Indian Healthcare

Healthcare
Last Updated: October-December 2008

India's rapid growth has brought about a 'health transition' in terms of shifting demographics, socio-economic transformations and changes in disease patterns.
Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017 according to Technopak Advisors in their report 'India Healthcare Trends 2008'.

Moreover, as per a PricewaterhouseCoopers study 'Healthcare in India: Emerging market report 2007', the revenues from the healthcare sector account for 5.2 per cent of the GDP, making it the third largest growth segment in India.

The sector's growth will be driven by the country's growing middle class, which can afford quality healthcare. Over 150 million Indians have annual incomes of more than US$ 1,000, and many who work in the business services sector earn as much as US$ 20,000 a year. If the economy continues to grow at its current rate and the literacy rate keeps rising, much of western and southern India will be middle class by 2020.

To meet this growing demand, the country needs US$ 50 billion annually for the next 20 years, says a Confederation of Indian Industry (CII) study. India needs to add 2 million beds to the existing 1.1 million by 2027, and requires immediate investments of US$ 82 billion as per the Technopak Advisors report.

Health insurance
Currently only 10 per cent of the Indian population has health insurance, which means that there is tremendous scope for growth in this area. The Indian health insurance business is growing at 50 per cent. The sector is projected to grow to US$ 5.75 billion by 2010, according to a study by the New Delhi-based PHD Chamber of Commerce and Industry.
According to a report by McKinsey on the Indian pharmaceutical and healthcare sector, one-fifth of India's population is likely to have medical insurance by 2015, leading to an estimated increase in consumer spending on healthcare from US$ 2,054 per household in 2005 to US$ 3,514 per household by 2015.

The Insurance Regulatory and Development Authority (IRDA) has eliminated tariffs on general insurance as of January 1, 2007. This move is expected to drive additional growth of private insurance products.

Healthcare and IT
Hospitals have realised that information technology (IT) can be an effective tool towards efficient systems. According to a report by Springboard Research, India has the fastest growing healthcare IT market in Asia, with an expected growth rate of 22 per cent, followed closely by China and Vietnam. In fact, the Indian healthcare technology market is poised to be worth more than US$ 254 million by 2012.

Medical Tourism
'First World treatment' at Third World prices' is how industry sources define medical tourism in India. Although India is a recent entrant into medical tourism, it is fast catching up. According to a study by McKinsey and the CII, medical tourism in India could become a US$ 2 billion industry by 2012 (from US$ 350 million in 2006). Credit Suisse estimates medical tourism to be growing at between 25-30 per cent annually.

However, the current market for medical tourism in India is mainly limited to patients from the Middle East and South Asian economies. Indian hospitals are now trying to attract patients from Afro-Asian countries. Afro-Asian people spend as much as US$ 20 billion a year on health care outside their countries - Nigerians alone spend an estimated US$ 1 billion a year. Most of this money is spent in Europe and America, but it is hoped that this would now be increasingly directed to India.

The key selling points of the medical tourism industry are its cost effectiveness and its combination with the attractions of tourism. Many travel agents are now selling combined packages of treatment and vacation. The cost differential across the board is huge: only a tenth and sometimes even a sixteenth of the cost in the West.

Besides world class medical facilities, India is also trying to promote its traditional medicine. For instance, Kerala Ayurveda centres have been established at multiple locations in various metro cities, thus highlighting the advantages of Ayurveda in health management. The health tourism focus has seen Kerala participate in various trade shows and expos wherein the advantages of this traditional form of medicine are showcased.

Beyond cost advantage
However, the Indian healthcare story is not about cost advantage only. It has a high success rate and a growing credibility.
Indian specialists have performed over 500,000 major surgeries and over a million other surgical procedures including cardio-thoracic, neurological and cancer surgeries, with success rates at par with international standards.
The success rate of cardiac bypass in India is 98.7 per cent against 97.5 per cent in the U.S.
India's success in 110 bone marrow transplants is 80 per cent.
The success rate in 6,000 renal transplants is 95 per cent.

The Government has also been proactive in encouraging prospects in this sector with a number of initiatives:
A new category of visa 'Medical Visa' ('M'-Visa) has been introduced which can be given for a specific purpose to foreign tourists coming into India.
Guidelines have been formulated by Department of AYUSH prescribing minimum requirements for Ayurveda and Panchkarma Centres.

Areas of Opportunity
The fast growth in the Indian healthcare sector has created various pockets of opportunities for investors. A recent FICCI-Ernst and Young (E&Y) report titled 'Opportunities in Healthcare "Destination India" highlights several such areas within the healthcare sector.
Medical infrastructure forms the largest portion of the healthcare pie, and according to the report, the bed per thousand population ratio for India in 2006 stood at 1.03 as against an average 4.3 of comparable countries (like China, Korea and Thailand). The report points out that India is likely to reach a bed to thousand population ratio of 1.85 and, in a best case scenario, a ratio of 2 by 2012. Beds in excess of 1 million need to be added to reach a ratio of 1.85 per thousand at an investment of US$ 77.9 billion.

Another area of opportunity is medical equipment. Currently the medical equipment industry is around US$ 2.17 billion and is growing at 15 per cent per year. It is estimated to reach US$ 4.97 billion by 2012. Since almost 65 per cent of the medical equipment is imported, it is a key area for forging partnerships across borders. In addition to this, engineering excellence, cost-effective labour, increasing emphasis on intellectual property rights and most importantly a fast growing domestic market makes India an ideal manufacturing base. This opportunity has attracted foreign medical equipment makers to float Indian subsidiaries -- 30 of them received import clearances in 2007 alone.

The growth in medical infrastructure will be complimented by a demand for associated products and services, for example, the medical textiles industry which is projected to double to reach US$ 753 million by 2012.

The report further states that clinical trials have the potential to become a US$ 1 billion industry by 2010 and the health services outsourcing sector has the potential to grow to grow to US$ 7.4 billion by 2012, from US$ 3.7 billion in 2006, at a compound annual growth rate (CAGR) of 11 per cent.