An Emerging Sector
Healthcare one of India’s largest sectors, not only in terms of revenue but also employment, is expanding rapidly. The 1990s saw the growth of the healthcare sector at a compound annual rate of 16%. Today the total value of the sector is more than $34 billion. Not only that by 2012, India’s healthcare sector is projected to grow to nearly $40 billion. Not only that, the private sector accounts for more than 80% of total healthcare spending in India. Healthcare spending in India accounts for over 5 per cent of the country's GDP. According to Ma Foi Randstad, about 1.6 million jobs will be created in 2011 in the organised sector of healthcare. The Indian healthcare sector constitutes of the following: Medical care providers: physicians, specialist clinics, nursing homes and hospitals; Diagnostic service centers and pathology laboratories; Medical equipment manufacturers; Contract research organizations (CRO's), pharmaceutical manufacturers; Third party support service providers (catering, laundry) What is it that has lead to the increase in growth of this sector at such a rate? How has this sector capitalized on the opportunities in India? Let us look at these issues in detail.
Drivers of Growth
It indeed is phenomenal that even during recession, the healthcare industry grew to over 42%. Even now, the rate of growth of the health care industry in India is moving ahead neck to neck with the pharmaceutical industry and the software industry of the country.
The key drivers for this extraordinary growth are as follows: Growing population: The population of India currently stands at 1.21 billion and is expanding at a significant rate. By 2050, the population is projected to reach 1.8 billion. This population increase is partly due to a decline in infant mortality, rapidly increasing life expectancy and better healthcare facilities. The government has also played a major hand by laying more emphasis on eradicating diseases such as hepatitis and polio among infants. This has in turn increased the revenue of the healthcare sector and the demand for better faster treatment has gone up. Booming Middle Class: India’s thriving economy is driving urbanization and creating an expanding middle class, with more disposable income to spend on healthcare. With the trend of working women , the purchasing power of the Indian household is further boosted. As a result , today at least 50 million Indians can afford to buy Western medicines. Market Trends: India's healthcare sector has been growing rapidly and estimated to be worth US$ 40 billion by 2012. The Indian healthcare market is currently estimated at US$ 78.6 billion and is growing at a rate of 16%. 90 per cent of this growth comes from the private sector. Private hospitals on estimation are expected to rake in $35.9 billion (Rs 147,154.1 crore) in 2012. Since the funds in the Indian healthcare sector are more or less private, 60 per cent of all outpatient care in India and as much as 40 per cent of all in-patient care is the responsibility of the private sectoer. It is estimated that nearly 70 per cent of all hospitals and 40 per cent of hospital beds in the country are in the private sector. The latest market trends have also shown that the Indian health insurance business is fast growing at 50 per cent and investments into the medical and surgical instruments segment amount to US$is about US$ 5 billion by 2012.
Healthcare delivery and pharmaceuticals account for nearly 75% of the total healthcare market. Rise of disease: Although it is a matter of concern for the normal people, rise in diseases is the major driving force of India’s healthcare sector. It is not only infectious and chronic degenerative diseases but ailments such as poliomyelitis, leprosy, and neonatal tetanus, dengue fever, viral hepatitis, tuberculosis, malaria, and pneumonia, that have created havoc and some of them keep returning in force or have developed a stubborn resistance to drugs. The treatment for most of these diseases is expensive. This has lead to an increase in the healthcare insurance market.
Key Players in the Healthcare Segment:
Private players have made significant investments in setting up state-of-the-art private hospitals in cities like Mumbai, New Delhi, Chennai and Hyderabad. The major private sector healthcare players are: The Escorts Group: This has a presence in specialized cardiac treatment and multi-specialty care hospitals providing a whole gamut of specialized medical services. Escorts operates ten hospitals across India. The group is also reputed for tertiary care services such as neurology, neurosurgery, plastic surgery and urology. It has carried out over 80,000 angiographies and 43,000 cardiac surgeries over the past fifteen years – which is a world record. Arvind Eye Hospital: This hospital in South India is the single largest provider of eye surgery in the world. In 1998, its hospitals saw 1.2 million outpatients and performed 183,000 cataract surgeries. Fortis Healthcare: This is a company founded by the promoters of the Indian pharmaceutical major, Ranbaxy Laboratories, started operations in 2001. It has approximately 12 hospitals with 1,900 beds. It has operations across North Indiain the cities of Delhi, Noida, Mohali, Amritsar, Faridabad, Raipur and Srinagar. Max Healthcare: This is a fully owned subsidiary of the highly diversified Max Group, with a chain of clinics and hospitals with a bed capacity of 1200. On an average, Max Healthcare treats 30,000 patients every month, with 200 new patients visiting the facilities every day.
Wockhardt: This is among India’s leading pharmaceutical and healthcare companies. Since inception in 1989, the Wockhardt Hospital & Heart Institute has become a renowned tertiary level heart centre providing cardiac care to patients of all age groups. It has approximately 10 hospitals with 1,500 beds. Apollo Hospitals: Apollo Hospitals has emerged as the single largest private hospital group in South Asia. It operates hospitals, dispensaries, clinics and laboratories and a network of approximately 41 specialty hospitals and clinics with a bed capacity of over 9,000 across the country and abroad. Manipal Health Systems: Its chain consists of approximately 9 primary centres at 7 rural locations, 8 secondary hospitals at urban and semi-urban locations and 3 tertiary hospitals at urban and semi-urban locations.
Foreign collaboration in the Indian Healthcare sector
Since liberalization in 1991, a growing number of Indian companies have formed alliances with foreign firms. The following are some of such alliances: Wockhardt collaborated with Harvard Medical International Inc. USA Fortis Healthcare collaborated with Partners Healthcare System, USA Birla Heart & Research Centre collaborated with Cleveland Clinic Foundation, USA Apollo-Gleneagles Hospitals is a 50:50 joint venture between Apollo Hospitals Ltd and Parkway Group of Singapore. Phillip sells about US$ 43-49 million worth of medical systems in India. The US-based healthcare products major, Proton Health Care is making an entry into India with its range of digital health monitoring devices. Siemens is a leading manufacturer of medical equipment with a market share of more than 30 per cent in India. Wipro GE Medical Systems, a joint venture between GE Medical Systems and Wipro Corporation, is India’s largest medical systems sales and service provider.
The Healthcare Divide
However, all is not hunky dory in the healthcare sector. Every story has another side. This story too has an ugly side to it. India’s healthcare deplorably is woefully inadequate to meet today’s healthcare demands. Indian healthcare facilities are
limited in their ability to drive healthcare standards because of the poor condition of the infrastructure. To quote an example from the PWC report, “Of the 15,393 hospitals in India in 2002, roughly two-thirds were public.” Not only that, most public health facilities provided only basic care. The number of healthcare facilities is inadequate in the urban areas only. The conditions in the rural areas hence can be left to ones imagination. When it comes to healthcare, our country is clearly divided into two, the country that provides high-quality medical care to middle-class Indians and medical tourists, and the India in which the majority of the population lives having limited or no access to quality care.
Opportunities within the Indian Healthcare Sector
Medical Tourism: Indian hospitals have now become the first choice for an increasing number of foreign tourists. India’s capability to provide quality healthcare at a greatly reduced cost is acknowledged worldwide. The following is a rough comparison of treatment charges is that a liver transplant costs US$ 500,000 in the US as opposed to in India it costs US$ 40,000.
Telemedicine: This is one of the emerging markets within the healthcare sector opportunity that allows even the interiors to access quality healthcare and at the same time significantly improve the productivity of medical personnel. Several major private hospitals have adopted telemedicine services. Health insurance:
With growing illnesses and only 10% of the Indian population having access to health insurance, the potential market for health insurance is huge. Companies can target this urgent need to expand the health insurance net in India.
To conclude, the Indian healthcare sector is a glass half empty or a glass half full depending on one’s perception. Even though the challenges are substantial, the opportunities are equally compelling. .