'Affordable, Accessible & Quality Healthcare for All' February, 2018 Bangalore Interna onal Exhibi on Centre, Bengaluru K A E

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1 E 'Affordabe, Accessibe & Quaity Heathcare for A' C February, 2018 Bangaore Interna ona Exhibi on Centre, Bengauru K A E O s S P

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3 E 'Affordabe, Accessibe & Quaity Heathcare for A' C February, 2018 Bangaore Interna ona Exhibi on Centre, Bengauru K A E O s S P

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5 Contents 1. Messages About India Medica Device About FICCI Medica Devices Forum Overview Artices: i. Lack of Latent Demand and Manufacturing Expectations Mr Sushobhan Dasgupta ii. Need to Address Poicy Asymmetry in Medica Devices Sector Mr Probir Das iii. Affordabiity in Heathcare Mr Madan R. Krishnan iv. Increasing Insurance Penetration to Augment Access to Innovative Technoogies - Ms Shobha Mishra Ghosh - Mr Amit Mookim v. Non-Compiance to Goba Standards and a push for Loca Standards Mr Nanda Kumar Subburaman 6. Acknowedgements

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7 vuardqekj ANANTHKUMAR jk;u,ao mozjd rfkk anh; dk;z ea=h Hkkjr jdkj MINISTER OF CHEMICALS & FERTILIZERS AND PARLIAMENTARY AFFAIRS GOVERNMENT OF INDIA v- ¼h,aMQ½ D.o.No.../M(C&F) 6602 Message It is a matter of great peasure and pride to convey this message for INDIA MEDICAL DEVICE 2018" -3rd edition of Internationa Exhibition and Conference on Medica Eectronics & Devices sector schedued to be hed from February, 2018 at Bengauru. With the theme Accessibe, Affordabe & Quaity Heathcare for AII, the event woud be a positive step towards the deveopment of Medica Devices Sector in India and woud aso be a patform where the Indian Industry wi showcase its strength to an Indian and Internationa audience. The event has aready estabished itsef as a program of repute amongst the heathcare sector stakehoders. Parae events ike the CEO s Forum, Conference, Internationa Reguators Meet, Buyer-Seer Meets and interactive functions wi create the right atmosphere for exchange of ideas and for doing serious business. I am confident that this event wi be extremey reevant for the participating companies and I wish them a fruitfu participation. th 7 February, 2018 (AnanthKumar) Office : Room No. 316-A, Shastri Bhawan, Dr. Rajendra Prasad Road, New Dehi , Te.: , , Fax : Office : Room No. 15, Pariament House, New Dehi , Te.: , , , Fax : Residence : 26, Tughak Crescent, New Dehi Te.: , , Fax : Bengauru Office : 15 Cross, 2ⁿ Bock, Jayanagar, South End Circe, Bengauru Te.: , Fax : , e-mai : ananthkumardehioffice@gmai.com, ananth@ananth.org Visit : 1

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9 jkt; ea=h M+d ifjogu,oa jktekxz] tgktjkuh] jk;u,oa mozjd Hkkjr jdkj Minister of State Road Transport & Highways, Shipping, Chemicas & Fer izers, Government of India euq[k ekamfo;k MANSUKH MANDAVIYA Message INDIA MEDICAL DEVICE 2018 is an initiative of Department of Pharmaceuticas, Ministry of Chemicas & Fertiizers, Government of India supported by the Federation of Indian Chamber of Commerce & Industry (FICCI) being hed from February, 2018 at Bangaore Internationa Exhibition Centre (BIEC), Bengauru. I am confident that the event wi prove to be an exceent patform for the Indian Medica Devices sector to interact with a stakehoders and poicy makers. Scientific, Technica and Poicy eve interaction on the atest deveopments in the sector wi go a ong way in charting out a course for the industry in the future. I extend my greetings to a the participants and hope that there are significant takeaways from this event. (Mansukh Mandaviya) Room No. 201, Transport Bhawan, New Dehi Te : , , , Fax :

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11 India Medica Device 2018 Affordabe, Accessibe & Quaity Heathcare for A The Indian Medica Devices industry is currenty vaued at around USD 4.9 biion and has been growing at an average rate of 17% during the ast five years. It is strongy beieved that growth wi outperform the pace, resuting in the Indian Medica Devices market crossing USD 25 biion by the year The main factors for this growth are rising incidence of chronic diseases, increased urbanization and a growing edery popuation. The increased awareness about atest technoogy soutions to augment ife and rehabiitation have aso given a further boost to the sector. The infux of medica technoogy has strengthened the existing heathcare infrastructure in various ways right from digitizing medica tests, diagnostics and therapeutic procedures to enhancing the reach of heathcare through Teemedicine and Heath IT. However, the sector has not been abe to reaize its fu potentia owing to numerous chaenges being faced by the industry. It is imperative for a the stakehoders to converge their efforts and address these chaenges to provide the required impetus that India needs in reaizing its vision of achieving 'Affordabe, Accessibe & Quaity Heathcare for A 5

12 India Medica Device 2018 is being jointy organized by the Department of Pharmaceuticas, Ministry of Chemicas & Fertiizers, Government of India and Federation of Indian Chamber of Commerce & Industry from 15th-17th February, 2018 at Bangaore Internationa Convention and Exhibition Centre, Bengauru. The endeavour is to promote India as a quaity manufacturing hub in the Medica Eectronics and Device sectors through a patform for manufacturers to showcase their products and technoogy. It wi aso provide an opportunity for a the stakehoders of the sector to deiberate on the road ahead and find soutions for the current chaenges. 6

13 FICCI Medica Device Forum FICCI had aunched the FICCI Medica Device Forum (MDF) to hep respond to the requirements of the medica devices industry and create awareness about the opportunities in the sector. Since its inception, FICCI MDF has been working cosey with various departments of Government of India viz. Ministry of Heath & Famiy Wefare; Department of Commerce, Ministry of Commerce and Industry; Drug Controer Genera of India (DCGI); Department of Pharmaceuticas, Ministry of Chemicas & Fertiizers and Ministry of Eectronics and Information Technoogy. The Forum has supported the deveopment of the Medica Device Poicy as we as Rues and has aso been activey working with the Nationa Pharmaceutica Pricing Authority (NPPA) on the pricing poicy for devices. FICCI has been committed towards an appropriate and baanced Nationa Medica Device Poicy that is designed to enabe a quick and we-panned acceeration of the sector. FICCI MDF has beieved that the poicy shoud acknowedge the sub-segmentation of medica devices into simpe engineering and compex engineering, and appy distinct poicy treatment, wherever appicabe. The Forum has aso been working towards promoting innovative and appropriate technoogies through oca manufacturing and beieves that this wi hep in deveopment of 7

14 custom products suited better to our disease pattern and patient demography thereby reducing the overa cost of deivery. Further, the Forum aso advocates the need to deveop our own quaity contro standards specific to Indian context. Recenty the FICCI Medica Device Forum has been merged with the FICCI Medica Eectronics Forum to form a FICCI Committee that wi incude Medica Eectronics, Equipments and Devices as we as In Vitro Diagnostics (IVDs). The new Committee wi focus on the concerns of a these subsectors and work with the government and other stakehoders to hep augment this significant and highy speciaized sector of Medica Technoogy in India. 8

15 CEOs Speak Overview India has made significant strides in the heathcare sector in past coupe of decades. This is refected in progress made towards achieving ower Materna Mortaity Rate (MMR), Infant Mortaity Rate (IMR), Tota Fertiity Rate (TFR) and other key indicators. However, with 21% of goba disease burden and aarming increase in non-communicabe and ifestye diseases, incrementa changes wi not be enough for providing quaity heathcare to a. In fact, India envisions 'Universa Heathcare' in its Nationa Heath Poicy 2017 as we as through its recenty announced Ayushman Bharat scheme. Medica technoogies through their disruptive soutions have the potentia to provide the impetus needed to make our heathcare system more accessibe, affordabe and sustainabe going forward. The goba medica device market, currenty estimated at USD 389 biion, is expected to grow at a CAGR of 4.4% per annum. It is a highy innovative and rapidy advancing industry¹,² that encompasses various areas ike diagnosis, treatment as we as monitoring. However, in India, most of the indigenous manufacturing is restricted to medica consumabes and technoogicay advanced innovation has witnessed ow eves of penetration and adoption. ¹ ² 9

16 Despite the existing chaenges, the Indian medica technoogy sector has witnessed rapid growth in recent years, argey driven by unmet cinica needs and improved focus on domestic manufacturing. Medica devices that represents ~6%³ of the overa Indian heathcare industry, is presenty vaued at approx. USD 4.9 biion⁴ and is expected to grow to USD biion by 2025⁵. Sti at a nascent stage, it has found its pace in top 20 goba medica device markets and is the fourth argest medica device market in Asia, mainy due to the advantage of 'design-to-cost' factor, owing to price-sensitivity in the Indian market. The export of medica devices from India has grown from USD 0.87 biion in 2012 to USD 1.2 biion in 2014⁶. USA has been the chief destination for export and contributes cose to 15 per cent of the export trade for India⁷. Mutinationa companies, especiay in severa high technoogy segments, are currenty driving the growth of Indian medica devices sector with imported medica devices generating about 75% of the saes⁸. The import of medica devices had grown from USD 2.46 biion in 2012 to USD 2.87 biion in However, this shoud not be seen as a deterrent. Some of the most deveoped markets of the word, ike Germany and Singapore, have been entrenched with foreign industry giants from Japan and USA. According to data pubished by the Government of USA, the import market size for medica devices was USD 23.3 biion in Germany⁹ (~39% of its market size) and USD 11.2 biion in Singapore¹⁰ (~51% of its ⁴ ⁵ ⁶ ⁷ ⁸ ⁹ ¹⁰ 10

17 market size) in In order to bring India higher on the goba medica technoogy map, we need concentered efforts, on both demand as we as the suppy side. The Government of India has taken some eary steps to boost this sunrise segment in the country. One such step was permitting 100 per cent automatic foreign direct investment in the sector, which heped attract FDI worth USD 1.57 biion during Apri 2000 and March Roing back of import duty concessions for 67 medica devices has aso given a boost to the sector. A series of Medica Device Custers have emerged due to supportive stateeve poicies and the government is now in the process of setting up Medica Technoogy Parks across the country. India has aso seen augmentation of the sector as a part of the Make in India initiative that provides immense opportunities to oca manufacturers and startups as we goba payers. However, it is important to understand that medica technoogy is a highy speciaized sector covering very diverse and niche sub-segments. So, it may not be viewed from the same ens as that other segments ike FMCG or eectronics goods. The nature of operations, marketing, suppy chains and ski requirements of this industry are very distinct and thus, requires a strategic approach taiored to its requirements. The year 2017, athough has been a significant year for the medica devices sector, from the perspective of poicy and reguations as we as industry growth, it has aso brought in new chaenges that need attention from both poicymakers as we as the industry in order to sustain the momentum. The government's move to separate medica devices from drugs in the country's poicy framework is indeed audabe. However, the government needs to provide further carification since there is uncertainty about the impact of new Medica Device Rues and eventuay foow this up with a different Act, competey separating medica devices from pharmaceuticas. 11

18 Price contro is ikey to emerge as a major impediment, which is ikey to inhibit the growth of medica device industry is India. The recenty announced price contro poicy, whie intended to improve affordabiity, needs reconsideration before further impementation. In its current form, the poicy wi have imited impact on patient costs and coud rather, deprive India of innovations and new technoogies in the future, besides restraining sectors ike high-end tertiary care and medica tourism. It is aso imperative for us to reaize the need for appropriate Trade Margin Rationaisation rather than unnuanced caps on device ceiing prices. It is crucia that strategies and measures adopted by the government provide carity and assurance, not ony to the industry but aso to the most important stakehoder who is the end-user of technoogy i.e. the patient. Patient-centricity, which has evoved as the key eement of an effective heathcare ecosystem does not seem to find adequate focus in the current scenario. This wi adversey affect the existing trust deficit in the entire heathcare ecosystem. Hence, we need to be coectivey mindfu that the ongoing reforms hep strengthen patient engagement, safeguard doctor-patient reationship and optimize revenue in the heathcare ecosystem, which is significanty consumer and market driven. Medica technoogy has the potentia to create a new patient-centric business mode that combines devices with big data anaytics and artificia inteigence to deveop innovative and personaized products. Devices can aso provide a unique patform that heps us to consider the appropriateness of treatment, avaiabiity of quaity heathcare and reduce the pressures of financing and accessibiity. It is therefore critica to create the right environment to foster the growth of this sector by coming up with a gobay harmonised approach to the reguation of ife-saving medica devices. 12

19 This White Paper is an effort to bring the voices of the industry to the forefront and re-focus our efforts on creating appropriate environment as we as buiding patient-centricity in our system. Some of the key industry eaders have shared their viewpoints on pressing issues and presented the soutions that can hep us reshape the future of our country's heathcare andscape without hampering the interests of any stakehoder. The themes shared in the paper are: Lack of Latent Demand and Manufacturing Expectations: India has been strugging with ow heathcare spend and huge gaps in infrastructure. This has ed to a ack of atent demand in the sector, hence affecting the need for medica technoogy. With robust poicy reforms and appropriate investments in heathcare infrastructure and deivery, it is expected that there wi be an increase in the atent demand of heathcare services. This increase in demand wi further provide impetus for growth and advancements in the diagnostics, pharmaceutica, medica devices and other aied industries. Need to Address Poicy Asymmetry in Medica Devices Sector: Medica technoogy, the smaest whee of the heathcare continuum, being far more compex than the more deciphered heathcare deivery and pharmaceutica sectors, needs to be given due recognition by our poicy makers and thought eaders. The recent pathway to poicy reforms, athough we intentioned, needs to be reconsidered with a arger vision of providing stabiity to this highy speciaized sector, whie keeping with the goas of affordabiity and access to quaity heathcare. Affordabiity in Heathcare: It is critica for the government to recognize the advantages of trade margin rationaization over capping of device prices, which can ead to greater transparency and higher affordabiity. Athough fixing trade margins woud 13

20 restrict how much a product's price can be raised from the import or manufacturing cost, but innovation woud sti be rewarded. Increasing Insurance Penetration to Augment Access to Innovative Technoogies: Lack of affordabiity for high-end technoogy devices among arge section of Indian popuation has been the major cause of ow per capita consumption of medica devices. Financing channes, chiefy heath insurance provisioning through increased penetration as we as innovation in insurance products to provide coverage for new technoogies and procedures that incude high-end medica devices is the way forward. Non-Compiance to Goba Standards and a push for Loca Standards: Obtaining cearance from a reguator or a certifying agency is a critica part of stepping into any new market. Often these processes pose a major chaenge to manufacturers who se in the goba market due to the time taken dupication of efforts. We need to work towards a unified goba standard or at the very east towards eiminating needess dupication. 14

21 ARTICLES

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23 INDIAN HEALTHCARE INDUSTRY: LACK OF LATENT DEMAND AND MANUFACTURING EXPECTATIONS - Mr Sushobhan Dasgupta, Managing Director, Johnson & Johnson Medica India Ltd.; VP - DePuy Synthes, Johnson & Johnson Medica Asia Pacific INDIAN HEALTHCARE INDUSTRY Indian heathcare has been constanty evoving over the ast decade. Heathcare has become one of India's argest industries - both in terms of revenue and empoyment generation. Heathcare comprises of hospitas, medica devices, pharmaceuticas, medica tourism, diagnostics, heath insurance and medica equipment. Despite strong growth, the Indian heathcare market continues to be significanty smaer compared to other arge economies. Figure 1: India Heathcare market as compared to the arger economies in the word 2700 Heathcare market USD biion Source: IBEF Heathcare Report 2015, SKP anaysis USA Japan China Brazi India 17

24 Within the heathcare industry, the Indian medica device sector is estimated at USD 4.9 biion. Whie the sector is reativey sma, it has seen unprecedented growth in the past few years. The sector has grown at a CAGR of 17% during the ast five years and is expected to maintain strong doube-digit growth of 15% over the coming decade¹¹. Figure 2: Sector wise break-up of the Indian Heathcare industry, further break up of Medica Device Sector 14% Indian heathcare sector - USD 80 biion 6% 3% 77% Hospitas Pharmaceuticas Medica Devices Diagnostics 7% 27% Indian medica device sector - USD 4.9 biion 13% Equipment and Instruments Consumabes and Disposabes Impants Patient Aids 53% Source: IBEF Heathcare Report 2015, SKP anaysis LACK OF LATENT DEMAND FOR SURGICAL INTERVENTION Latent demand may be defined as the desire or preference, which a consumer is unabe to satisfy due to ack of information about the product's avaiabiity, or ack of financia resources. In the context of surgica interventions, we woud need to ook at demand for surgery with respect to the disease burden that exists in the country. Let us take surgica oncoogy as a case in point (Figure 3). The disease burden is high across a the key organs ¹¹ 18

25 (intestina cancer, ung cancer, hepatic cancer and gastric cancer) and has been growing significanty at around 3% to 4%. However, the procedure penetration rates have been quite ow, hovering around the 15% mark. Figure 3: Oncoogy- Patient Funne Trends Priority Cancer Patient Funne Trends Disease Burden 2016 (Incidence) 73K 79K 31K 72K CAGR% (5 Yrs) 3% 4% 4% 3% Procedure penetration % Nationa Screening Key factors that ead to atent demand not being addressed incude: 1. Avaiabiity of trained Heathcare Professionas (HCPs) 2. Heathcare spending as a percentage of GDP 3. Insurance coverage vs Out-of-Pocket Expenditure 4. Provider trends & access of heathcare to masses 19

26 Avaiabiity of Trained Heathcare Professionas: With the arge popuation of the country the chaenge faced by India is to be abe to deveop and train the adequate number of HCPs to be abe to meet the requirements posed by the disease burden. Currenty, India has an average of 0.7 doctors avaiabe for every 1000 of the popuation as opposed the word average of 3 doctors per 1000 of the popuation¹². To match the word average, we need up to four times more doctors than the current numbers. The state of the nurses and paramedica staff is equay chaenging. Figure 4: Comparisons of India vs other countries in Heathcare infrastructure parameters Per 10,000 popuation China India Indonesia Maaysia Singapore Thaiand Austraia USA Heath Workforce Density Physicians Nurses and midwives Denta Infrastructure Hospita beds Heathcare Spending as a percentage of GDP: The goba average for heathcare expenditure as a percentage of GDP is approximatey 10%, whie India is currenty anguishing at mid-singe digits¹³. The recent nationa heath poicy has been positive in this regards and stated that the Government aspires to progressivey achieve Universa Heath Coverage (UHC) thereby ensuring improved access and affordabiity of quaity primary, secondary and tertiary care services. ¹² CRISIL research / Apoo investor presentation ¹³ WHO - Word heath statistics 2015 / Apoo investor presentation 20

27 Figure 5: Tota heathcare expenditure as a % of GDP, with pubic and private trends Tota Heathcare expenditure as % of GDP 4.7% Pubic Expenditure as % of GDP 1.4% To be increased to 2.5% by % Private Expenditure as % of GDP 3.3% Figure 6: Tota heathcare expenditure as a % of GDP, as compared to other countries India s heathcare expenditure as % GDP was 3.8% (Government spends 1.2%) as compared to goba average of 8.6% (Government spends 5.0%) US France Canada Japan UK China India Maaysia Thaiand Indonesia Goba Insurance coverage vs Out of Pocket Expenditure: High dependence on 'Out of Pocket' expenditure for treatment has been one of the key reasons for sow adoption of innovative technoogies. And, it goes without saying that technoogica innovation requires significant investment. The goba coverage of popuation having heath insurance is estimated to be upwards of 80%, whie in India we are around the 35% mark. This primariy incudes government as we as empoyee schemes that have smaer reimbursements avaiabe to the beneficiary. The encouraging part has been 21

28 the consistent growth in the private heath insurance sector, which indicates promising progress over the next decade as we. Figure 7: Insurance trends over the past 7 seven years and future projections Popuation coverage Changing payer mix: individua to institutuiona Commercia insurance 4% 6% 12% Empoyee schemes (CGHS, ESIS) 5% 6% 9% Government schemes 16% 25% 45% Uncovered popuation 75% 63% 34%* P With the recent announcement of Ayushman Bharat program, the new Nationa Heath Protection Scheme (NHPS) is expected to be game changer, as it wi cover 40% of the country's popuation. Since majority of heathcare services are deivered by private heathcare providers, participation of private sector wi be integra in successfu deivery of NHPS. Increase in demand in heathcare wi aso provide impetus for growth and advancements in the diagnostics, pharmaceutica, medica devices and other aied industries. Provider trends & Access of heathcare to the masses: The Indian heathcare deivery is highy fragmented in terms of the types of providers and the geographica mix. Taking hospita beds as a measure, India has an average of 1.4 beds per 1000 of the popuation as compared to a goba average of 5 beds for every

29 Figure 8: Heathcare deivery is geographicay fragmented and is evoving. Figure 9: Expansion pans are focused on emerging geographies that wi account for 45% of the new hospita additions Metro 27% 27% Tier II Tier III 6% 14% 9% 17% } 45% Tier I 17% 19% Other* 36% 28% Figure 10: The changing mix of heathcare providers over the ast decade with private hospitas taking giant strides Shares in Heathcare Spending in India, 2005 Shares in Heathcare Spending in India, % 34% Government hospita Top tier 30% 19% Government hospita Top tier 14% 26% Mid tier Nursing home 11% 40% Mid tier Nursing home Source: IBEF Heathcare Update (Dec 2017) 23

30 LOCAL MANUFACTURING Indian heathcare industry is highy import dependent, and the oca manufacturing in fragmented across mutipe sma payers. Supporting oca demand for medica devices by expanding provision of services in its pubic heath and heathcare programs can catayze investments in the country by meeting atent demand of the services, by making them affordabe and accessibe, commensurate with the objectives of India's Nationa Heath Poicy Consumabes Equipment Impants Patient Aids Figure 11: Segment wise import proportions 10% 25% 60% 40% 90% 75% 20% 80% } Driven by cost competitiveness Technoogicay advanced and competitive on account of inverted duty structure Source:Beroe Inc 0% 20% 40% 60% 80% 100% Indigenous Saes Import Figure 12: Highy fragmented domestic Industry 10% Fragmented Sma Payers Less than INR 100 miion 25% INR miion >INR 500 miion Source: Association of Indian Medica Device Industry (AIMED) 65% 24

31 The Evoving poicy andscape to support Loca Manufacturing: The poicy andscape in India is activey evoving, and the government is taking active measures to ensure growth of oca manufacturing. The government aunched the 'Make in India' campaign and subsequenty formed a task force and initiated the process of impementing its various recommendations such as separating medica devices from the definition of 'drugs' and aowing 100% FDI for brownfied and greenfied investments in the sector. More guideines coming out in in the industry where the manufacturing footprint of an organization in India is becoming a significant parameter even in procurement through tendering in government hospitas. Such guideines are making the MNCs deiberate on setting up manufacturing in India, and at the same time offering an edge to the indigenous manufacturers and hence supporting their pans. Figure 13: Key Poicy trends impacting the manufacturing sector Sep 2014 Launch of 'Make in India' Campaign Dec % FDI Aowed The medica device sector was carved out from the pharmaceutica sector thereby aowing 100 % FDI Mar 2017 Nationa heath Poicy 2017 focuses on Improving Pubic Sector Capacity for manufacturing essentia drugs and vaccines Oct 2014 Formation of Task Force by the DoP to identify issues in manufacturing of high end medica devices. Jan 2017 Notification of Medica Devices Rue for new cassification of medica devices 25

32 THE ROAD AHEAD When we ook at the big picture India's heathcare industry is one of the fastest growing sectors and it is expected to reach USD 280 biion by 2020¹⁴. Indian Heathcare is on an unprecedented growth trajectory with positive deveopments across a the areas impacting the atent demand, and in turn the oca manufacturing requirements positivey supported by the poicies of government of India trying to strengthen the manufacturing capabiities. Whie the sector is currenty import dependent with imited or no access to new technoogy, with the government's improved focus, favorabe poicies, backed by the reguatory scenario post change indicates the possibiity of strong, sustainabe and technicay sound domestic industry with high quaity standards and affordabe pricing. The industry can now not ony produce high-quaity, ow-end products but can aso manufacture high-end products through the assistance provided by the government (through reguatory and poicy changes) and technica coaboration with their foreign counterparts. We are aso witnessing some of the arger MNC payers in the medica devices space setting up manufacturing operations in India, and in future we are ikey to see even more of such practices. ¹⁴ 26

33 Need to address poicy asymmetry in the medica devices sector - Mr Probir Das, Chair, FICCI Medica Devices Forum; Managing Director, Terumo India Pvt. Ltd. Introduction: The medica devices sector in specific and heathcare in genera, have been at the forefront of socio-poitica discourse over the past coupe of years. This is a wecome change in a country, which has faced chaenges in providing equitabe access to heathcare. India's demographic dividend hinges upon the webeing of its society. However, this dividend can be competey wiped out by impending threats ike NCDs, which is ikey to account for 75% of India's disease burden by 2030, and may resut in USD 5 triion oss to the economy. Thus, it is important that the Government is recognising the need for Universa Heathcare Deivery even though it has been unabe to provide adequate budgetary provisions. Medica technoogy, the smaest whee of the heathcare continuum, being far more compex than the more deciphered heathcare deivery and pharmaceutica sectors, has not been given due recognition by our poicy makers and thought eaders. It is high time we reaize that without the apt appication of the atest innovative medica technoogies, the heathcare objectives of our country surey cannot be met. 27

34 Reevance: Medica technoogy in India is disproportionatey sma vis-à-vis other key markets e.g. China's per capita consumption of medica devices is estimated at USD 178, Brazi's at USD 28, Russia's at USD 43 whie for India, it is estimated at USD 3¹⁵. Gobay medica technoogy is estimated at USD 389 biion market¹⁶ with India contributing ony ~1.3% to it. Uniquey, 60% of share of this market beongs to ess than 50 top goba payers, and the ast haf decade has seen mega M&As to further consoidate this. Perhaps the reason for this consoidation is the huge sectoria dependence on egacy knowhow and need for massive financia staying power and incrementa innovation driven high resiience to quick obsoescence. Further, though very often paraes are drawn between pharmaceuticas and medica devices manufacturing, very itte of medica devices, apart from the ow risk and noncompex devices, can ever be compared to pharmaceuticas. Quaity of medica devices reies on their continuous improvement, unike the bockbuster nature of pharmaceuticas, and hence its manufacturing requires a far arger and continuous pug-in into medica research, an innovative bio-design community and a commensurate nimbe component suppy ecosystem. It is imperative for the stakehoders to understand these unique needs in order to create any meaningfu poicy interventions for high risk, high compexity subsegments of medica devices. Current Scenario: Currenty there is an absence of a nuanced, cogent, outcome focused and stakehoder consuted poicy. In the absence of this poicy, and deep poicymaker understanding ¹⁵ Statista, Medica devices expenditure per capita ¹⁶ 28

35 regarding the various diverse sub-segments of this sector, there have been we intentioned, yet disjointed ineffective movements to reguate prices, increase of import duties and sporadic formation of MedTech parks and a ack of a compete ecosystem approach for subsegment focussed sectoria deveopment. Price contro of coronary stents and knee impants have seemingy brought investment in this sector to a naught to ony USD 173 miion in this fisca, as compared to USD 439 miion in 2016¹⁷. Severa engagements between eading MedTech park providers and goba investors aso seem deraied, and the overa goba sentiment for India as an attractive medica device investment destination has taken a massive hit. However, there are siver-inings too. The government's industry aigned effort of adopting New Medica Device Rues, providing operationa ease from a reguatory standpoint, and the most recent budget announcement of Rs 5 akh heath cover provision for 10 crore Indian famiies are exceent deveopments. These now need to be taken to the next eve swifty through a Medica Device Act and by effectivey operationaizing the Heath Insurance Program, respectivey. ¹⁷ 29

36 10 Gaps and Recommendations: SL. NO GAPS RECOMMENDATIONS 1 Lack of a MedTech Vision 2030 Document Vision document that baances the foowing: Ÿ Poicy continuity and stabiity Ÿ sub-segmented approach Ÿ quaity of care provision & treatment outcome Ÿ cost of deivery Ÿ everaging the goba ecosystem Ÿ sub-sector nuanced innovation capabiity Ÿ marrying MNC innovation capabiity with indigenous ow cost manufacturing 2. Current price contro approach neither creating affordabiity nor access 3. Un-sub-segmented, hence uncear Manufacturing expectations Ÿ Ÿ Ÿ Ÿ Gobay benchmarked heath technoogy assessment and vaue based heathcare approach, incentivising innovation. Trade margin rationaization Sub-segment nuanced, capabiity inked manufacturing expectations. We need to pot our expectation map on capabiities that we can use now and what we need to buid over the next decade. High quaity MedTech creates empoyment in provider segment (which is the 3rd argest empoyer in India). If we compromise quaity for speed to force create manufacturing bases, it wi adversey impact quaity and ruin the provider sector growth and job creation potentia. 30

37 SL. NO GAPS RECOMMENDATIONS 4. Archaic Import substitution focus ed import duty increase 5. None or very imited Innovation / Bio- Design faciities 6. (Even with New Rues) Medica Devices fa under Drugs Ÿ Ÿ Ÿ Ÿ No country is import independent in medica devices; even China which is a far arger market and a net exporter of medica devices imports 70% of its domestic consumption of medica devices. Yet it recenty reduced its import duties from 4.3% to 3%. For those sub-segments those are currenty produced in India at gobay exportabe quaity, the import duties may be kept at current eves, but for those sub-segments that are not, duties must be brought down to create ower cost access to patients, expansion of product usage, job creation under provider segment, and eventua market expansion ed domestic manufacturing. Given Indian heathcare deivery is unique and ow cost, India can become the exporter of fruga innovation gobay. Currenty the bio-design ed MedTech innovation centres are just too few. The Poicy must emphasize on significant scaing up of such centres. The Rues are a great start, but we need to quicky get egisative support and form a Medica Devices Act, competey separating medica devices from Pharma. 31

38 SL. NO GAPS RECOMMENDATIONS 7. MedTech parks are in paces without ecosystem support 8. Sma sized market. Genera texture of market is treatment quaity ungoverned 9. Risk of a non-gobay aigned, protectionist, oca quaity system Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Ÿ Map the existing medica devices manufacturing rich zones (e.g. Bawa Faridabad, Bangaore, Trivandrum, Pune, etc.) and provide them with Park Status aong with common faciities (testing, QA/QC, Steriization, Packaging, Advanced Warehousing, etc.) Provide attractive tax breaks for goba company mega-projects to attract manufacturing investments. Aign med tech parks to centres of medica exceence and research. Quick and time bound operationaization of Centra Government Heath Cover (Nationa Heath Protection Scheme of Rs 5 akhs for 10 crore poor famiies) Creating standard treatment guideines Creating outcome registries Gobay the standards for medica devices are ISO (devices) & IEC (eectronics). There seem to be movements in India to create standaone parae quaity systems (e.g. ICMED) 32

39 SL. NO GAPS RECOMMENDATIONS 10. Lack of a singe window system / genera EoDB chaenges Ÿ Ÿ Ÿ Ÿ This wi cut India off from a goba suppy chain, hurt Make in India for the word, and create a ow quaity perception about India in goba markets. Hence, this shoud be prevented and focus shoud instead be increased to improve ISO / ICE appreciation and scaabiity. Currenty to set up a new faciity, approximatey 35 different icenses may be required. Create a consoidated faciitation desk (under DOP or DIPP) and create a singe window touch point. ¹⁷ 33

40 Affordabiity in Heathcare - Mr Madan Rohini Krishnan, Vice President Indian Subcontinent, Medtronic PLC For the first-time in India's history, we have seen an unprecedented eve of focus on heathcare. Recenty, we saw a series of announcements and programmes aimed towards quaity and affordabe heathcare for a, from the Government of India, with the reease of Nationa Heath Poicy, Medica Device Rues, Price Capping of Stents and the path-breaking Nationa Heath Protection Scheme i.e. Ayushman Bharat. Of a these announcements, price capping of stents has been the most debated topic as it reates to the cost of heathcare in India. Its a we-known fact that topic of 'cost of heathcare' is of a constant debate and discussions word over. Some progressive countries have been abe to differentiate between the cost and the vaue of heathcare. The difference is, where one ooks ony and ony at the cost of heathcare without a view on outcomes or benefits; whie for the other, ooks at the outcomes for the patients and the heathcare system aong with the cost and strives to find a baance. Heathcare in India faces chaenges of 3As Awareness, Access and Affordabiity. One needs to ook at soving a three chaenges together to find rea benefits fowing to the patients and ascertain the end resut of patient outcomes. The need to address 3As 34

41 hoisticay becomes profound for medica devices as they are used for surgica treatment unike drugs. Whie industry supports government's efforts to address two eements of the 3As - Access and Affordabiity, the price capping of stents has not resuted in meeting these objectives. A recenty reeased study from IQVIA-AdvaMed suggested that the reduction of stent prices did not ead to a surge in number of angiopasties and the reduction of prices amost 85% did not resut in corresponding reduction in the overa procedure cost for patients. Moving forward, we need actions which address the root-cause of the chaenges of affordabiity that primariy revoves around the channe margins, at the same time bring systemic soutions to the chaenges of Access and Affordabiity. The chaenges on the channe margins were brought up through the data pubished by NPPA a year back. The Channe Margin i.e. Trade Margin is the difference between the price at which the manufacturers/ importers ses to trade/ hospita and price to patients/mrp. In the short term, trade margin chaenge can be addressed by adopting the recommendations from the Report of the Committee on High Trade Margins in the Sae of Drugs, from the Department of Pharmaceuticas. The report suggested impementing 'Trade Margin Rationaization' can ead to greater transparency and higher affordabiity at the same time hep patients to gain access of innovative therapies. In the onger term, we need to evove more scientific approaches towards evauating the vaue of medica technoogy through rea-word evidences, patient outcome research or registries or heath technoogy assessments. These evidence based approaches eventuay wi hep create a soid foundation for the government's vision of providing 'Quaity and Affordabe Care for A'. 35

42 Increasing insurance penetration to augment access to innovative technoogies - Ms Shobha Mishra Ghosh, Assistant Secretary Genera, FICCI - Mr Amit Mookim, Genera Manager South Asia, IQVIA Whie the Indian economy has pursued a path of expansionary growth and deveopment, it has not yet been abe to achieve the goa of providing universa access to heathcare. The government has been facing various chaenges as it seeks to provide citizens with affordabe and equitabe access to high quaity heathcare, incuding procedures invoving innovative medica technoogies. India ags behind most deveoped as we as comparabe ow and midde income countries on heath expenditures as percentage of GDP. Compared to India's 5% (incuding both Myanmar India Bangadesh Cambodia Ghana Tajikistan China Uzbekistan Nepa Kyrgyz Repubic Liberia Tanzania Kenya Vietnam Honduras Nicaragua Genera govt heath expenditure as % of tota govt expenditure 24 Source: Word Heath Organization, Word Heath Statistics,

43 government and private expenditure), China spends 10.4% of its government budget on heath. Vietnam spends 14.2% and Nicaragua a huge 24%¹⁸. India's reativey imited investment in heathcare has resuted in inequitabe access to supportive heath infrastructure that enabes successfu provision of necessary heathcare services. Despite a doube-digit growth rate of the medica devices market, the Indian per capita consumption of medica devices remains significanty ow at ~USD 3.0¹⁹. It is much ower than the goba average per capita consumption of USD 47, apart from the per capita consumption of deveoped nations ike USA and Germany. Lack of affordabiity for high-end technoogy devices among arge section of Indian popuation is the key reason for this ow per capita consumption. Financing is one of the most critica determinants for quaity heathcare infrastructure of a country. It is cosey inked to the provisioning of services as we as the quaity of outcomes. The current andscape of heath financing in India is argey characterized by out-of-pocket payments, with tax breaks provided for heath insurance. The Nationa Sampe Survey data shows that Indian househods are increasingy reying on their own income and straining their savings to finance heathcare expenses. This hods true for both rura and urban househods. The overa out-of-pocket spending for househods has risen significanty over the past decade. Studies show that 67% of a expenditure on heath is out-of-pocket and of this, 63% ¹⁸ ¹⁹ 37

44 is on out-patient expenditure²⁰. The high burden of out-of-pocket expenditures on heath in India pushes amost 63 miion peope beow the poverty ine every year. Athough the pubic sector spending accounts for ess than a quarter of the tota heath spending in India, it has a major roe in terms of panning, reguating and shaping the deivery of heath services. The Centre and state governments have, over the years, aunched various schemes and reforms for financing heathcare in the country, mainy through socia heath insurance. However, these pubic heath insurance schemes have not been associated with ower heath burden for the average househod as measured by tota rea out-of-pocket heath expenditure, catastrophic heath expenditure or impoverishment caused by heath expenses. In 2017, the coverage of the Rashtriya Swasthya Bima Yojana (RSBY) was increased from Rs 30,000 to Rs 1 akh, reinforcing insurance as the ong-term strategy for heathcare financing by the government. This has now been suppemented with an even arger step by the government - the new Nationa Heath Protection Scheme (NHPS), under 'Ayushman Bharat Program' - which gives a coverage of Rs 5 Lakhs to 10 crore famiies, estimated 50 crore beneficiaries. Emerging economies ike India that seek to promote access to medica technoogies shoud consider supporting a private medica insurance system that can coexist with pubic funding for ow-income segments. Such dynamics provides the capacity for a system to absorb costs associated with advances in medica technoogies and services and enabe wider ²⁰ 38

45 penetration of innovative products. It is apparent that NHPS wi bring significant growth opportunities for private heath insurers in the short as we as ong term. Later on, these payers can innovate further and provide coverage for screening, diagnostics and monitoring products outside the IPD settings. Heath insurance payers need to expore possibiities of covering such diagnostics and home care devices, incuding wearabe medica devices as we as integrated mheath based devices etc. As the penetration of insurance grows, insurance companies can expand their reimbursement net beyond conventiona devices ike impants, thereby faciitating access to innovative best-in-cass technoogy. Indigenousy manufactured devices that are at par with imported medica technoogies, can be provided a higher eve of reimbursement under both private and government insurance programs, thus incentivizing oca production. 39

46 Non-Compiance to Goba Standards and a push for Loca Standards - Mr Nanda Kumar Subburaman, CEO, Perfint Heathcare Pvt. Ltd. Patient needs to be at the core of medica device reguatory poicy, processes and systems. The primary expectations from reguations and reguatory process is to provide assurance to the patient and the physician that the product is effective and safe for the intended use. Its absence eaves patients and device users with unverified caims of performance and safety by the manufacturer. The reguatory poicy and processes shoud be scientific and simpe, we documented and understood, quick and cost effective to encourage device manufacturers and technoogy providers to continuousy innovate and introduce new products that benefit the patient. Compexity, ack of transparency and prohibitive cost of reguatory processes simpy discourage commerciaization of inventions. Further, in a gobaized word, the credibiity of the reguatory cearance shoud be such that it enabes manufacturers to suppy their products gobay rather than imiting it to country of their origin. A medica device reguatory body needs to ook at three key aspects before cearing a product: 40

47 a) Effectiveness of the product for its intended use Design Contro Process - Whether the manufacturer is aware if his specifications woud address the intended use and whether they have a robust reaization process to create a product that meets these specifications. Risk Management - Whether the manufacturers understand the cinica risks arising from use of the product and whether these risks are adequatey mitigated through product design Verification and Vaidation (V&V) Process - Whether the manufacturer has vaidated that the specified product addresses the intended use effectivey Whether the marketing caims are ceary justified and supported by the outcome of the above V&V process b) Safety of the product Whether the manufacturer knows the potentia eectromechanica and eectromagnetic concerns and if these concerns have been addressed adequatey. (IEC standards) c) Quaity Management System (QMS) Whether the manufacturer has a comprehensive, we-documented, rigorousy impemented and monitored management process that is under continuous improvement, to ensure that the products consistenty compy with the cearance provided. - (ISO13485 or ISO9001, in case the design is invoved) 41

48 Whether the QMS drives the management to recognize, capture and anayse issues arising during product usage and take effective corrective and preventive action incuding notifying reguatory bodies, product reca etc. The above three aspects are critica before cearing any product for market use. Every country, or a region ike EC, has its own reguator and reguatory cearance process. A manufacturer needs to obtain cearance from the respective reguator to pace his product in any market. This dupicity of efforts takes time, effort and money and thus poses a major chaenge to manufacturers who se in the goba market. Various reguators have acknowedged this concern and effective steps are being taken to eiminate dupication of efforts. Some of these steps are: Most reguators rey on the IEC standard for product safety and recognize the certification of compiance to IEC provided by notified bodies or certification bodies. Some of the odest and most foowed reguators in the word (USFDA, Japanese PMDA, EC, Heath Canada, Austraian TGA, Brazi) have come together to harmonise the process of certification and surveiance of the manufacturers' QMS into a singe certification caed Medica Device Singe Audit Program (MDSAP). Many countries accept USFDA or CE or such cearance and ony insist on registering the product through a domestic entity (a ega agent), before they are paced in their country. The ega agent is accountabe for compiance in the territory. Hence, the trend is towards a unified goba standard or at the very east towards eiminating needess dupication of efforts. 42

49 In this background, we are seeing the emergence of a new QMS standard caed Indian Certification for Medica Devices (ICMED) Scheme in India and a ca by various manufacturers to treat this certification at par with product cearances ike USFDA and CE. There are two points that merit serious discussion and consideration at the poicy makers' eve: Is another Indian QMS standard or certification needed at this stage when initiatives ike MDSAP have become a reaity? Or shoud India work with the certifying bodies to make it economica for Indian manufacturer to certify to an MDSAP? Woud an ICMED or an equivaent QMS certification be considered equivaent to a product cearance ike CE Marking or USFDA? The answers woud be obvious to a buyer and a patient, and to manufacturers who consider their product to be good enough to compete gobay. With regard to product certification in India, the Government of India has introduced Indian Medica Device Rue (IMDR) to certify products based on the risk category through an accreditation body and certification agencies authorized by the accreditation body. Whie it is expected that any country that deveops its own reguatory standards, woud want to treat it at par with the USFDA or PMDA or CE cearance, it is difficut to see such a product being automaticay approved to be paced in other advanced markets ike the US or Europe or Japan. In this context, it woud be prudent for the Indian reguator to not to insist on a mandatory Indian approva for such products that are ceared by other reputed reguatory bodies, but instead buid credibiity over the next severa years to obtain goba recognition so that Indian manufacturers benefit gobay from an IMDR cearance. 43