India’s healthcare sector presently constitutes 4 of its GDP, with an estimated annual expenditure of USD 17 billion. Mc Kinsey estimates that this sector will contribute 8 of India’s GDP and employ 9 million people by 2012. At present, 50 of India’s total healthcare expenditure is in primary care, 40 in secondary care and the remaining 10 in preventive care. However, with greater penetration of healthcare services in rural areas and an expanding Indian middle-class, this composition is soon likely to change.
The Indian Government seeks to encourage medical tourism. The cost of medical treatment in India is typically 20 less than abroad, while the standards are similar given that most Indian doctors have been trained or practiced abroad.
It is also under consideration to recognize India’s healthcare sector as ‘infrastructure’, thereby providing the possibility of tax incentives. However, establishing an on-the-ground presence in the form of hospitals and healthcare centers still requires permission from both the Central and state governments, which may impede US healthcare providers to penetrate India’s large but untapped rural healthcare market.
There appears to be a significant opportunity in India’s medical infrastructure, as India’s beds to thousands ratio is rather low. A 2:1000 by 2012 ratio goal can only be attained with investment of USD 70 million injected by India’s private sector. Almost 65 of India’s medical equipment is still imported. US-based medical equipment manufacturers could utilize India’s cost-effective manufacturing base to cater to India’s fast-growing domestic market for medical equipment, particularly high-tech products.
According to a report by Visiongain, India is becoming a competitive player in manufacturing Active Pharmaceutical Ingredients (APIs), generic drugs, intermediates for drug makers, and also new formulations; apart from becoming a major outsourcing hub. Indian firms are also manufacturing for foreign clients at reduced costs and developmental time. Most Indian drug manufacturers have certifications by the US Food and Drug Administration (FDA) and other regulatory agencies.
According to a McKinsey study, the Indian pharmaceutical industry is projected to grow to US$ 25 billion by 2010 and the domestic market is likely to more than triple to US$ 20 billion by 2015 from the current US$ 6 billion to become one of the leading pharmaceutical markets in the next decade.
According to the global pharmaceutical market intelligence company, IMS Health, the Indian generic manufacturers are expected to grow more than US$ 70 billion as the patents on drugs worth approximately US$ 20 billion are due to expire in 2008. With nearly US$ 80 billion worth of patent-protected drugs become available because of patent expiration by 2012, the Indian generic manufacturers are positioning themselves appropriately.
Likewise, almost 300 biotech companies in India are providing research and development services to global pharma companies for drug discovery and manufacture. The Indian Biotech industry has generated almost US$ 1.2 billion from exports.
India is also positioning itself as an off-shoring destination for clinical and pre-clinical research and other support services. With low-cost and world-class quality standards, India is becoming a global hub for contract research and manufacturing services. According to a study by Ernst & Young, the overall market for clinical research activities in India is likely to reach US$ 1.5-2 billion by 2010.
