Indian Healthcare : The Changing Scenario INDIA

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INDIA IN THE NEW KNOWLEDGE ECONOMY


The Changing Scenario

Dr. Naresh Trehan
Chairman, CII National Committee on
Healthcare & Executive Director
Escorts Heart Institute and Research
Centre, New Delhi, India


INDIA IN THE NEW KNOWLEDGE ECONOMY

Transition from BPO to KPO Destination


Growth of Services sector


Contribution to India’s GDP



8 + %

51 + %



Knowledge Process Outsourcing
-

To grow 46% to $ 17 Billion by 2010

Emerging Trends in the last two years:



Silicon Valley VCs setting shop



US companies relocating up to 95% of R&D work in next generation technologies especially in the


wireless space & optical networking systems.



Intel, Cisco doing core development work on chip design.



Texas Instrument has its global centre for wireless LAN & semi
-
conductors R&D based in India



Tech Multinationals have filed 1, 700 global patents for product developed out of India



Automotive engineering design services (AEDS) projects


already executed $ 500 million worth of


Global Contacts



Bosch’s Indian team does major chunk of Diesel systems development in India



PRODUCT DEVELOPMENT REQUIRES ONE


FOURTH THE INVESTMENT IN INDIA

INDIA IN THE NEW KNOWLEDGE ECONOMY



Healthcare




Pharma & Biotechnology



Information & Communication
Technology (ICT)



Indian Healthcare : The Changing Scenario

Current Healthcare Landscape

Indian Healthcare : The Changing Scenario

INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE

3.7
19
22.7
5.2% of
GDP

Total
Healthcare
Market

Pharma
market*

Healthcare
delivery
market

* Retail

Source:

National Accounts Statistics 2001; McKinsey analysis

Indian Healthcare : The Changing Scenario

THE HEALTHCARE DELIVERY SECTOR PLAYS AN

IMPORTANT ROLE IN THE ECONOMY TODAY

Sector

Direct employment

Revenues/GDP

Million, 2000
-
2001

Per cent, 2000
-
2001

4.0
5.3
1.0
1.2
1.6
0.8
1.7
0.4
5.2
4.8
3.5
3.0
1.8
1.4
0.9
1.7
Healthcare

Education

Retail banking

Power

Railways

Telecom

Hotels, restaurants

Source:

National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis

IT

Healthcare is the
largest service
industry in terms
of revenues and
the second
largest after
education in
terms of
employment

By 2012, the sector could account for 7 to 8 per cent of GDP and provide

direct and indirect employment of 9 million

Indian Healthcare : The Changing Scenario

IN TERMS OF DELIVERY, PRIVATE PROVIDERS CAPTURE 63%

0F THE US $ 19 BILLION SPEND

63
37
Government and public
employers*

Healthcare provision, 2002

Per cent of total spending

Private providers

(individual, charitable
and for
-
profit)

100% = US $ 19 billion


*
Including government spend (20%), public employers’ spend (11%) and out
-
of
-
pocket spend at government providers (
6%)

Source:

McKinsey analysis

Indian Healthcare : The Changing Scenario

INDIA: AN EMERGING HEALTHCARE HUB


Over 60,000 cardiac surgeries done
per year with out comes at par with
international standards



Multi organ transplants like Renal,
Liver, Heart, Bone Marrow
Transplants, are successfully
performed at one tenth the cost.



Patients from over 55 countries
treated at Indian Hospitals.

INDIAN HEALTHCARE CAPABILITY


FACT#1: Proven Indian healthcare system





Ayurveda recognized as an
official healthcare system in
Hungary.



Doctors in the west are
increasingly prescribing Indian
Systems of Medicine



More than 70% of the American
population prefer a natural
approach to health




Americans are said to spend
around $25bn on non
-
traditional medical therapies
and products

*


Source : Los Angeles Times

* Economic times dated 25
th

July 2003

Ayurveda


Yoga


Siddha

India’s Gift to the World

INDIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST OF

THE WEST & EASTERN HEALTCARE SYSTEMS


Indian Systems Of Medicine


Staging a Comeback
´



Physicians, Nurses, Medical Technicians and Other Scientific
Occupations will Become Growth Industries to Rival the IT Sector within
the Next Decade
´



-

India Vision 2020

Report

HEALTHCARE

.THE SUNRISE INDUSTRY


PROCEDURE

COST (US$)

THAILAND

THAILAND

INDIA

Heart Surgery

Bone Marrow Transplant

Liver Transplant

Knee Replacement

Cosmetic Surgery

7,500

-------

-------

8,000

3,500

6,000

26,000

69,000

6,000

2,000

US

US

40,000

2,50,000

3,00,000

20,000

20,000

UK

23,000

1,50,000

2,00,000

12,000

10,000

Indian Healthcare : The Changing Scenario

Cost Advantage

HUGE GROWTH POTENTIAL


TO GROW BETWEEN

US $ 43


US $ 60 BILLION IN 2012


*

With 6% GDP real growth per year

US $ IN BILLION at 2000
-
2001 prices

2001

Private

spending


Government

spending


ESTIMATE

2012

Scenario 1:
Baseline
increase in
private spend


2012

Scenario 2:
Baseline
with
insurance in
middle class


2012

Scenario 3:

Baseline with
insurance and
high
government
spending


19

43

51.0

60.0

3.76

15.24

8.0

8.0

17.0

35.0

43.0

43.0

Key

Assumption

1% GDP

Government
Spending

1% GDP

2
% GDP

Indian Healthcare : The Changing Scenario

INDIA OFFERS HUGE POTENTIAL FOR INVESTMENTS IN
HEALTHCARE OVER THE NEXT 10 YEARS

Investment requirements in India (Estimates)

US $ in Billion Next 10 years

Healthcare

Power**

Telecom**

Roads**

22
-
31

24
-
33

40
-
51

95
-
126


* Estimates based on analysis detailed in Chapter 3 of this report


** Estimates computed by scaling 2002
-
06 estimates from Rakesh Mohan committee report by a factor of 1.5
-
2.0

Investment needs
of the healthcare
sector are
comparable to
other infrastructure
sectors

Indian Healthcare : The Changing Scenario

India’s Growth Sectors
-

Pharmaceuticals & Biotech


INDIA IN THE NEW KNOWLEDGE ECONOMY

The Indian Pharmaceutical Industry


has practically achieved

Self sufficiency

&

Global recognition


as a

Low cost producer

of

High
-
quality bulk drugs & formulations

KEY ACHIEVEMENTS

India has the 2
nd

highest number of qualified
doctors in the world. Of every six medical
doctors in the US, one is Indian

700,000 science and engineering graduates &
1500 PhDs qualify annually. Over 15,000
scientists

Investigational New Drug stage costs about
$100 to 150 million in US, but costs only
around $10 to 15 million in India

Indian companies are offering custom synthesis
services at 30
-
50% cost savings compared to global
costs

While clinical trials cost approximately
$300 to 350 million in US, they cost only
about $25 million in India

India’s huge population and the prevalence of
a wide spectrum of disease conditions offer a
wide patient
-
resource for clinical trials

CHANGING FACE OF INDIAN PHARMA

Players thinking local

Players thinking global

Top 5 Companies Sales & Export Revenues

Source: Company reports

Rank
Company
Sales ($ mn)
Exports ($ mn)
Exports %
1
Ranbaxy
969
736
76%
2
Cipla
400
163
41%
3
Dr.Reddy's Lab
336
212
63%
4
Aurobindo Pharma
264
128
48%
5
Lupin
210
92
44%
Pharmaceutical exports increased at a CAGR of 23%
during FY1995
-
FY2002

Indian pharma companies filed the largest number of Drug
Master Files (DMFs) for APIs and 23% of ANDAs with the
USFDA during 2003

Ranbaxy acquired RPG Aventis, France; Wockhardt
acquired CP Pharmaceuticals, UK; Zydus Cadila acquired
Alpharma, France

Export revenues now contribute over half the total
revenues for the Indian pharma majors

CHANGING FACE OF INDIAN PHARMA

MNC
-
Domestic
Competition

MNC
-
Domestic
Collaboration

New Drug Research


Glaxo SmithKline's recent R&D alliance
with Ranbaxy Laboratories

Clinical Trials


Novartis, Astra Zeneca and Eli Lilly making
India a global hub for clinical trials

Co
-
marketing


Glaxo
-
Cipla,
Wockhardt
-
Bayer,
Ranbaxy
-
Knoll tie
-
ups

In
-
licensing


Ranbaxy licensing agreement with KSB, UK
for marketing TransMID

Pharma
-

IT


Novartis processes drug safety data and is
designing clinical development software

Local research


Astra Zeneca’s $40 million R&D facility in
Bangalore for TB drug discovery

COLLABORATION

Source: Media Reports, E&Y

CHANGING FACE OF INDIAN PHARMA

BIOTECHNOLOGY

INDIA IN THE NEW KNOWLEDGE ECONOMY



Market
-

A Consistent Uptrend

2002
-
03

2010

25% growth in investment

70% growth in employment

74% growth in R&D

manpower

10% of global industry

1 million skilled jobs

USD 5 billion annual


revenues

Source: Confederation of Indian Industry (CII)

SOURCE FROM INDIA



India’s first genetically
engineered vaccine
costs less than half the
price of competing
vaccines

Bio Agri
-


India (2
nd

largest
producer of food) offers
significant opportunities
to source products

Biogenerics
-

$25 billion
biological products going off patent
in 2004. Indian companies strong in
biogenerics

Biocon

was the first
enzyme company globally
to receive ISO certification
in 1993



India: largest producer
of Measles & DTP
vaccines. Vaccine
exports to over 130
countries

Clinton Foundation
sourcing HIV treatment
from four firms
-

three
of which are from India

Source: Newspaper Reports

One out of every two children in the world is immunized by a
vaccine made in India


Shantha Biotech
-

SHANVAC
-
B

meets
40% of the global
demand of Hepatitis
B vaccine.


GOING GLOBAL IN BIOTECH

The India Advantage

Trained manpower


and knowledge base

Rich biodiversity

Extensive clinical trials


opportunities

Excellent network

of research laboratories

Well
-
developed

base industries

Information & Communication

Technology (ICT)

INDIA IN THE NEW KNOWLEDGE ECONOMY

India : Key IT figures


Software & services
export(2004
-
05) ~ US $ 17.5
billion


Grown from a $150m in 1991
-
92


CAGR in last 10 yrs: 35%


Projected to be US $ 50 b in 2008


Software & services
domestic(2004
-
05) ~ US
$ 4.5 bn


IT enabled services(2004
-
05)
~US $ 4.9 bn


IT domestic hardware(2004
-
05) ~ US $ 4.8 bn

Source: McKinsey:NASSCOM

Balanced Portfolio of IT offerings

2.04
2.88
3.8
5.03
6.05
8.67
12.2
13.5
17.1
23.8
31.7
0
5
10
15
20
25
30
35
94-95
95-96
96-97
97-98
98-99
99-00
00-01
01-02
02-03
03-04
04-
05
US$ bn

India: Moving up the Value Chain

Source: SSB, Fall 2000

1960

2000

Client / Server

Internet

Mainframe

Facilities
management

Unix
-
based
coding

Maintenance

Migration & Re
-
engineering

Package
Implementation

Application
development

Web Enabling
legacy

Consulting

Maintenance

Package
Implementation

E
-
business
applications

Embedded
software

Network
Management

Network
Security

Aligned to Technology Needs

Telecom Market



7
th

largest telecom network in the world



Telecom network growth rate


30%



Fixed lines (Dec, 2004)



44.76 million



Wireless connections (Dec, 2004)

48 million


Size


(2003)




US$ 9 billion


2010 (projected)




US$ 23 billion




Rising Teledensity & Telephone Subscribers

Sot


India is targeting 250 million users by 2007




India needs
$30 billion to meet a target of one phone for every five people by 2010



Total telecom revenues expected to almost triple from USD9 billion in 2002 to


USD 23
-
25 billion by 2007.

47

Mn

19

Mn

7

Mn

3Mn

5Mn

3Mn

India

Bangladesh

Pakistan

Iran

Brazil

Mexico

Philippines

5Mn

4Mn

Vietnam

2Mn

Turkey

Potential surplus population in working age group (2020)

-
10

Mn

China

-
6

Mn

Russia

5Mn

Indonesia

1Mn

Malaysia

0Mn

Ireland

Israel

0Mn

Iraq

2Mn

-
1

Mn

Czech

Republic


Note:

Potential surplus is calculated keeping the ratio of working population (age group 15


59) to total population constant;

Source:

U.S.
Census
Bureau
; BCG Analysis

4Mn

Egypt

-
17Mn

US

-
2 Mn

UK

-
2 Mn

Italy

-
3 Mn

France

-
9 Mn

Japan

-
0.5
Mn

Australia

-
3 Mn

Spain

-
3 Mn

Germany

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