India Healthcare and Medical Device industry Analysis
Divya Kumar, Neel Mehta, Kavita Tangirala, Jared MckeeHSM502WP Carey MBA –Class of 2014Tempe Campus
Introduction
Republic of India: Facts and Figures
• Location: South Asian country. • 1.2 billion population, 2nd most populous country• 3rd largest economy in Asia and expected to be 3rd largest in the
world by 2050. • Steady GDP growth rate of 8.5% in last 5 years.
Demographics
• 28 states and 7 union territory • 30 official languages + English is widely spoken • World’s largest democracy • Currency is rupees 1 USD = 54.47 INR (www.xe.com @ 12/7/12)
Foreign Direct Investment
• 1991 brought the economic reforms• 3rd Most favorite nation for Foreign Direct Investment (FDI)• $58 Bilateral Indo-US trade (2011)
Healthcare/Medical Technology Market
• $80 billion Healthcare market (KPMG, 2012)
• Expect to reach $280 billion in 2020
• Steady growth of approx. 15%
• $11 billion Pharma market• Expect to reach $74 billion in
2020 (Ernst & Young)
• $5 billon Medical Device market
• Expect to reach CAGR of 15% (KPMG)
Why India?• 2.3% medical device excise Tax in US from 2013• India increases its government share of healthcare expenditure to 2.5%
by 2017 (12th 5 year plan)
http://www.emergogroup.com/files/2012-medical-device-industry-survey.pdf
SWOT AnalysisStrength Weakness
• Hugh market opportunity• English speaking population • World’s largest democracy, stable
democratic govt.• Low cost manufacturing• currency restrictions and reduce tariffs• SEZ (Special Economic Zones)• Tax break holiday • Second largest pool of scientist and
engineer• IFRS Based Accounting practice • Medical tourism
• Slow Reforms Process• The Long List Syndrome• The No Follow –through Syndrome • Lack of infrastructure • Political corruption • Trade barriers • Poor productivity record, FDI, Economic
reforms• Delay in dispute resolution
Opportunity Threats• Rapidly growing market • Small Distributorship Advantage• Middle class disposable income • Change in lifestyle of urban Indians• 1 billion+ market • Foreign Direct Investment Entry
• Fraud and Reliability Checks • Corruption and bribery• Poor copyright law• Foreign relations • Piracy • Social blunders • Macroeconomic concerns (inflation, etc.)
CGMS
• Continuous Glucose Monitoring System
New Class III deviceEffective management of blood glucose levelsComponents: Sensor, transmitter & a wireless
monitorAlerts the patient Downloadable data
National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) http://diabetes.niddk.nih.gov/dm/pubs/glucosemonitor/index.aspx
• IndiaPatient base of 63 millionCauses for prevalence:
• Insulin resistance• Abdominal adiposity• Low adiponectin • Higher C-reactive protein• Diet and lifestyle
• Major impediments: Cost and affordability
International Diabetes Federation http://www.idf.org/sites/default/files/IDF_SEA_5E_Update_FactSheet.pdf
Mohan, V., Sandeep, S., Deepa, R., Shah, B., & Varghese, C. (2007). Epidemiology of type 2 diabetes: Indian scenario. The Indian journal of medical research, 125(3), 217-30.
Indian Human Development Surveyhttp://ihds.umd.edu/incomeRU.html
CGMS
Recommendation
• Invest in Indian Market– Medical Device Market growth rate of 15%– “We can expect 12%–16% annual growth over the next 10 to 15 years. All the risk factors
put together are just irritants, which at most can bring growth to 8%–9%. This is still significantly higher than the 2%–3% growth that developed, Western markets are currently experiencing.”
Annaswamy Vaidheesh - Johnson & Johnson
– Emergent Middle Class• Additional 580 million customers
– Growth of Insurance Market
Recommendation Investment Strategy
• Short-Term Strategy – Develop local distribution to distribute Tier 1 products
• Minimize fixed investment • Maintain flexibility • Utilize local sales force
• Long-Term Strategy – Invest in Manufacturing facilities
• Initially produce Tier 2-3 products• 100% Foreign Direct Investment• Utilize Indian facility to supply Asian markets• As markets mature manufacture Tier 1 products
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