A glance at the other side

The latest report by Frost & Sullivan titled Indian healthcare industry gives the low down on the economic, political and social infrastructure of one of the most dynamic and evolving industries in the country today.

On the fast track!

Increasing investment in recent years in health infrastructure and facilities combined with quality health professionals has improved the healthcare services in India. India is fast emerging as a regional hub for healthcare services attracting patients from many countries in Asia, Europe, and the United States. Key healthcare initiatives undertaken by the government include establishment of new regulatory bodies, launch of several healthcare programmes and changes in patent laws.

The healthcare industry is currently one of the largest service sectors in India with healthcare being delivered through both the public and private sectors. In 2005, India's expenditure on healthcare was around 5.3 percent of the gross domestic product (GDP), of which almost 75 percent to 80 percent was contributed by the private sector and the rest by the public sector. Public healthcare expenditure as a percent of GDP is very low when compared to the private healthcare expenditure. It provides healthcare services free of cost or at subsidised rates to low-income families in urban and rural areas. The public sector is mainly financed by general taxes and non-tax revenues from both internal and external agencies, with the basic role of planning, regulating, and shaping the Indian healthcare system. The provision of healthcare services by the public sector is a responsibility shared by the local, state, and central governments. The funds allocated by the government are well short of the figure that is required to meet the country's growing demand. In India, the private healthcare sector provides the bulk of the curative services. This trend puts India in the league of being one of the highest proportions of private healthcare spending countries in the world. This sector has grown immensely in the past 10-15 years.

Glaring urban-rural disparities

There is a glaring contrast in the healthcare status of people in India as is clearly pointed out by the differences in various healthcare indicators. Appropriate and affordable healthcare facilities are still inaccessible to millions of people residing in the urban and rural areas, particularly women and children. The quality of healthcare services is poor and the number of healthcare facilities is not adequate for the present population. In India, the vast majority of the population (nearly 70 percent) resides in the rural areas, while the remaining 30 percent in the urban areas. The per capita expenditure on public health is very low in the rural areas when compared to the government's healthcare spending in the urban areas. The healthcare system in India is ill-equipped to cope up with the rising number of changing disease patterns, with an average of just less than one percent of hospital beds and physicians per 1,000 people.

Government support

The key issues that the government is addressing are the modernisation of the healthcare system and greater collaboration with the healthcare industry so as to provide innovative drugs, expansion of healthcare insurance, modern medical equipment in the hospitals and better healthcare services to the people. The Indian government has been following a policy of encouraging several healthcare programmes to leverage healthcare services to people residing in the rural areas with various developmental programmes, such as the Common Minimum Prog-ramme and the National Rural Health Mission. Increased awareness of IPR increase in drug and pharmaceutical R&D expenditure and creation of suitable modern infrastructure is likely to bring new projects for drug development into the country.

The National Health Policy, National Rural Health Mission, Common Minimum Programme and increase in healthcare expenditure and increased outlay in the 2007- 08 Union Budget are some initiatives in this direction.

Public-private partnerships

Since government resources have not been able to maintain the existing healthcare system and increase access to healthcare services, the government is no longer viewed as the only engine of development. Public-private partnership (PPP) is an essential strategy to expand the scope of the existing healthcare system nation-wide and secure co-operation from the non-governmental organisations (NGOs) and social activists for this purpose. The government is in the process of developing necessary guidelines for PPPs in which the public sector is expected to play the main role in defining the framework and sustaining the partnerships.

Growth prospects

Prospects for the Indian healthcare industry remain bright in the forecast period due to new demand originating from different sections of the society. Economic conditions are favourable for sustainable growth; increase in disposable income is expected to increase the per capita expenditure on healthcare during the forecast period (2007-2010).

The demand for healthcare services is expected to grow substantially over the next to 5-10 years, and to meet this growing demand for healthcare services, high investment is likely to be required. Particular growth opportunities exist in the Indian healthcare industry in areas like medical tourism, healthcare outsourcing, pharmaceuticals, biotechnology, healthcare insurance, clinical trials, and medical devices and equipment. Significant growth opportunities also exist in stem cell biology and bioinformatics in India. The research is expected to result in the development of advanced treatment for a number of debilitating diseases. The medical tourism segment is by far the most promising and dynamic segment of the Indian healthcare industry.

Medical tourism

Currently, medical tourism is the buzzword in the Indian healthcare industry. The most important reasons why medical tourism has gained so much fame in India is the low-cost advantage and the emergence of high quality healthcare service providers in the country. The factors, which are likely to favour and make India a prominent medical tourism destination, are the high quality expertise of medical professionals, the fast improving medical equipment and nursing facilities, improvement in medical infrastructure and technology, and cost-effectiveness of the overall package. The healthcare industry is creating the necessary standards with the help of insurance companies, credit rating agencies involved in the self-regulation of the industry, which is likely to give a boost to the medical tourism industry in India.

Healthcare outsourcing

The major reason behind India emerging as an attractive destination for healthcare outsourcing is the quality of the human resource pool available in the country. Healthcare outsourcing activities in India range from claims processing and medical transcription, to medical analytic and clinical processing. In addition, Indian companies have an edge in offering a large number of value-added services such as diagnostic analysis by highly qualified medical professionals at a much cheaper cost compared to developed countries. The qualified labour force is rising as a result of the increased importance given to medical and technical education by the government.

Pharmaceuticals and drugs

Indian pharmaceutical companies' export performance has substantially boosted their sales revenues. Indian pharmaceutical exports were worth $2.33 billion in 2005. Formulations contributed over 50 percent of exports, which in turn has seen a 7.5 percent growth rate in 2005. Since 2001, the government has decided that foreign direct investment (FDI) of up to 100 percent will be allowed through the automatic route for the manufacture of drugs and pharmaceuticals. The Patent (Amendment) Act introduced in 2005 brought the pharmaceutical products under the patent regime. This law is expected to gradually slowdown the product launches in the country and at the same time drive Indian companies to increase their R&D activities.