Plugging the gaps in healthcare policy

On the policy front, key regulatory changes could make or mar the sector. Achieving the perfect balance between the interests of various stakeholders will continue to be a major challenge

If 2023 was a year of tentatively putting COVID on the back burner to re-focus on pending infrastructure updates, 2024 will probably be more of the same. On the policy front, key regulatory changes could make or mar the sector. Achieving the perfect balance between the interests of various stakeholders will continue to be a major challenge.

Unfortunately, COVID is not completely out of the picture. The WHO Director-General Dr Tedros Adhanom Ghebreyesus declared an end to COVID-19 as a public health emergency of international concern in May 2023. But by the end of the year, the latest COVID variant, JN.1, has caused a spike in COVID cases, in certain countries, including India. The Ministry of Health & Family Welfare stepped up surveillance and advised hospitals to keep beds, ventilators etc ready but for now, the situation seems under control.

Analysts seem confident the sector will clock a decent year of steady revenues. Kinjal Shah, Vice President & Co-Group Head – Corporate Ratings, ICRA expects the performance of the Indian hospital industry to remain strong in FY2024, on the back of healthy occupancy and strong ARPOB levels. ICRA expects occupancy of its sample set to remain flattish at 64-65 per cent in FY2024, while the ARPOB is expected to expand by 8-9 per cent.

The sector is expected to reap the benefits of various measures. As Shah points out, “Benefits from improving scale, cost optimisation efforts, steady demand for margin-accretive elective procedures, and improving case and payor mix in addition to healthy international patient footfalls will support operating profit margins (OPM) of over 22-23 per cent for the sample set companies in FY2024 as compared to 22.6 per cent in FY2023. Further, given the healthy accruals and low debt levels, debt metrics for the sample set companies are expected to remain strong in FY2024 despite ongoing capital expenditure towards capacity expansion. Thus, ICRA continues to have a stable outlook on the Indian hospital industry.”

A recent report from Jeffries also picked India’s hospital sector as a top growth sector, with a projected 3-10 per cent rise in net income from FY24-26, as significant capacity expansion over the next 12 -15 months reaches a critical break even point. Thus it is no wonder that 2023 saw PE/VC funds increasing investments in India’s hospital segment.

The country’s medical devices also saw a ‘record-breaking surge’ of $464 million in foreign investments in medtech in the first three quarters, as per the Medical Technology Association of India (MTaI). As Pavan Choudary, Chairman, MTaI puts it, “MTaI member companies supply nearly 80 per cent of the critical care medical devices and account for 70 per cent of the overall medical device market share. Through its members’ investments in manufacturing, R&D and Healthcare worker training it has served the Indian patient while at the same time creating most of the market that exists in the country today. MTaI members are also responsible for bringing a large portion of the investment in this sector through FDI.”

But will increasing FDI suppress the domestic medical devices sector and the hope for indigenous more affordable medical devices? The fault lines between the two sides are sure to be more visible as policy makers try to update current regulations. For instance, the passage of the new Drugs, Cosmetics & Medical Device Bill, 2023 through Parliament promises to test the balancing prowess of policy makers. Domestic medical device manufacturers, under the aegis of the Association of Indian Medical Device Industry (AIMED) pointed out the need to have a separate regulatory process for medical devices, while their global counterparts seem fine with the status quo.

Listing the significant difference between drugs/medicines and medical devices, AIMED Forum Coordinator Rajiv Nath reasoned that medical electronic devices are like engineering products like cars, and therefore cannot be manufactured or regulated like drugs. In addition, they need to be stored, transported, installed, and maintained and regularly calibrated to ensure patient safety for the lifecycle of the product. While a separate cadre of qualified regulators for the medical device sector would be ideal, the dearth of inspectors is a major stumbling block. Policy makers need to address the legitimate concerns of patient groups and local medical device makers before the new Drugs, Cosmetics & Medical Device Bill, 2023 is implemented.

The recent launch of the National Single Window System (NSWS) Portal by the CDSCO, is another recent regulatory reform. While Nath appreciates that the NSWS portal could streamline certain applications for drugs and the import and manufacturing of medical devices, he points out that its success will lie in the on-boarding of the various other ministries and regulators at both the central and state levels. According to Nath, a manufacturer currently needs to apply for over 35 approvals to set up a greenfield medical devices factory in Haryana state. If implemented appropriately, the NSWS portal will reduce transaction time but will it turn out to merely be old wine in a new bottle? With general elections scheduled later this year, let’s hope 2024 will be more than just pre election rhetoric.



health policymedical devicespoliciesregulatory changes
Comments (0)
Add Comment