Incentives to promote API Manufacturing; Need for IoT Platforms in Quality Control: study

The government has to take cognizance of this looming market erosion that calls for careful consideration of market economics and facilitate effective means of affordable healthcare access with the objective of retaining attractiveness of local markets for domestic players, reveals the ASSOCHAM-Sathguru joint study.

With the export appetite stealing all the limelight, the domestic market is underserved by incumbents and it is ironic that much of the API for the domestic market is contributed by low cost Chinese imports. As India continues to flourish in the formulations space, the potential that exists for local players in APIs is largely unaddressed. 

The increasing frequency of Food and Drug Administration (FDA) inspections in India and the upward trend in warning letters has put the industry in a panic drive. In an export driven market, where credibility weighs high to maintain market share, at this point in time India cannot afford this kind of reputation compromise that has the potential to break the market positioning we enjoy in global markets. This trend in turn is pushing companies to think on ways to improve quality control and testing. Technologies based on Telemedicine, Internet of Things (IoT) platforms, are the way forward, to decrease manual interventions and for the industry to redeem itself from quality related allegations and the urgency for embracing innovation in this space is extremely time sensitive.

Incentivizing green manufacturing could enable a greener economy and at the same time inculcate innovation spirit in the much ignored manufacturing sector, adds the study.

Marching towards a stronger and more evolved industry landscape in India for devices, diagnostics and delivery is critical for several reasons – encouraging indigenous solutions to contextually relevant unmet needs, addressing quality and product gaps, expanding pricing and product options and steering away from import dependency, noted the study. 

There is no easy solution to accomplish the Make-in-India objective. Given the complex ecosystem, it is critical we appreciate challenges, identify initiatives that are impactful and make fundamental structural changes required to foster sustainable industry engagement. We discuss below developments that are steering the industry forward and challenges that continue to hinder realization of the real potential.

Despite certain revisions, the current duty structure is still skewed, for several medical device categories and favors imports over indigenous manufacturing. In these cases, import duty on final products are significantly lower than the duties on imports of raw materials. Although there is cognizance of this challenge, efforts taken towards addressing it lacks in scale. 

This renders local manufacturers uncompetitive and drives continuing dependence on imports. It essentially undermines all other developments under Make-in-India and calls for urgent attention. Policy makers need to address this problem and rationalize duty structures across medical device and diagnostic products to create a conducive environment where Indian manufacturers can be competitive.

While there are avenues for non-dilutive funding and advancing until proof of concept, there is still significant gap in risk capital for funding innovative product development. Pioneering Indian ventures have struggled to raise initial and progressive rounds of venture capital funding required for capital intensive product development pathway for healthcare products.

While funds created under Startup India holds potential to dclog this problem, the trickle down to venture capital funds and investible capital has been extremely slow and there hasn’t been any significant change in the funding landscape in high-risk venture capital funding for product development in the last three years.

To maintain the momentum in startup activity and to create pathway for Indian startups to advance to markets, domestic and global, it is pertinent that this funding gap is bridged on priority. While we now boast of a rich domestic pipeline in medtech innovation, the transition to marketed products and clinical benefits heavily rests on this challenge being addressed.

It is critical that there is focused and accelerated execution that fosters private sector participation and aggressively bridges capacity gaps in public healthcare while creating a structured pathway for adoption of innovative technologies for public health applications.

Public health procurement is still price driven with poor mechanisms for uptake of an innovative device or diagnostics. To compound the problem further, there has been a historical challenge of public tenders calling for CE marked and FDA cleared devices.

While the lack of clear public health procurement pathway affects most companies, it has a more severe dampening effect on innovations that have public health potential and have greater dependency on public healthcare system for reaching the intended beneficiaries. 

It is critical that the policy environment is revamped to usher in a more structured market with easer to access channels across public and private healthcare systems. Public healthcare procurement processes need to be revisited to create pathways for adoption of innovative products and to steer away from a purely price based approach. Transparency should be required of all stakeholders in the private healthcare system and unethical practices should be curbed.

Given the immature market structures highlighted above, market penetration remains a challenge for most companies. Over that, recent threats on price capping add further restraints to an already challenged market. While price capping ensures affordability across the healthcare system, a universal approach such as this has dire consequences for Make-in-India and overall attractiveness of the industry.

Complementary to creating a nurturing environment for innovation and building momentum for progression, government needs to orchestrate a strategy to sustain the innovations for a longer run by ensuring better proliferation across primary, secondary and tertiary care. The government needs to anchor the efforts to embrace innovation and drive growth underpinning the Make-in-India theme. The segments holds significant growth potential and the next decade will be critical to realize it.