Pandemic and the Future of Med-Tech

For all the gloom that COVID-19 has created, there are some bright specks also. Drug companies have designed a vaccine against a pathogen within a short period. But what about the med-tech industry? HE explores the uneasy relationship between COVID and Med-Tech Industry.

"2020 has been a tough year for the health care sector with many challenges and issues flared up with the pandemic. While COVID19 pandemic hindered hospital operations, maintaining the follow up of critical cases, was a choppy ride across the year," says GSK Velu, Chairman, MaxiVision Group of Eye Hospitals. We stopped all our outreach programs which are mass vision check camps, to avoid risks of infection. We stalled all our expansion plans conceived at the beginning of the year and rescheduled it to 2021," he adds.

Has COVID-19 re-shaped the med-tech industry?

Pavan Mocherla, Managing Director-BD India/South Asia, points out that the sector is evolving in multiple ways.

"Telemedicine and remote consulting are growing now. COVID has removed the barriers for adoption that prevented this from happening over the years. With telemedicine growing, diagnostics' concomitant need before therapy can be initiated is creating a larger segment of home collections and remote diagnostics. Another important advancement is a new segment of COVID diagnostics and vaccine– this could be a USD 1 billion segment in the future as we recover from the initial shock. The pandemic has raised serious questions about the limitation of acute care facilities in crisis times and the need to find ways to move care out of acute care into the community like home-based care. Simultaneously, as the recovery is taking shape, healthcare is returning to its normalcy of physical way of doing business as opposed to the digital world that they had to depend upon for 2-3 months of lockdown. We believe that in future, med-tech will be 'Phygital' – a combination of physical and digital way of operating," he explains.

The Year is Winding Down, Not Challenges

With COVID-19, many hospitals were forced to scale up its critical infrastructure, didn't it push up demand for med-tech?

"Yes and no," says Mocherla. "While the demand for ventilators, PPEs and COVID diagnostic tests went up, the other conventional areas of healthcare like hospital utilisation, regular diagnostics, consumables have all taken a dip as patients stayed away from hospitals. Overall, healthcare industry suffered from about March to September," he adds.

What about innovation? "Yes, but not necessarily in any revolutionary way. Yes, the time taken to bring vaccine into the market is a significant development. Still, the industry has not seen any acceleration of innovation in other aspects just due to COVID," he adds.

2021= Vaccine

The Managing Director-BD India/South Asia asserts that vaccination provides a boost for the sector.

"Yes, it would boost the confidence of the public in utilizing healthcare services as vaccination would provide the peace of mind. We have already seen a good pick up in utilization of healthcare facilities compared to pre-COVID level, and vaccination will drive more confidence," says Mocherla.

Can India's Med-Tech Sector stay Atmanirbhar?

With <35% insurance penetration in Indian population for healthcare, bringing the latest technologies of the developed world continues to be a challenge. While the Government of India drives to make healthcare more accessible and affordable, balancing the stakeholders' interest in profitable growth vs the nation's interest in providing health to all is a delicate challenge. Having harmonized standards and regulations for enabling India to be a part of Global Supply Chain (Atmanirbhar Bharat) is another challenge – overcoming the jingoistic 'we must have Indian Standards vs Global Standards" will make it harder to attract investments as well as make Indian companies uncompetitive when they go to developed markets," he explains.

Return to Normal Operations Only by Q3 or Q4 of 2021

Pavan Choudary, Chairman, MTaI, points out that the COVID-19 pandemic has severely impacted the MedTech sector. "The lockdown brought the elective surgeries to a complete standstill for much of the first half of this year. The Unlock 1.0 did little to alleviate the low patient and doctor confidence. This led to a steep decline in the hospital revenues and cash flows resulting in them delaying payments and deferring CAPEX plans, which if deployed uninterrupted, would have helped the MedTech industry cushion some of the blows caused by the pandemic. Even before the pandemic, the MedTech industry was reeling from the impact of the new health cess ad valorem imposed in February and the falling value of INR compared to USD & Euro (a more than 9% decline). The hammer blow of COVID has compounded the problem and slowed down the industry sharply. Though currently, the MedTech industry is on a path to recovery, experts estimate the return to normal operations only by Q3 or Q4 of 2021," he explains.

Demand Push Was Lopsided

Choudary notes that many hospitals had expanded their critical care infrastructure to cater to the increasing COVID-19 cases. "This meant two things for the MedTech industry," he says, adding, "First, the demand push was lopsided for the devices used in the COVID patient care such as masks, gloves, PPEs, ventilators etc. There is a large universe of various medical devices and equipment that saw a steep decline in demand. Hospitals had already allotted their already reduced funds (due to the lockdown and reduced elective procedures) to COVID specific facilities. Second, elective surgeries, which form a significant part of hospital revenues, were dramatically reduced due to the low patient confidence and reluctance of star surgeons (who mostly are aged 50+ years) to come to the hospitals and conduct those procedures."

Collaboration in Med-Tech Industry

He also has a different take on innovation due to COVID.

According to him, medical technology contours are affected by advances in material sciences and new technology. As revolutionary changes are happening in these spheres, medical technology was already going through its golden age of innovation. A crisis like COVID multiplied this momentum. It was heartening to see how speedily and effectively did Johnson & Johnson and the Reliance Group collaborate to make the testing swabs indigenously. The IIT Kanpur mentored startup, Nocca Robotics, supported wholeheartedly by the global Medtech companies also brought their medical ventilators to the market. Medtronic open-sourced its ventilator design to the world. Reminiscent of Volvo open-sourcing its car safety-belt patent to the entire automobile industry in passenger interest, this move lighted up the path to manufacturing ventilators, for many a company. Becton Dickinson brought its Veritor system for rapid detection of SARS-CoV-2, Baxter brought its Oxiris filters, Boston Scientific brought its reusable personal respirators and Vygon its CPAP assembly. These are just some of the details that I remember. Terumo, Stryker, Halyard, 3M, Braun, Smiths Medical and many others also innovated to respond to the COVID challenge," he adds.

COVID has triggered a revolution among two of the healthcare sub-sectors: telemedicine and home healthcare. MTaI and its companies are closely studying both these areas. "The MedTech industry's hopes for a quicker return to complete normalcy is not dissimilar to what other sectors are hoping. Reliable vaccine alternatives would surely instil confidence in the public to undertake elective procedures in hospitals. Elective procedures would increase the demand for medical devices, thereby assisting the sector in returning to pre-COVID circumstance. In other words, any measure that will help us defeat the coronavirus will be increasing the chances of achieving normalcy, which would result in the demand side of the economy to rise and thus increase the trade and commerce, giving boost to not just the MedTech industry but the economy as a whole," he explains.

Customs Duty and Escalating Healthcare Costs

The chairman of MTaI also notes that the high customs duty regime has caused an adverse impact on the costs of medical devices in the country. "Customs duty coupled with the new 5% health cess ad valorem imposed on the imported medical devices has drastically reduced the revenue streams of an industry which (in the absence of a vaccine or an effective remedy) has still valiantly shouldered the fight against the pandemic. The issue is of great concern to the patient since more than 70% of the demand for medical devices is being met through imports; his healthcare costs are escalating," he adds.

Policy Requirements to Boost Growth

The industry has been requesting for the implementation of Trade Margin Rationalisation (TMR) from the first point of sale (Price to Trade) as per the recommendations of the Department of Pharmaceuticals' (DoP) report of the committee on high trade margins in the sale of drugs, 2016.

"We feel this is the best mechanism which will ensure that the excessive retail pricing of drugs and medical devices is curtailed while continuing to allow the industry to invest in innovation and training of the healthcare workers. The pilot TMR implemented last year for cancer drugs by the NPPA, which resulted in savings of more than 980 crores (as per the MoHFW) is a testimony to this mechanism's efficiency. Another concern is the Public Procurement Order (PPO) for the MedTech sector. The PPO in its current form is not reflective of the ground reality of manufacturing capabilities in the medical devices sector. We have requested DoP to assess the local content capacity involving a third-party agency/independent committee of experts empowered with hospital administrators and clinicians from super-specialities. It will be imperative to be judicious and take a phased, wise approach to import substitution considering the diverse technological and capital requirement of a product spectrum as comprehensive as in this sector. Phased import substitution will avoid any shortages, quality deficits and India would be able to establish an unswerving reputation of a nation which manufactures quality medical devices," he concludes.