01-10-2016, 03:04 PM
1457317365-ProjectReportIIC.doc (Size: 5.76 MB / Downloads: 19)
Indian Healthcare Industry
1.1 Introduction
The Healthcare sector, in India, has become one of India's largest sectors - both in terms of revenue and employment. The industry comprises hospitals, medical devices, Pharma, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment. The Indian healthcare industry is growing at a tremendous pace due to its strengthening coverage, services and increasing expenditure by public as well private players.
The Indian healthcare delivery system is categorized into two major components - public and private. The Government i.e. public healthcare system comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centers (PHCs) in rural areas. The private sector provides majority of secondary, tertiary and quaternary care institutions with a major concentration in metros, tier I and tier II cities.
The Indian healthcare industry is projected to continue its rapid expansion, with an estimated market value of USD 280 billion by 2020, on the back of increased population growth in India's low income communities. Large investments by private sector players are likely to contribute significantly to the development of India's hospital industry and the sector is poised to grow to USD 100 billion by the year 2015 and further to USD 280 billion by 2020.
Rising incomes, greater health awareness, lifestyle diseases, and increasing insurance penetration will contribute to growth. Private sector's share in healthcare delivery is expected to increase from 66 % in 2005 to 81 % in 2015 with private sector's share in hospitals and hospital beds is estimated at 74 per cent and 40 per cent, respectively.
As per KPMG- FICCI report 2015, healthcare spending in India accounts for over 4.2 per cent of the country's GDP. Out of this, the public spending in percentage is around 1 per cent of GDP. The presence of public health care is not only weak but also under-utilized and inefficient.
Healthcare delivery and pharmaceuticals account for nearly 75% of the total healthcare market. India has only 0.7 beds per 1,000 people, far below the global average of 2.6.India needs to add 2 million beds to the existing 1.1 million by 2027, and requires immediate investments of USD 82 billion to make up for its infrastructure deficit.
1.2 Market view of Indian healthcare sector
The Indian healthcare industry is seen to be growing at a much rapid pace of 17% CAGR and is expected to become a USD 280 billion by 2020 from USD 68.4 billion in 2011. A break-up of the sector of 2012 is provided in Figure.
India – Underpenetrated Healthcare Market
Demand for healthcare services in India is expected to rise owning to favorable demographics and radical shift in the disease patterns of its populace. India’s healthcare spending is lowest both (as % to GDP and Per capita spending) when compared to developed countries suggest tremendous potential for growth.
As % of GDP
India’s healthcare spend is significantly low when compared to the global, developed and other similar emerging economies. India’s healthcare expenditure as % of GDP was 3.8 % (in which government spends 1.2 %) as compared to global average of 8.6% (government spends 5.0%).
Per capita healthcare spending
Also per capita healthcare spending of USD 196 is lowest compared to USD 8,845 in the US, USD 3,235 in the UK and USD 578 in China.
1.3 Growth Drivers of Indian healthcare sector
Demand for healthcare services in India is expected to rise owning to favorable demographics and radical shift in the disease patterns of its populace. The key factors attribute to growth in healthcare sector are:
Increasing health awareness and disposable incomes
Rising per capita income in India has improved affordability of healthcare and significantly expanded the addressable market for private healthcare providers. This has led to an increase in the standards of consumer awareness and patients are now demanding and willing to pay for better infrastructure, improved diagnostic facilities, latest technology and best-in-class medical care. Even though healthcare is considered as a non-discretionary expense, considering that an estimated 59 per cent of households in India had an annual income of less than 2 lakh in 2013-14, affordability of quality healthcare facilities remains a major constraint.
Growth in household, and consequently, disposable incomes, is, therefore, critical to the overall growth in demand for healthcare delivery services in India. The immense opportunity in the industry can be gauged from the fact that the share of households in the 2-5 lakh per annum income bracket is expected to go up to 38 per cent in 2017-18 from 28 per cent in 2013-14.
Increasing penetration of health insurance
The insurance penetration level in India is very low when compared with the global average. Low
Health insurance penetration is one of the major impediments to the growth of the healthcare delivery industry in India as affordability of quality healthcare facilities by the lower income groups continues to remain an issue. As per the Insurance Regulatory and Development Authority (IRDA data, less than 15 per cent of the Indian population is covered through health insurance).
Increasing healthcare cost and burden of new diseases along with low government funding is raising demand for health insurance coverage. Many companies offer health insurance coverage to employees, driving market penetration of insurance players.
By 2015, spending through health insurance will reach 8.4 per cent of total health spending, up from 6.4 per cent in 2009–10. With increasing demand for affordable and quality healthcare, penetration of health insurance is poised to grow exponentially in the coming years. The share of population having medical insurance is likely to rise to 20 per cent by 2015.
Rising incidence of lifestyle-related diseases
Demand for lifestyle diseases-related healthcare services in India is expected to grow over the next 5 years. Life-related illnesses or non-communicable diseases (NCDs) have been increasing rapidly in India over the last few years. Statistics show that these illnesses accounted for nearly 56 per cent of all deaths in India in 2008. CRISIL Research believes that these illnesses exhibit a tendency to increase in tandem with rising income levels. With the share of households earning above 5 lakh per annum expected to go up to 20 per cent in 2017-18 from 13 per cent in 2013-14, the share of NCDs as a major cause of deaths in India will rise. Consequently, demand for healthcare services associated with lifestyle diseases such as cardiac ailments, oncology, diabetes, etc. is also forecast to increase.
Increasing ageing of Indian population
India is the second most populated country in the world and is expected to surpass China to become the world’s most populated nation by 2025. While it is considered as a country with a large proportion of population below the age of 30, India is also expected to have a significant population of middle-aged and older adults, leading to a corresponding increase in demand for healthcare delivery systems and services. Nearly 8 per cent of the Indian population was above the age of 60 years in 2011. This proportion is expected to climb to 12.5 per cent by 2026, but there is no documented knowledge base on the healthcare needs of the elderly (aged 60 years or more).
As per the ‘Report on the status of elderly in select states of India, 2011’ published by the United Nations Population Fund (UNFPA) in November 2012, chronic ailments like arthritis, hypertension, diabetes, asthma and heart diseases were common place among the elderly. Nearly 66 per cent of the elderly reported at least one of these. Hence with more and more people being added to this age group, the demand for healthcare infrastructure in India will only increase in the future.
Government initiative to boost diagnostic infrastructure through PPP model
The Govt. of India has proposed national strategy for providing essential diagnostics facilities free for all under National Health Mission. The Scheme is aimed at providing free diagnostic tests, including several blood tests, x-rays and advanced CT scans, for those visiting public health facilities. It also aims to rope in Private Service providers wherever required.
Government is taking initiatives in boosting up the healthcare sector by entering into Public-Private-Partnership (PPP) and attracting inflows of foreign direct investment in diagnostic sector. Healthcare is one of the most significant social sectors in India and government expenditure on this sector is expected to rise further. Entering into partnership with government at various levels can help private diagnostic players to enter difficult rural market and in fact expand at larger scale.
With 60-70 per cent of medical treatments in India are based on diagnostic laboratory testing results, such government initiatives are likely to boost diagnostic/healthcare infrastructure and also in turn drive the Per capita sales of pharmaceuticals in India.
Growth in Medical Tourism
India was one of the first countries to recognize the potential of medical tourism and currently it is leading destination for global medical tourists. Advantages for medical tourists include reduced costs, the availability of latest medical technologies and growing compliance to global standards. Moreover foreigners are less like to face a language barrier in India. A key competitive advantage India has in medical tourism, in comparison to other countries, lies in the cost effectiveness it has to offer to its patients. A person coming to India for his/her medical treatment can have savings anywhere in the range of 30 to 70 per cent. As medical treatment cost in western world balloon, westerners are finding the prospects of international medical care increasingly appealing and India is the popular choice among them.
1.4 Healthcare Infrastructure in India
Healthcare is one of the key parameters in which a country’s development and stature are measured. It is an important indicator to understand the healthcare delivery provisions and mechanisms in a country. It also signifies the investments and priority accorded to creating the infrastructure in public and private sectors. Health Infrastructure indicators are subdivided into two categories viz. educational infrastructure and service infrastructure.
Educational Infrastructure: Educational infrastructure provides details of medical colleges, students admitted to M.B.B.S. course, post graduate degree/diploma in medical and dental colleges, admissions to BDS and MDS courses, AYUSH institutes, nursing courses and para-medical courses. Medical education infrastructures in the country have shown rapid growth during the last 20 years.
The country has 381 medical colleges, 301 Colleges for BDS courses and 140 colleges conduct MDS courses with total admission of 43,576 (in 381 Medical Colleges), 25,320 in BDS respectively during 2013-14.
There are 2670 institution for General Nurse Midwives with admission capacity of 109224 and 686 colleges for Pharmacy (diploma) with an intake capacity of 40898 as on 31st March, 2013.
Service Infrastructure: Service infrastructure in health include details of allopathic hospitals, hospital beds, Indian System of Medicine and Homeopathy hospitals, sub centers, primary health centres (PHCs), community health centres (CHC), blood banks, mental hospitals and cancer hospitals.
There are 19,817 hospitals having 6, 28,708 beds in the country, of these 15,398 hospitals are in rural area with 1, 96,182 beds and 4,419 hospitals are in urban area with 4, 32,526 beds.
There are 1,51,684 Sub Centers, 24,448 Primary Health Centers and 5,187 Community Health Centers in India as on March 2013.
There were 2760 licensed blood banks in the country as on February 2015.
CGHS has health facilities in 25 cities having 260 allopathic dispensaries and 90 Ayush dispensaries in the country with 9,82,461 registered cards/ families
Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH): A separate Department of Indian Systems of Medicine and Homoeopathy (ISM&H) was set up in 1995 to ensure the optimal development and propagation of AYUSH systems of health care. The Department of ISM&H was renamed as the Department of AYUSH (an acronym for – Ayurveda, Yoga and Naturopathy, Unani, Siddha, Homoeopathy) in November 2003.
The Department of AYUSH under the Ministry of Health and Family Welfare, promotes and propagates Indian systems of Medicine and Homoeopathy, and is committed to infuse the wisdom of traditional medicine with the methodologies of modern science, scientifically validating the systems and presenting them in the scientific idiom, relating their efficacy to modern life styles. The Department has, over the years, developed a broad institutional framework to carry out its activities.
Medical care facilities under AYUSH by management status i.e. dispensaries and hospitals are 26,107 & 3,167 respectively as on 1.4.2013.
Private Healthcare infrastructure
The Indian healthcare delivery system is categorized into two major components - public and private. The government's share in the healthcare delivery market is 20% while 80% is with the private sector. The Government i.e. public healthcare system comprises limited secondary and tertiary care institutions in key cities and focuses on providing basic healthcare facilities in the form of primary healthcare centers (PHCs) in rural areas. A major portion of secondary, tertiary and quaternary healthcare institutions comes from private sector with a concentration in metros, tier II and tier I cities.
While India did have a private hospital sector at the time of Independence, it is only recently that it has grown and diversified over the years. As per report from Sehgal and Sood, the private hospital market in India is estimated at USD 54 billion at end-of 2014 from USD 22 bn in 2009. Increase in number of hospitals in Tier-II and Tier-III cities has fueled the growth of private sector.
Meanwhile, private sector is quite dominant in the healthcare sector. Around 80 percent of total spending on healthcare in India comes from the private sector. Inadequate public investment in health infrastructure has given an opportunity to private hospitals to capture a larger share of the market. In addition the demand for hospital services has been increasing due to the rise in lifestyle related diseases.
Key Players in the Private Healthcare Segment:
Private players have made significant investments in setting up state-of-the-art private hospitals in cities like Mumbai, New Delhi, Chennai, and Hyderabad. The following are the major domestic private healthcare providers in India:
Apollo Hospitals: Apollo Hospitals has emerged as the single largest private hospital group in South Asia. It operates hospitals, dispensaries, clinics, and laboratories. It manages a network of approximately 41 specialty hospitals and clinics with a bed capacity of over 9,000 across the country and abroad.
The Escorts Group: This has a presence in specialized cardiac treatment and multi-specialty care hospitals providing a whole gamut of specialized medical services. Escorts operate ten hospitals across India. The group is also reputed for tertiary care services such as neurology, neurosurgery, plastic surgery, and urology. Escorts Heart Institute and Research Centre (EHIRC) has a 325 bed tertiary care institute, with 9 operation theatres, 5 Cath labs, 2 heart command centers and world class facilities.
Fortis Healthcare: .This is a company founded by the promoters of the Indian pharmaceutical major, Ranbaxy Laboratories, and started operations in 2001. It has approximately 12 hospitals with 1,900 beds. It has operations across North Indian the cities of Delhi, Noida, Mohali, Amritsar, Faridabad, Raipur, and Srinagar.
Max Healthcare: This is a fully owned subsidiary- of the highly diversified Max Group, with a chain of clinics and hospitals with a bed capacity of 1200. On =average, Max Healthcare treats 30,000 patients every month, with 200 new patients visiting the facilities every day. It has collaborated with Singapore General Hospital in the areas of medical practices, nursing, paramedical research and training.
Wockhardt: This is among India's leading pharmaceutical and healthcare companies. Since inception in 1989, the Wockhardt Hospital & Heart Institute has become a renowned tertiary level heart center providing cardiac care to patients of all age groups. It is the first recognized hospital in South Asia on the worldwide panel of Blue Cross blue Shield, the largest provider of health insurance in USA. It has approximately 10 hospitals with 1,500 beds. It has entered into Public-Private Partnership with the Government of Gujarat to manage the 275-bed Palanpur Civil General Hospital in Gujarat
Manipal Health Systems: Its chain consists of approximately 9 primary centres at7 rural locations, 8 secondary hospitals at urban and semi-urban locations and 3tertiary hospitals at urban and semi-urban locations. It has a joint venture with Pantaloons Retail for comprehensive retail healthcare foray.
1.5 Global Pharmaceutical Market – Introduction
The pharmaceutical industry is the part of the healthcare sector that deals with medications. The industry comprises different subfields pertaining to the development, production, and marketing of medications. These more or less interdependent subfields consist of drug manufacturers, drug marketers, and biotechnology companies.
The global pharmaceutical industry, as per IMS estimate, amounted for revenues of USD 1057.1 bn in 2014. Being a part of life science industry, pharma industry facing moderate growth over the next five years, marked by a rebound in US pharmaceutical growth and strong, but slower growth from emerging markets.
The global pharmaceutical market is projected to increase at a compound annual growth rate (CAGR) of 4–7% to 2018 and reach USD 1.3 trillion, according to estimates from IMS. Moderation of generic-drug incursion in developed markets, strong growth in emerging markets, increased innovation, notably in specialty medicines, and resurgence in the US market, particularly for 2014, are some key highlights. The US and Pharmerging markets # are expected to account for more than 60% of sales and 80% of sales growth to 2018.
1.6 Indian Pharmaceutical Market – Introduction
Growth of the Indian pharmaceutical industry has impressed the world. In recent past, Indian pharmaceutical multinationals are both “admired and reviled” for producing low-cost generic versions of patented medicines. However, these multinationals are slowly shedding their copycat image. The industry is growing on an average rate of 15 to 20 per cent per annum and is expected to grow at similar rates in the near future. The industry has several internationally known players for instance, Sun Pharma, Dr. Reddy’s laboratories, Lupin, CIPLA, and Wockhardt etc.
Industry Background Overview
Indian pharmaceutical industry is ranked 2nd (by volume) and 14th (by revenue) in the world. The industry has seen a major transition since the introduction of new institutional regime brought in by the introduction of the New Patent Act in 2005, and India’s accession to the Trade Related Aspects of Intellectual Property Rights (TRIPS) and the World Trade Organization (WTO). Earlier, Indian pharma multinationals gained worldwide popularity for their ability to reverse engineer innovations and drugs discovered by western multinationals. Many Indian pharma multinationals reinvented the wheel by modifying the process of production because previously they were allowed to patent the process of production rather than the end product.
Indian pharmaceutical multinationals did face challenges in the international courts, particularly in the USA for breaching the patent protection. However, the proposition of reverse engineering was tempting. Many Indian pharmaceutical companies could not resist reversing engineering patented drugs until the law changed at home. Production of generic drugs using reverse engineering methods significantly reduces the cost of production because it saves huge spending involved in undertaking research and development (R&D) of new drugs.
Most of the generic drugs produced through reverse engineering are exported by the Indian multinationals to the third world countries where consumers’ and the state’s ability to buy original (expensive) drugs are limited. For obvious reasons, poor developing states welcome generic drugs in their land. At one hand, Indian pharmaceutical multinationals argue that they did a socialistic act by making life saving drugs available at lower prices but on the other hand these multinationals pilfer the intellectual property developed by other multinationals by spending huge money on R&D.
Owing to large volume of generic exports, India trade balance in the pharmaceutical industry stands positive, since a long time. However, in the new institutional regime India’s exports of pharmaceutical has seen a slight fall. Now, generic drugs can only be produced for the off-patent drugs. In response to the institutional changes, Indian pharmaceutical multinationals have increased their spending on their R&D as their business model of producing generic drugs based on reengineering is no longer valid.
Though the transition into the new institutional regime was not welcomed by the Indian pharmaceutical industry, Indian government was committed to bring the change. Indian government viewed that active engagement in R&D is likely to make Indian pharmaceutical multinationals internationally competitive.
Notably, few multinationals have already shown signs of transition from generic drug model with success in original drug search.
Active engagement in R&D has also provided opportunities for Indian pharmaceutical multinationals to form joint ventures with foreign multinationals.