VIEW: Untold story of Indian medtech and how to make it ‘Atmanirbhar’
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
India has larger medtech companies, but predominantly trading Chinese products, refurbished machines or selling products that are not compliant with international safety standards.
Skanray was founded in 2007 by 5 ex GE engineers in an incubation centre in Mysore and started commercial production in 2012. By then it had put compliance, safety, regulatory, quality systems, CE, UL, FDA certifications and audits in place making Skanray stand apart as a unique start-up. 2013 onwards was the era of organic growth and acquisitions with L&T Medical systems, Pricol, CEI Italy, Skanray Europe, Cardia Netherlands, Skanray USA starting activities at Brazil, Mexico and China for local manufacturing and sale of Skanray designed products.
Today Skanray stands as a leader in the Indian medtech space with 100,000 machines in installed base across 80 countries, over 50 products, 80 trademarks, IP and proprietary designs, more than 700 professionals, 6 facilities worldwide and an Advanced Electronics test facility getting ready at Mysore in partnership with the Government of India (GOI), Government of Karnataka (GOK) and the private sector.
By 2020, there was significant core technology, supply chain, global regulatory, manufacturing capability established inhouse by the company. Apart from Skanray, there have been companies like Clarity Medicals, Phoenix, RMS technologies, Shalya, Alan, Nice Neotech, Divya labs and a few others who had core technology with them. Skanray is leading the Indian R&D/Core technology-driven medtech sector.
India has larger medtech companies, but predominantly trading Chinese products, refurbished machines or selling products that are not compliant with international safety standards. India is still lacking in enforceable safety and performance regulations. Large MNCs have brought in advanced technology and Compliance to India but rarely develop core technology or products from concept to end of life in India. There is another breed of “Make in India” Champions who import full modules and components from China and other countries and sell them directly or package them in Indian Sheet metal enclosures to show them as made in India. Many of these have mastered the art of managing government tenders and have a good portion of their revenues coming from government sales. Putting everything together, Indian medtech manufacturing is less than 10 percent of the $4 billion medtech buy.
Here is the story of COVID ventilators: Skanray has been manufacturing and exporting Advanced ICU ventilators since 2014. The GoI and the state governments have been buying ventilators from China in large quantities while Skanray sold in the premium private sector or exported to developed countries. The popular European and the US brands too sold to the government but in much smaller quantities.
Come COVID-19 and the only choice before the Government was to scout for domestic manufacturers and Skanray/Max ventilators of AB industries were the only ICU ventilator manufacturers with long domain experience. The rest of the ventilator story is there in overdose and variety in the public domain. Many start-ups, JV, cheap imports, second-hand machines, scams, accolades, theories and metaphysics emerged during this period. Our netas congratulated each other for creating products for COVID-19 in a short time.
The truth was that we always existed and exported while the successive governments slept over this critical health sector and imported for reasons best known to all of us dealing with the government.
On the March 18, 2020 we got a call from Niti Aayog, Health and defence ministries requesting for 100,000 ventilators for the national calamity. The underlying story here is that the states and centre couldn’t import from China or elsewhere during COVID since these countries had domestic shortages and compulsions of their own. China chose to cater to the European and American markets first since they could realise almost double the price that they could get in India. China had started dismantling COVID hospitals in April and had lots of sparingly used machines ready to export. Not many know that imports from China have grown significantly since march 2020 in medtech while we all have been screaming “Atma Nirbhar” and “Make in India” from our rooftops. Most Indian manufacturers believe that cheap imports may replace the domestic buy once life is back to normal. This rush for Make in India may last just as long as the COVID virus that came from China followed by their products that helped combat the virus.
For us, it was a cruel comedy to watch all kinds of hype peddled in the name of Atma Nirbhar Bharat. Even in a national calamity, many state governments indulged in large-scale Chinese imports, corruption and scandals in COVID treatment and the Indian banks never lent anyone on time. It was the CDC that is owned by the UK Government that came forward quickly with an offer for working capital, not the Indian banks nor the state or central Governments.
We have payments as old as 3 years from the Andhra, Telangana and Chhattisgarh Governments that never comes with any amount of follow up or legal notices. The funny part is that these same governments are asking us to set up facilities in their state promising crores in grants. Our legal system will take decades to deliver justice. This is the story of hundreds of companies working with the governments.
Unless this is fixed, we will never have an Atma Nirbhar Bharat with self-respect and dignity.
The only silver lining was the speed at which the PMO, BEL, DRDO, the Ministry of External Affairs, Commerce, health and defence worked round the clock to help us deliver the 30,000 units the GoI placed for the Skanray CV 200 advanced ICU ventilators on BEL. It was a clean GoI to GoI transaction with no scope for middlemen or graft.
It would be misguiding the public if we didn’t bring out the positive changes, we see with the GoI in the last few years.
The central government and a significant chunk of the bureaucracy have changed for good. We find the GoI spending long hours on key policy matters and long term plans for the nation that may not bring rich electoral dividends. Compared to the past where we had a very little talk on long-term policies and lots of debates on sops, freebies, subsidies, minority, majority, backward, forward issues linked strongly to the electoral politics of the country.
Corruption in the central Government has reduced significantly while most state governments cutting across party lines continued to be as corrupt and bureaucratic as ever. The decisions and execution may not be always right, they may not have delivered the results expected, but at least there is a sincere effort towards transparency, towards transforming the nation. It’s time to capitalise on this leadership and good intentions of the Centre.
Here are some concrete steps to build a robust and self-reliant med-tech industry.
1) Atma Nirbhar in medtech is local R& D and innovation with a min of 70 percent value add manufacturing in India. Assembly or labeling of Chinese/ imported kits is not Make in India.
2) A 10 year undisturbed R&D, manufacturing, global compliance plan is the foundation of Atma Nirbhar Bharat. We just can’t have “Make in India” products that can’t be sold in the US, Europe, Japan and the rest of the world. A successful Atma Nirbhar should also get us significant exports.
3) Backward integration and quality supply chain is the core of creating a manufacturing ecosystem. We are far away from what the world expects from an alternative to Chinese capabilities as a global supplier. Our democracy and English speaking population are nice for poetry, not enough for companies to move away from China and set base in India, but we can surely get there. There is an urgent need for predictability in government policies. Political parties need to look at long term collaborative work so that the successive governments won’t overturn earlier policy decisions. There is a need to relook at the political system and policies to reassure global companies and investors that there is continuity of policy and time-bound approvals. Its time to stop talking and start executing.
4) Law of reciprocity should be applied by the Indian government to countries that impose a high tariff on Indian goods and use the regulatory route to delay or block the entry of Indian products. We have some countries that have 67 percent tariffs on Indian products while the Indian government buys large volumes from these same countries levying 5 percent import duties. There are free trade agreements that the GoI signed several years ago with countries that never let Indian goods on their shore. Blocking imports or levying high import duties will be detrimental to the Indian manufacturing sector since cheap, unsafe, substandard products will be sold in the Indian market in the name of Make in India and Atma Nirbhar. It is a balanced step that the MEA, Commerce ministry and the Finance ministry has to take looking at all aspects of business, trade and neighborly relations.
5) Development of the Indian industry is not just providing land. Most of what state governments do is focus on acquiring fertile agricultural land and sell to the industry at subsidised rates. This has led to land hoarding by industrialists and real estate mafia largely controlled by politicians. Disallow change of use of industrial land pan India and bring in strong laws to reacquire industrial land not fully utilised in 3 years. Millions of sq kms of land will be freed in days. It is worthwhile to go back and check the story of the SEZ, ESDM, tech parks, clusters that came up since 2000 and see what happened to all these schemes. The truth will be out. For a medtech/core manufacturing sector, land is the last thing to worry about. Skilled engineers, quick and reliable IMPEX policies and clearances, friendly and consistent tax laws, matured, honest, researched IT, GST laws sans activism and harassment are more important than just land and sops.
6) Fab facility for semiconductors is something that India lacks to become truly Atma Nirbhar in Electronics and medtech which has a forex impact higher than that of petroleum imports. India had a semiconductor complex in Chandigarh that got destroyed in a fire and we never have been able to get semiconductor Fab in India even after decades of meetings and discussions. It’s time we look at this on a top priority. BEL had a semiconductor transistor and IC manufacturing unit which is now decommissioned.
7) Vibrant domestic market and healthcare/medtech market is the basis for new investments and growth. The MNC’s came to India at the same time they set base in China. Indian medtech market and healthcare penetration have been dismal while China grew a hundred times. Companies that brought in R&D/manufacturing lost money and interest to invest due to poor domestic demand, corruption in tenders and high attrition in trained R&D staff. China provided a strong supplier base with the government supporting them to gain domestic market and exports. Of course, China used this to build its own local skills, its own Atma Nirbhar China and inhouse technology disregarding international IP laws.
Currently, the healthcare delivery penetration in India is less than 20 percent in its huge 1.4 billion population. Increasing the healthcare delivery and insurance cover to 40 percent of the population will spurn a 500 percent growth in healthcare delivery, medtech, pharma, consumables, health tourism, telemedicine, homecare and help India become a global healthcare hub. The government should keep off in pricing matters of education, healthcare and the farm sector unless it provides a sustainable market and stability. Growth and competition will regulate the price anyway more effectively than government in the long run. The government has no role in pricing for a 100 percent privately funded sector that is alive inspite of the government and not because of the government or its policies.
It was European/Scandinavian technologies that China scaled in the mobile market to make cheap cell phones and services to the entire world. India has a unique opportunity to do the same in healthcare. With its versatile and strong tech base, with its strong democracy, with its value systems, respect for IP, 80 percent lower cost in core research budgets, 70 percent cheaper in engineering, V&V, testing, SW development costs, 50 percent higher productivity in labour costs, healthcare is above $500 billion forex earner for India if the government and industry work with speed, oneness and seriousness.
Medtech in specific has nothing in common with pharma, healthcare delivery business, consumables and services even though they are all bracketed as healthcare and brought under the pharma regulators.
China which is usually compared with India has more than 16,000 medtech companies and 300 of them sized above Rs. 1000 crore, while India with a similar population, potential in technology and manufacturing capabilities, lower cost of R&D and manufacturing has very few companies in medtech core technology. This is excluding the few multibillion-dollar MNCs operating in India. Thanks to the hostile ecosystem, corruption, opaque tendering processes, weak quality vendor base and the pathetic Indian banking sector.
8) Atma Nirbhar is not just “Make in India”. There is no country in the world that is self-reliant in technology, raw materials and market. The same holds true for India as well.
If China sheds its expansionist policies and fosters a long-term relationship based on equality and territorial integrity, India, China, Pakistan, Bangladesh, Afghanistan, Myanmar, Nepal, Bhutan, Sri Lanka and other neighbours can form an Asian union with a common currency, shared economy and an open border. We can together be self-reliant to a large extent and keep a healthy balance of trade with the US, Europe, Japan and the rest of the world. It’s just that we have to keep religion and beliefs private, stop expansionist attitude in territory or religion, stop cross border terrorism and shun violence in all forms.
If Europe that fought bloody wars just a few decades ago can dissolve the borders and become one large economy, why can’t we create an Asian Union? Commerce, Finance and Foreign affairs ministries need to be tied up closely for the long term good of the nation. Foreign affairs is the enabler of Atma Nirbhar.
9) If this can’t happen in a reasonable time, India, Israel, Japan, the US, UK, Italy, the Middle East and few others can create a larger economic alliance of barter and sharing to cooperate in food, healthcare and knowledge sectors that are core to well being. COVID has shown us that if the borders are shut permanently in this global economy, the entire human race will be affected and destroyed eventually. We are at risk with skewed globalisation and blind nationalism.
10) There is this new thinking that needs research and public debate to develop consensus within the nation.
Can we do away with GDP and consumerism based economy? Can we look at a sustainable minimalistic society to focus on just food self-sufficiency, health and happiness and rural empowerment with a common spiritual awakening than religious fundamentalism? The time has come to reset and restart. Else nature will reset us for sure.
—Vishwaprasad Alva is the founder and Managing Director of Skanray Technologies. The views expressed are personal
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