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The article delves into the present state of the Healthcare and Pharmaceutical sectors in India as of 2023. Additionally, it discusses the notable emerging trends expected to shape the Indian healthcare and pharma industries in 2024.

An Overview of Indian Healthcare industry in 2023

The Indian Healthcare industry continued its healthy growth in 2023 and reached a value of USD 372 bn driven by both private sector and government. The government continues to play a critical role in the sector with its focus on creation of facilities in rural India – for primary healthcare and ensuring availability of diagnostics, funding medical insurance to the low-income population (through Ayushman Bharat), driving penetration of generic medicines (through Jan Aushadhi centers) as well as funding R&D in medical technologies and diagnostics in various labs and through ICMR. Govt. spending on healthcare is now 2.1% of GDP (33% higher compared to FY19). The government has also been allocating investments to support healthcare start-ups and ecosystem.

On the other hand, the private sector has been investing strongly in capacity creation across areas (hospitals, diagnostics, medical devices etc.) as well as laying the foundation for long term growth through skill development.

Medical insurance penetration has grown rapidly over the past few years. Out of pocket spend on healthcare is now at 45% (in 2020) compared to 63% in 2014.

Key Emerging Trends in 2024 for the Indian Healthcare Industry

Covid Induced Transformations in Healthcare: Specific trends in patient behaviour induced by Covid will continue to strengthen and accelerate e.g. Telemedicine and Remote Healthcare (supported by mobile and internet connectivity) has  become mainstream with leading hospitals and other private players offering it.

Consolidation in Hospitals Sector: PE firms, MNC players, and other large national hospital chains will focus on acquiring smaller standalone private hospitals (in both large centers and in Tier-2 and 3 cities). This trend is already evident and various factors are contributing to this e.g. lack of succession planning among the promoters of family-owned private hospitals, profitability impacted due to compliance with EWS reservations in hospital beds and an overall challenges in competing with larger players for purchase of medicines and equipment, lack of quality workforce etc.

Increased Indigenisation and Local Manufacturing in India : There will be increased focus on local manufacturing of medical devices in India (and components) to move beyond assembly. This trend has received a strong boost from the successful PLI scheme of GoI. This will further accelerate in 2024 as the Public Procurement Order (PPO) is widely implemented to force government organisations to purchase locally made products. The successful implementation of the GeM (Government e Marketplace) and its continued improvement will help further. A focus on developing MedTech clusters will further be enhanced in the coming years.

Advent of Digital Tech driven Healthcare: Digital technologies will find increased usage across various healthcare areas. Some of the major areas will include e.g. Diagnosis Technologies (e.g. AI in medical imaging, smart wearables for real time diagnostics, predictive genomics), service delivery enhancement (pathology workflow automation, omnichannel diagnostics service platforms, Teleradiology, Digital Pathology) and for optimising healthcare delivery (e.g. Big Data and Analytics of patient data at a Hospital / Chain hospital or lab or aggregated level)

Point of Care Testing (PoCT) technologies will be used to drive increased availability of tests in remote areas. However the implications on ensuring quality standards, test reliability and costs will need to be assessed.

Govt.-Industry Partnerships : PPP models will be used more efficiently to drive increased availability of quality testing in government hospitals especially in rural areas.

Increased focus on compliance and quality standards: 2024 will see the Medical devices industry coming under full regulatory scrutiny by CDSCO with the implementation of standards for Class C and D devices (alongwith Class A and B implemented in 2023). This will ensure that uniform quality standards, testing and validation protocols are followed. Similarly, there will be an increased thrust on standardisation of diagnostic labs with the widespread adoption of NABL / QCI accreditations. There will be further detailing of regulatory standards for emerging technology areas e.g. AI and Software as a Device.

The issue of skilling will come into focus as government and industry will together aim to solve for training and skill gaps prevalent in healthcare sector.

An Overview of Indian pharma industry in 2023

After witnessing a higher growth in the Covid period (mainly due to demand in specific categories e.g. anti-infectives, vaccines etc.) Indian pharma industry has maintained its strong position in 2023. The FY24 growth projections for domestic formulations market is in the range of 8-10% CAGR (USD 20-22 bn) which is slightly lower than the historical pre-Covid growth rate (10% CAGR in the period FY12-20). The growth will be a combination of price increase (4-5%) and volume growth as well as new introductions. Avalon Consulting projects that formulations exports growth for FY24 at 10% (USD 22-24 bn) compared to historical long-term growth in pre-covid times of 15% CAGR. Pricing pressures and regulatory scrutiny in US market continues to be a key challenge. API exports are showing sluggish growth (5% CAGR in FY18-23) as competition from China continues to be high.

Emerging Trends

Domestic pharma market:

  1. Historical model of success driven by brand / distribution / doctor reach will be threatened due to price pressures (due to NLEM as well as increased competition), increased genericization (partly driven by government) etc. Emphasis will need to shift to volume rather than value growth.
  2. will focus strongly on driving quality standards in the domestic market evident in the recent crackdown on sub-standard players by CDSCO and state licensing agencies. This will favour consolidation through large quality conscious players – both captive and contract manufacturers
  3. Successful players will differentiate through specialty products and therapy, focus on regional micro-markets (which will grow faster) and deeper patient engagement (through Digital initiatives and going “Beyond the Pill”)

Exports Market:

  1. Pricing pressures in US market, increased competition and regulatory compliance issues are likely to pose a challenge to formulations export growth in future.
  2. Exports will grow faster and successful Indian players in exports will have a mix of conventional products and complex generics (injectables, inhalation, sprays etc.), biosimilar as well as new products (branded)
  3. R&D will be mainly focused on new formulation / delivery changes (complex generics). NCE introductions are unlikely to be significant – both in terms of investments and out licensing.

APIs

  1. PLI and an industry view to reduce dependance on China is forcing Indian API companies to indigenize intermediates and KSMs and to improve competitiveness in the medium term.
  2. Similarly, the PLI on APIs (INR 15,000 Cr outlaid by GoI) and the formulation companies drive to reduce sourcing from China will accelerate market growth through import substitution in the medium term as competitive intermediates are available locally.
  3. Private Equity led consortiums are driving consolidation and investments to build scale and a potential move into CDMO organically or through acquisitions outside India.
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