Massive Insurance Plan In India Will Open New Markets For Medical Devices
By Gunjan Bagla and Rajnish Rohatgi, Amritt, Inc.
Today, India’s government spends less than two percent of its GDP on healthcare. Millions of poor Indians die prematurely, and hundreds of millions suffer devastating loss of income due to illnesses or injury. But now, flush with rising tax revenues, India’s federal government recently announced a plan to offer free medical insurance to over 500 million of its poorest citizens.
Astute medical device companies can leverage this opportunity to build new businesses while transforming the lives of millions of families who presently lack access to the most basic procedures. The problems are massive, and so are the proposed solutions.
India’s Healthcare Situation
Medical expenses drive many Indian families into debt, since 62 percent of all such expenses currently are paid out-of-pocket, according to World Bank data. One quarter of the world’s tuberculosis patients live in India, 95 percent of its population resides in malaria endemic areas and, each year, 1.1 million laboratory-confirmed cases of malaria are reported. But, with the support of the World Health Organization (WHO), India has eliminated polio, smallpox, and maternal and neonatal tetanus.
As of April 2018, India has 1.16 billion active mobile phone subscribers, with over 90 percent of them leapfrogging landlines. In parallel, about the same number have been assigned a unique biometric identification number, called Aadhar, more secure than the U.S. social security number. The government health plan will ride on an information technology infrastructure that will leverage these twin platforms.
The new National Health Protection Mission is called Ayushman Bharat (A.B., meaning “long life, India”) and will be led by Dr. Indu Bhushan, who holds a Ph.D in economics and a master’s degree in health sciences from Johns Hopkins University. Bhushan was located in Manila, Philippines with the Asian Development Bank for 21 years, most recently leading its East Asian program.
The government plans to build or upgrade 153,000 primary healthcare centers for basic care, treatment of diseases, maternal care, and childcare. These centers will provide diagnostic services, as well as drugs. A.B. will be a cashless plan and will cover almost $8,000 per family, per year, in secondary and tertiary hospital care, with flat rate payments made directly to the providers.
While full details are yet to be announced, the intent is to cover over 1,200 procedures, including treatment of diabetes, cancer, and heart disease. If the per-person coverage seems low, compare this with actual out-of-pocket costs of medical procedures in India: according to a 2013 peer-reviewed study, you could get a coronary bypass graft for $2,900, or a functional endoscopic sinus surgery for less than $1,100; even if costs have doubled in the last five years, projected coverage seems adequate.
So far, it seems that the federal government will pay over 60 percent of the cost and ask India’s states to raise or redirect the balance from their own funds. Patients will not pay anything. Companies and nonprofit organizations also may be encouraged to contribute to the plan with services, buildings, or products. Since 2014, India has required larger companies to spend two percent of profits for corporate social responsibility programs.
What Does This Mean For Medical Device Companies?
The most immediate opportunity is for low-cost products that screen, diagnose, or treat millions of people: for example, a quick test for tuberculosis, a treatment for slow-healing open wounds that prevent poor Indians from working, and a means of promoting healthy childbirth and safe maternity.
Products that leverage today’s low-cost sensors, microfluidics, and the computing power of smart phones, or products that can operate on batteries in portable mode in India’s hot, humid conditions will flourish. Given the anticipated scale, products that are intuitive to learn and use, and don't require much field training of clinicians, will stand a much higher chance of success in India. This requires rapid and nimble innovation and a willingness to discard legacy approaches to both treatment and to product design. Companies that are willing to manufacture — or at least assemble part of the devices — in India probably will have a competitive advantage resultant of the Make In India program.
The scale of sales of such devices in India will dwarf western numbers, just as we have seen in telecom, where India currently is the largest market for smartphones. In addition, products that succeed in India will readily translate to other emerging countries in Africa, South America, Eastern Europe, and Southeast Asia.
The second group of beneficiaries is less direct but equally valuable. As half a billion of the poorest citizens will start to gain access to basic healthcare, more affluent Indians will naturally demand better services and coverage, leading to an increase in demand for mid-range and mainstream medical devices to service the Indian middle and upper classes.
Private medical insurance already is growing in India, and the A.B. initiative will only spike its growth. So far, medical insurance in India typically covers hospital stays, but we expect that outpatient procedures will eventually come under the umbrella. Corporate employers will be compelled to up the ante for medical coverage to compete for the best employees.
India’ s government agencies — such as the railroad, the military, and the nuclear energy corporation — run their own medical care systems, and all have steadily been offering wider and better coverage for employees and their families. A.B. will encourage them to cover newer and more expensive procedures and treatments.
About The Authors
Based in Los Angeles, Gunjan Bagla is managing director of Amritt Inc., a California-based consulting firm focused on helping American companies to succeed in India. His clients include Covidien (now Medtronic), Roche Diagnostics, BD, Lifenet Health, Johnson & Johnson, Gojo, and many more. For his India expertise, he has appeared in The New York Times, the Los Angeles Times, and the Washington Post, and on Bloomberg TV, BBC Television, and Fox Business News. He also writes about India for the Harvard Business Review. Gunjan has an MBA from Southern Illinois University and a mechanical engineering degree from the Indian Institute of Technology (IIT) Kanpur in India.
Based in New Delhi, India, Rajnish Rohatgi is a senior advisor for Amritt’s Medical Technology Practice. He spent over seven years building BD’s medical surgical business in South Asia. Rajnish has over 25 years of marketing, sales, and leadership experience in India and Africa in the healthcare, medical device, and consumer sectors. This includes a stint as VP of marketing for Max Healthcare, a leading hospital chain in North India. Rajnish has an MBA from the Indian Institute of Management Calcutta (which was established by MIT’s Sloan School) and a bachelor’s degree in metallurgical engineering from IIT Kanpur.