The newly proposed National Medical Device Policy assumes significance given that India imports about 80 per cent of its medical device requirements. There is a need for FDI in the sector as the domestic medical devices industry is fragmented into small and medium enterprises and primarily manufactures products such as disposables.

The draft National Medical Device Policy, 2015, had proposed incentives for both new and existing medical devices firms. It had asked for interest subsidy to MSMEs, concessional power tariff, seed capital, viability gap funding, tax benefits to the sector, minimum or zero duty on raw materials.

In fact, the draft policy had also suggested setting up of an autonomous body National Medical Device Authority and a single window clearance for the industry.

The global market size for medical devices is about $220 billion and India has the potential to tap the opportunity. The sector in India is relatively small compared to the rest of the manufacturing industry though India is one of the top 20 markets for medical devices in the world and 4th in Asia.

A task force under the chairmanship of the DoP secretary addressed issues concerning domestic production of high-end medical devices and pharma equipment manufacturing that have been elaborately incorporated in the new policy.

Medical devices include any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes.

It also includes a device which is a reagent, calibrator, control material, kit, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes.

Executive Summary

The Indian medical device market is dominated by imported products, which comprise of around 75% of total sales. The domestic companies are largely involved in manufacturing low-end products for local and as well as international consumption. Lately, many multinational companies have established local presence by acquiring established domestic companies or starting a new business.

There are few key factors about operating in India that every serious player should be aware of. Foreign Direct Investment in medical device manufacturing sector is now possible without any prior approval.

The Indian Government has introduced various fiscal measures to promote research, development, manufacturing and import of medical devices. There is no import duty on certain medical equipment. Similarly, a number of lifesaving medical equipment are exempt from payment of excise duty.

The regulatory framework in India applicable to medical devices borrows heavily from the regulatory framework applicable to drugs. At present, only 15 types of medical devices are regulated (unfortunately, as “drugs”). The rest are unregulated. After a lot of efforts of various stake holders, the government has notified the Medical Device Rules, 2017, which are to come into effect from the 1st of January, 2018. These rules will regulate a much larger set of medical devices under a framework customized for medical devices. This should boost the confidence of all stakeholders, especially those who have been hesitant to enter into Indian market because of lack of regulation.

The Indian medical device sector is Asia’s fourth largest market, and presents an exciting business landscape and opportunities for both multi-national and domestic players. Till the early 1990s, the medical device sector was significantly dominated by domestic players. But after India opened up its markets in 1991, tables have turned. The technological advancement and expertise that the global market leaders offered has proved to be an advantage.

Today, India’s medical device sector is dominated by multi-national companies, which is evident from the fact that about 75% of the sales are generated by imported medical devices.

The domestic players, on the other hand, were quick to adapt the winds of change and started to focus on low cost devices. It will come as a surprise to many that the domestic players in India export more than 60 percent of their output as Indian markets are dominated by such imported medical devices. Over the years, many multi-nationals have set up operations in India.

However, the nature of majority of the operations is to only distribute imported devices and provide support function. Few multi-nationals have started domestic production too. Some multi-nationals have also entered India by acquiring domestic manufacturers.

A significant percentage of purchasers of medical devices are private medical institutions and hospitals. Due to increased competition in Tier I cities, private enterprises have started to focus on Tier II and Tier III cities, a market which is until now untapped in India. As private enterprises expand in lesser explored markets, the demand for medical devices will expand proportionally. Other reasons for strong growth prospects of the industry are:

• Economic growth leading to higher disposable incomes
• Increased Public Spending in Healthcare
• Increased Penetration of Health Insurance
• Improving Medical infrastructure
• Increasing affordability due to growing income
• Increasing number of ailments
• Increasing demand due to “Medical tourism”

The sector is also witnessing strong Foreign Direct Investments (“FDI”) inflows, which reflects the confidence of global players in the Indian market. As per official data, the medical and surgical equipment sector received a total of INR 8344 Crore (approx. USD 1452 Million) between 2000 and 20162. In 2013 alone, the FDI inflow was almost INR 920 Crore (approx. USD 138 Million). In 2015, this number jumped to a new high of INR 1019 Crore (approx. USD 153 Million).

India Entry Strategy

Doing business in India is as big a challenge as it is an opportunity. The sensitive healthcare sector in India has long been conservative about foreign investment over concerns of foreign influence over health priorities of domestic manufacturers. However, in recent times, there is growing governmental and popular support for foreign investment in all sectors, including health. It is, therefore, significant to observe the political and economic environment of India. It is equally important to understand the business culture and consumer mindset prevalent in India. Companies that are quick to adapt to it turn out to be more profitable. To be aware of the legal framework is another must. Specifically, investors must keep an eye on the exchange control laws as they govern how profits made by the company can be realized out of India.

Investment climate in India

By and large FDI is now permitted in almost all the sectors in India without obtaining prior regulatory approvals (i.e. under the “automatic route”) barring some exceptional cases like defense, housing and real estate, print media, etc. (referred to as the “negative list”). If the FDI is not in accordance with the prescribed guidelines or if the activity falls under the negative list, prior approval has to be obtained from the Foreign Investment Promotion Board (“FIPB”) (“approval route”).

FDI in manufacturing of medical devices is permitted to the extent of 100% under the automatic route.

For the limited purpose of FDI Policy,

Medical device is defined as follows;

Medical device means;

i) any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purposes of;

• Diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder;
• Diagnosis, monitoring, treatment, alleviation of, or assistance for, any injury or handicap;
• Investigation, replacement or modification or support of the anatomy or of a physiological process;
• Supporting or sustaining life;
• Disinfection of medical devices;
• Control of conception, and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means;

ii) A n accessory to such an instrument, apparatus, appliance, material or other article;

iii) A device which is reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of in vitro examination of specimens derived from the human body or animals.

iv) However the definition above would be subject to the amendment in Drugs and Cosmetics Act. for manufacturing of medical devices.

Aspects of Legality

As referred to in the introduction, the medical devices industry in India is currently largely unregulated because of the absence of a medical device specific legislation specifying standards of safety and quality for most of the medical devices. However, this is set to change with the introduction of the Medical Device Rules, 2017.

Presently, there are certain medical devices which have been regulated by creating a statutory fiction and deeming these medical devices as “drugs”. By virtue of this fiction, these few medical devices get regulated by the Drugs and Cosmetics Act, 1940 (“Act”) and the rules framed there under viz. Drugs and Cosmetics Rules, 1945 (“Rules”).

The Act and Rules seek to:
• Regulate the import, manufacture, distribution and sale of Notified Medical Devices.
• Ensure the availability of standard quality Notified Medical Devices to the consumer.

Licensing Process

The regulation of Notified Medical Devices is overseen by both, the central government and the state governments. Under the applicable regulatory framework, the functions of manufacture, import, distribution and sale of medical devices require licenses or permissions, as the case may be. In specific instances such as manufacture or import of new Notified Medical Devices (discussed later), both, a permission from the central drug licensing authority and a license from the state drug licensing authority is required. The required licenses and permissions are described more specifically in the table below.

The Rules have prescribed the standard format of the application forms for relevant licenses for the benefit of the applicants. It has also prescribed the standard form (template) of the licenses that may be issued for the benefit of the regulatory authorities and the applicants.

Manufacturing process

A separate license is required for each manufacturing location and for each Notified Medical Device at such manufacturing location. Under the Act, “manufacturing” includes any process (or part) for making, altering, ornamenting, finishing, packing, labeling, breaking up or otherwise treating or adopting any drug with a view to its sale or distribution. However, “manufacturing” does not include dispensing or packing at the retail sale level.

Importing Process

The IEC Number would be required to be mentioned in the documents filed with Customs for clearance of imported goods. For obtaining the IEC Number, an application in the prescribed form has to be submitted to the office of the jurisdictional Joint Director of Foreign Trade, wherein details of Bank Account Number and Permanent Account Number have to be furnished Under the Act, the activity of import of Notified Medical Devices into India requires an import license from the office of the Drugs Controller General of India.

In order to get an import license, there is a mandatory requirement of registration of the medical devices sought to be imported, the name of the manufacturer and its manufacturing premises with the office of the DCGI. The registration is certified by grant of a registration certificate. An application for grant of a registration certificate may be made by the foreign manufacturer itself if it has a valid wholesale license for sale or distribution of Notified Medical Devices under the Rules or its authorized agent in India, either having a valid license under the Rules to manufacture for sale of a Notified Medical Device or having a valid wholesale license for sale or distribution of Notified Medical Devices in India. Many a times, foreign manufacturers do not have an Indian subsidiary which has a wholesale license for sale or distribution of Notified Medical Devices. Hence, the manufacturers choose to appoint a third party as an authorized agent to make the application for grant of registration certificate. The authorization by a manufacturer to its agent in India must be documented by a power of attorney.

Clinical Trials

The applicable regulatory framework for clinical trials is drug-trial specific. There is no medical device specific regulatory framework for clinical trials in India. The DCGI, who regulates clinical trials, is aware of this fact and has therefore, allowed for some tweaking in the drug-specific clinical trial regulatory framework to suit medical devices. For example, the DCGI has exempted Phase I clinical trials of medical devices. A number of manufacturers of Notified Medial Devices are interested in carrying out post-marketing observational study of medical devices. The core difference between an observational study and a clinical trial is the degree of interference of the manufacturer in both the scientific studies. In observational studies, the manufacturer does not interfere in the use of the device by the subject but in a clinical trial, the manufacturer sets out the way (design) in which the device would be used. There is no requirement to obtain any permission for an observational study, but permission would be required to carry out a post marketing clinical trial.

Labeling

Before a Notified Medical Device is sold or distributed in India, it must be labeled according to specifications outlined in the Rules. All medical devices sold in retail or wholesale package should are required to comply with the labeling requirements of The Legal Metrology (Packaged Commodities) Rules, 2011.

Penalties

The penalties have been significantly enhanced through the amendment for manufacture, sale, distribution, stocking or exhibiting or offering for sale or distribution of spurious or counterfeit Notified Medical Devices to INR 1,000,000 or 3 times the value of the notified medical device confiscated, whichever is higher and imprisonment of not less than 10 years which may extend up to life, for spurious or counterfeit notified medical device leading to death or grievous hurt.

The entire amount of fine that is realized from the person convicted for the offence is now paid by way of compensation, to the person who is the victim of spurious or counterfeit Notified Medical Devices.

If the victim has died due the effect of the spurious or counterfeit Notified Medical Devices, the relative of the victim is entitled to receive the same amount by way of compensation. In case the spurious or counterfeit notified medical device does not lead to death or grievous hurt, then the penalty is a fine of up to INR 300,000 or 3 times the value of the notified medical device confiscated, whichever is higher and imprisonment of not less than 7 years which may extend up to life. The Ministry also has set up a “whistle blower” policy that aims to reward citizens, who provide information on the trade and source of spurious Notified Medical Devices.

Advertising and Sales

Advertising medical devices is strictly regulated. The Rules prohibits labeling of Notified Medical Devices in a manner that may convey to the intending user that the enclosed device may be used for prevention or cure of certain ailments and diseases specified in Schedule J of the Rules. Some examples of such diseases and ailments are: Blindness, Bronchial Asthma, Cataract, Growth of New Hair, Deafness, Genetic Disorders, Improvement in vision, Myocardial Infarction etc. Please note that while the restriction on labeling applies only to Notified Medical Devices, some of the restriction on advertisement is general in nature and are applicable to all medical devices. These are dealt in detail under the sub-heading of Drugs and Magic Remedies (Objectionable Advertisement) Act, 1954.

Concluding the Benefits

The Indian medical device industry continues its upward march of growth and is strongly supported by India’s robust legal framework. The Indian Government has identified the medical device industry as a focus industry for its flagship “Make in India” program.

There is also a proposal to launch new medical device parks in which government will provide fiscal and monetary incentives. This should give lot of confidence to potential stakeholders to consider the Indian medical device industry seriously.

With respect to the singular event of price fixation of Coronary Stents, The government had several interactions with the importers and manufacturers of Coronary Stent and took their feedback into account before fixing the price. Thus, it appears that the government sought to be restrained and transparent in its approach.

Also, it is still possible for importers and manufacturers of Coronary Stents to increase their current margins by structuring their business model or by using the available relaxations as discussed in the body of this paper. Lastly, with the introduction of the Medical Device Rules, 2017, the medical device industry in India is certain to receive a fillip.

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The WHO quotes hospitals as “health care institutions that have an organized medical and other professional staff, and inpatient facilities, and deliver medical, nursing and related services 24 hours per day, 7 days per week.”

In the present day scenario hospitals extend beyond just inpatient facility. They extend into the community and offer accessible care. Hospitals are focusing on health promotion and protection.

Hospitals are changing every day. The management of hospitals is also changing.

Need for change:

• Changes in healthcare
• Specialization on the rise
• Changed expectation of healthcare professionals
• Effectiveness of healthcare delivery
• More awareness toward quality of healthcare
• Increases awareness of safe practices in healthcare
• Influence of IT and other new regulation including Medical Tourism.
• More options to choose with freely available knowledge.

Patients are becoming more demanding than ever before and it will continue to increase. Hence hospitals have to think strategically and innovatively of how to make the experience better. It’s no longer just about the treatment. It’s about the healthcare experience. In order for hospitals to succeed it’s important to meet the needs of the customer and their families. Invariably it’s important the family is satisfied and more likely they are the word of mouth ambassadors keeping in mind they have a lot of time to be spent in the hospital when their loved ones are getting treated. Hence hospitals need to focus on both the experience of the patient as well as their families.

Patients have different needs and in all likelihood they have done a lot of window shopping before they reach a particular hospital. Also word of mouth still is the single largest way patients come to hospitals. The expectations seem to be growing and hence the hospitals have to take a holistic view of providing the healthcare experience to the patients and their families.

While infrastructure is important in hospitals, soft skills are equally important. At every step patients require hospitality in the hospital. Hence staff training and protocols are important. Staff needs to be better prepared to handle crisis situations, that too with a smile.

Boutique hospitals have recently become a trend and surely would become a common concept tomorrow that would grow rapidly.

Effective Leadership: Lean Management

Michael Porter, “Father of Modern Strategy Field” a Harvard Business School Professor said “We must make progress in dramatically improving the value that we deliver,”

The key to an effective hospital is effective focused leadership making execution the key to success.

Lean management was started by Toyota in 1950 and has found its way into making hospitals more effective. Lean management would increasingly be adopted by the hospitals of tomorrow to create the healthcare experience that the patient is looking to have. Lean hospitals focus on three areas: Firstly on the patients, secondly on the healthcare providers and finally on the hospital management.

Patient experience becomes the core of every activity in the hospital. Patient waiting time is greatly reduced that there is a seamless transition from appointment to treatment to billing and follow-up. The healthcare provider are the key in making this experience count hence keeping in mind their comfort also becomes vital to the success of the process. Hence usually hospitals conduct these workshops with the concerned staff to make them the process owners.

Technology for effective hospitals-mcloud

Technology has redefined the way healthcare is being delivered today. It has greatly enhanced access to knowledge and reduced the waiting time.

It’s been predicted by 2025 with introduction of technology there would be marked improvement in operational efficiency, reduction in medical errors, paper less hospitals and personalized care.

Aruba Network believes that technology in healthcare would create a radical shift. The hospitals of tomorrow using technology would have 50% better Operational efficiency, 75% reduced patients misdiagnosis, 80% paperless and wireless & 100% personalized care.

Operational efficiency:

Hospitals of tomorrow would be 50 percent more efficient as per the Aruba prediction through the birth of the ‘mCloud’ and Smart Waiting Rooms. This would give patients the ability to have healthcare across the globe. These online data would be protected and hospitals could reduce the unwanted storage space by using the cloud computing. The doctor would have access to patient details more quickly and ensure lesser waiting time. Operation efficiency using technology.

Reduced Misdiagnosis:

Reduce misdiagnosis by 75 percent through the partnership of real-time data and mobile technology use of real-time data through the use of mobile software and devices, all allowing for more accurate diagnosis giving consultants greater visibility into a patients ailments and reducing misdiagnosis. (See Fig:3)

Wireless and Paperless:

While an entirely paperless hospital would not be the ideal situation an 80% paperless hospital is a sure possibility in the hospitals of tomorrow with the wireless technology aiding it. Deliver a truly paperless and wireless world driving better confidentiality and collaboration using Telemedicine / electronic record (See Fig 4).

Personalized Experience:

The patients of tomorrow would expect personlized care like they currently do in a hotel. Hospital industry would become more an hospital cum hospitality industry. Through the use of mobile apps and techonolically connected rooms a completely customized and personalized experience would be provided to the patients. Bring a customized and smart patient experience through remote consulting, hospital app, smart rooms, consult doc and nurses through customized hospital app (See Fig 5).

Benchside to Bedside to Population

• The hospital of tomorrow needs to be a large, integrated system providing extensive outpatient care beyond its primary facility, dedicated to keeping community members healthy
• The hospital of tomorrow should proactive, devoted to disease prevention
• It has a large network of medical professionals reaching into the community, working in outpatient clinics as well as urgent care centers
• This approach will result in a significant reduction in emergency room visits, an important step to lowering the cost of medical care
• Instead of measuring hospitals by the number of beds filled with patients being treated for illnesses, the hospital of tomorrow will be judged more by its ability to maintain a community’s health

Hospital without walls: Community care

Health care is delivered both at hospitals and at home ( Fig 6). Hospitals of tomorrow would essentially spread beyond the borders of the four walls and extend into the community to provide home care. Using technology a perfect interphase can occur between the hospitals and the community care thereby ensuring continuity of care. Reduction of interphase is possible but interpersonal relationship is a must in healthcare.

Key objective of the hospital of the future will be to keep more patients out of the hospital, an optimal outcome for improved communal medical and fiscal health.

Collaboration for sustainability:

Healthcare concept has shifted over the years from being hospital centric to patient centric. With the patients’ wellbeing in mind and with the concept of doing more from less we at Santosh believe that Collaboration would be the best way forward for sustainability. With so much need for healthcare and at the same time limited resource it becomes imperative that the resources are used effectively to ensure sustainability. To share our personal experience we took up a mission of providing healthcare to the people of Ghaziabad’s urban slum area in Uttar Pradesh.

At first seemed like a huge task. We had access to a healthcare team, but that wasn’t sufficient we had to get to the interiors of Ghaziabad and spread the awareness that healthcare was available at an affordable cost. Hence we collaborated with the District administration, which in turn collaborated with the WHO, who wanted to provide immunization to the people but did not have access to the healthcare team.

Thus the collaboration was a win-win and we succeeded in providing immunization and healthcare to 3 lakh people. The hospitals of tomorrow would also collaborate expand the pie and bring in synergies to provide better healthcare at a cost that would be affordable to the patients.

The hospital of tomorrow is surely some years from becoming a reality. The good news is we are on the right path and with the use of technology, lean management principles, collaboration, preventive aspects of medicine and extending the hospital beyond boarders healthcare of tomorrow would be much better than what it is today.

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Attractions

Advantages of medical treatment in India include reduced costs, the availability of latest medical technologies, and a growing compliance on international quality standards, Doctors trained in western countries including US and UK, as well as English-speaking personnel, due to which foreigners are less likely to face language barrier in India. According to the Confederation of Indian Industries (CII), the primary reason that attracts medical value travel to India is cost-effectiveness, and treatment from accredited facilities at par with developed countries at much lower cost. The Medical Tourism Market Report: 2015 found that India was “one of the lowest cost and highest quality of all medical tourism destinations, it offers wide variety of procedures at about one-tenth the cost of similar procedures in the United States.”

Cost

Most estimates found that treatment costs in India start at around one-tenth of the price of comparable treatment in the United States or the United Kingdom. The most popular treatments sought in India by medical tourists are alternative medicine, bone-marrow transplant, cardiac bypass, eye surgery and hip replacement. India is known in particular for heart surgery, hip resurfacing and other areas of advanced medicine.

Quality of care

India has 28 Joint Commission International (JCI) accredited hospitals. However, for a patient traveling to India, it is important to find the optimal Doctor-Hospital combination. After the patient has been treated, the patient has the option of either recuperating in the hospital or at a paid accommodation nearby. Many hospitals also give the option of continuing the treatment through tele-medicine.

The city of Chennai has been termed “India’s health capital”. Multi and super-specialty hospitals across the city bring in an estimated 150 international patients every day. Chennai attracts about 45 percent of health tourists from abroad arriving in the country and 30 to 40 per cent of domestic health tourists.

Factors behind the tourist inflow in the city include low costs, little to no waiting period, and facilities offered at the specialty hospitals in the city. Chennai has an estimated 12,500 hospital beds, of which only half is used by the city’s population with the rest being shared by patients from other states of the country and foreigners. Dental clinics have attracted dental care tourism to Chennai.

Ease of travel

The government has removed visa restrictions on tourist visas that required a two-month gap between consecutive visits for people from Gulf countries which is likely to boost medical tourism. A visa-onarrival scheme for tourists from select countries has been instituted which allows foreign nationals to stay in India for 30 days for medical reasons. In 2016, citizens of Bangladesh, Afghanistan, Maldives, Republic of Korea and Nigeria availed the most medical visas.

Language

Despite India’s diversity of languages, English is an official language and is widely spoken by most people and almost universally by medical professionals. In Noida, which is fast emerging as a hotspot for medical tourism, a number of hospitals have hired language translators to make patients from Balkan and African countries feel more comfortable while at the same time helping in the facilitation of their treatment.

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