipment from 25 per cent to 5 percent.

Depreciation limit on such equipment rose to 40 per cent from 25 per cent,to encourage medical equipment imports.

Customs duty reduced to 8 per cent from 16 per cent for medical, surgical,dental and veterinary furniture.

Customs duty on as many as 24 medical equipments, which include X-rayand tele therapy stimulator machines, has been reduced to 5 per cent.

The leading international companies market most high value medical equipments, while only consumables and disposable equipments are made locally. Manymultinational companies have expanded their operations in the Indian market inrecent years and established manufacturing facilities to assemble equipments forthe domestic market and export sales.

Knowledge Process Outsourcing

Pharmaceutical Research

Pharmaceutical research is another area that is expected to achieve tremendousgrowth in the coming decade, due to Indias huge and growing population, low percapita drug usage, and increasing incidence of disease. Global pharmaceuticalalliances with Indian drug firms are finally beginning to look like a two way Street,

with major R&D deals being struck. For instance 7TM Pharma of Denmark hascollaborated with Dr Reddys Laboratories of India for drug discovery on theselected drug targets in the area of metabolic disorders. These types ofcollaborations which provide the opportunity of working jointly on individualstrengths can definitely provide fruitful results.

Clinical Trials

India has become an attractive market for clinical testing. In January 2005, Indianbecame compliant with the Trade related aspects of Intellectual property rights(TRIPS) agreement and formally recognized product patents. This triggeredgrowth in Indian clinical trial activity by contract research organizations.Government taxation benefits are further boosting R&D in India.

According to a study done by Rabo India finance, a subsidiary of Netherlandsbased Rabo Bank, the huge patient population offers vast genetic diversity, makingthe country an ideal site for clinical trials. Moreover, the study also mentions thatclinical trials account for 40% of the costs of developing a new drug and the costof a clinical trial in India is only 60% of what it would be in other developednations. As a result the Indian clinical trials market currently estimated at US$ 140million is expected to reach US$ 1 billion by 2012, according to Infomedia.

Contact informationFor further details, please contact:

The Royal Danish EmbassyThe Trade Council

Vaneet Bansal ([email protected])
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investmentpromotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies,Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danishcompanies in their export activities and internationalisation process according to the vision: CreatingValue All the Way.

The work in the Trade Council follows specific procedures and quality guidelines. In this way ourcustomers are secured the best possible quality under the varying working and market conditions at anygiven point of time.

Ministry of Foreign Affairs of Denmark

The Trade Council, Embassy of Denmark, New Delhi11, Aurangzeb RoadPhone no: (91) 11 4209 0700Fax: (91) 11 2379 2019

E-mail: [email protected]

sector analysis healthcare india

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