India’s Potential Medtech Energy Goes Kinetic

Up to this point, the most glaring problem in talking about the Indian medtech market is that the advice given has been largely generic. It is often based on assumptions of culture and simple repetitions of tropes about the market potential. Well, move over potential.

Heather Thompson

June 14, 2012

6 Min Read
India’s Potential Medtech Energy Goes Kinetic

After more than a year of research and interviews, PricewaterhouseCoopers (PwC) has released a report, “Taking Advantage of the Medtech Market Potential in India.” Tim Durst, principal in the pharmaceuticals and life sciences advisory services practice at PwC, is the author of the report. His team interviewed executives from global and domestic medtech firms that operate in India. These executives represent 40% of the $3 billion Indian market. Their experiences produced some key ideas about the realities, challenges, and opportunities of the Indian medtech market.

Jaipur's traffic at dusk. Photo by Nikada/

“India is a complex equation,” says Durst, explaining that up to this point, most medtech companies have been satisfied with an opportunistic strategy, i.e., importing products and processes to India, with little change to the products or services offered. The strategy works because products made in the United States have a perception of being higher quality and therefore, are more desirable to segments of the population that can afford it. Durst terms these buyers tier I, exemplified by western-style hospitals in major cities serving upper and middle class patients.

Durst says this opportunistic strategy works for many firms because it helps protect branding, intellectual property, design and capital. However, he says, catering only to tier I clients is a short-term strategy that doesn’t take full advantage of the market. “Large hospitals and urban centers: this is not the bulk of the story. It’s a big part, but it’s not the whole thing.”

Companies should be looking at direct distribution, as well as looking to broaden the business model to establish R&D, manufacturing, and services infrastructure, advises Durst. They should also look to appeal to tier II and tier III markets. Tier II markets are characterized by smaller cities and middle class consumers, and tier III is “a term for rural areas that still need healthcare, but have less ability to afford it,” explains Durst. However, even the tier I market segment is sensitive to costs, says Asit Kumar Jain, a consultant at Medium Healthcare Consulting. (Hyderabad, India)“Device companies have to be suitable for the Indian market in terms of pricing,” he says. “Firms need to take not only take advantage of the market but to participate in building the market,” Durst says.

The report notes that only 40% of survey respondents manufacture in India, and that 70% use third-party local companies as a primary distribution channel. PwC’s report suggests that companies should drive growth by “pursuing breakthrough product and business model innovation.” An example of product innovation that has seen success is the development of simplified electronic devices that emphasize portability and battery life over enhanced functions.

The biggest challenge identified by the respondents is local competition. George Ye, director of emerging markets for Abbott Medical optics explained his view on local competition to PwC, saying, “Local players are three to five years behind multinationals in terms of technology, but are rapidly closing the gap in the low- to mid-tier of the market.”

Providing healthcare technologies to lower-tier markets is a long-term strategy that Durst sees as essential to success in the market. But it won’t be easy and there are risks. “These are big investment decisions,” Durst explains.

So what steps should be taken? Durst advises engaging in customizing and innovating, as follows:

Establish a low cost manufacturing network. More than 50% of respondents plan to have manufacturing presence in India within the next three to five years. Products with decreased complexity should lead the way, to appeal to the lower tier markets, although Durst says there is some room for high-complexity devices.

Establish an innovation model that addresses the needs of India and other emerging markets. Manufacturing locations should be developed to supply to the rest of Asia. But more than that, business models must adapt to assess market needs. Product design costs might be too high and innovation focuses too much on complexity rather than value. This includes voice-of-the customer research and exploring local R&D capabilities. Despite the significant risks, such as IP protection, management, and quality control, Durst says, establishing local R&D infrastructure will be a clear necessity.

In addition, companies must establish a factor that Durst says has been missing from the discussion: service. “Consider after-sales service. The Indian healthcare environment…rarely has redundancy built into operations, and equipment breakdown can spell complete nonavailability of services,” notes the report. Durst echoes this idea, emphatically: “We provide examples of companies that have built roaming training centers to gain access and ensure quality; even back office operations need to be done differently. For example, bill collection. This is a cash oriented society, and that changes how to manage receivables.”

Jain agrees. “80-85% of healthcare payments are made out of pocket,” he says. Jain also points out that outreach efforts can have a considerable influence on the market. Programs such as Healthy Heart for All, India, a Medtronic initiative successfully increased patient access through public awareness campaigns that included health hotlines, patient counselors, and heart screenings. It also developed a tiered service and financial programs. According to Medtronic’s site, device implants to treat cardiac rhythm disease and cardiovascular conditions increased more than 100% during the pilot period.

Enhance commercial operations to address new market segments. To enhance product awareness, increase access, and expand Tier 2 and 3 segments of the India market, medtech companies may need to strengthen commercial operations in ways not practiced in developed economies. In addition to training, Durst recommends revising distribution operations. External distributors may not be as effective as direct sales, which could give medtech firms greater control over the message and order fulfillment, as well as direct contact with customers. In addition, the report notes that medtech companies might find they are taking over customer-facing interactions to increase value.

What’s not in the report is advice for small and medium companies that might also be interested in taking part in the Indian market. Jian, who represents small and medium device companies estimates that about 60% of his business is domestic, but 40% is international. Durst explains that the PwC report was designed for large medical device companies and that companies that earn less than $50 million per year, for example, might be better off focusing on domestic business. However, “if certain hurdles are put in front of small companies (e.g., IP, regulatory, clinical requirements) to the point that the business becomes unfundable in the US or Europe, perhaps those small businesses should look to build up presence in India or other countries.”

Companies that aspire to broaden the approach in India face risks. But such risks will yield high rewards. Durst says firms need to be aggressive and customize not only their products, but also their infrastructure to be successful in India. “You’ve got to go and do voice of the customer—do your homework,” he says.

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