Catalyzing growth of the Indian diagnostic and medtech sector through enabling policies

 

The enabling role being played by the Government to bring preventive healthcare into focus has been notable, especially over the last two years. 

The sun seems to be shining bright on the Indian diagnostic and medtech industry with the recent growth prospects that are giving an impetus and opening up a pleothera of opportunities for the Indian manufacturers and diagnostic service providers.

The current scenario  

Diagnostics is an essential part of the preventive healthcare. And in a country that houses 21% of the world’s disease burden, the importance of reliable, affordable and quality diagnostics cannot be ignored. Let’s not forget, a healthy working population contributes to strong economic development. A healthy country is a happy country.

The good news, the domestic diagnostic industry, estimated at USD 9 bn (around INR 675 bn) is expected to grow at a CAGR of ~15% over the next 5 years. While there have been many growth enablers, the government’s role needs a special mention. In the recent past, courtesy the pandemic, the government has acknowledged the crucial role played by the medical diagnostics sector in not just treatment but disease prevention.

So far, public health was always presumed to be the responsibility of the state but now the scenario is changing. The huge outlay announced by the government for the healthcare industry and the introduction of quite a few enabling policies for promoting the diagnostic and medical device sector are a testament to the government’s intent to recognize the importance of healthcare.

We have broadly tried to classify some of the government policies that are aiding in promoting the sector, based on three aspects:

Regulatory regime on quality and safety: While certain diagnostic products such as reagent kits were regulated under the Drug and Cosmetics Act 1940, there was no law governing diagnostic instruments. However, the Medical Device Rule 2017 broadly classifies instruments under A,B,C and D categories, depending on the risk stratification.

Further, MDR-17 also stipulates licensing of these instruments with Central Licensing Authority (class C and D) and State Licensing Authority (for class A and B) and assures quality of manufactured equipment. Thus a complete mechanism has been provided for, in MDR-17 to ensure quality and safety of medical devices. Obviously, a quality product always find favour in the market. 

Affordability: A hard-hitting fact is that 80% of our diagnostic needs are met through imports, and as a result providing affordable diagnostics remains a big challenge. However, the government has recognized medtech as a sunshine sector in its Make in India propaganda and is encouraging indigenous manufacturing to contain costs and generate employment and skilling opportunities.

PLI scheme- It is a good start and will incentivize domestic manufacturers to engage in high value production. It can make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology; ensure efficiencies; create economies of scale; enhance exports and make India an integral part of the global supply chain. However, currently, the PLI scheme offers incentive of just 3-5% for IVD industry. There is a need to increase the PLI incentive to atleast 15% for five years to help local manufacturers become global players.

Further to this, the government has also introduced policies for creating dedicated medical zones and medtech parks. A classic example is the Andhra Pradesh Medtech Zone (AMTZ). The concept is now taking shape in other states such as Telangana, MP, Himachal Pradesh etc. At these medtech parks, apart from providing the required infrastructure which mainly includes land, certain fiscal incentives and capital assistance are also being provided to establish and promote indigenous manufacturing of medical devices.

Market opportunities - To support the domestic market, the government has passed the Public Procurement Order and it has been amended from time to time. As a part of this policy, local manufacturers are given preferential treatment in the government /public procurement and thus aid in creating secured market opportunities. 

Apart from this, other policies by the government that have been framed to strengthen the public health system are also supporting the domestic market. For example, the government’s plan for setting up 100 bedded hospitals with all essential medical equipment (as per the National Essential List of diagnostic equipment) is creating opportunities for the Indian manufacturers. 

Having said that, it’s a long road ahead, as it remains a huge challenge to provide regular diagnostics services to each of the 1.3 billion Indians. This can only be achieved with focused approach and targeted incentive schemes to build not only a manufacturing infrastructure but also the much needed R&D infrastructure. Medical diagnostics is a technologically evolving industry and without adequate R&D in India, the country will remain dependent on imports.

The industry looks forward to the government’s support in filling up certain other policy gaps as well.

 

 

Authored by:

Ashok Suthar

Sr. General Manager – Taxation, Legal and CC

Transasia Bio-Medicals Ltd.