Medical equipment industry may struggle to keep up with demand

As the focus of healthcare sector has completely shifted to COVID-19, many people with other ailments are waiting for the lockdown to lift to go to hospitals. However, as medical device makers struggle to carry on production, on account of absence of components that are largely imported, industry experts suggest it will be difficult to keep up with the demand once the lockdown is lifted.

Follow latest updates on the COVID-19 pandemic here

Almost 80% of medical equipment in the country are imported. Most companies in the Indian medical equipment market cannot produce without importing something or the other.

Low demand, difficult logistics and non-availability of raw materials have become serious impediments for the medical devices sector.

According to Suresh Vazirani, Chairman and Managing Director at Transasia Bio-Medicals Ltd, most imported products come through passenger aircraft, but as the operation of passenger aircraft has completely halted, now they are coming through cargo aircraft, at a frequency of only once in 12-15 days.

“Even if a small part is unavailable, the end product cannot be made. It, along with low demand, has forced companies to cut down or stop the production,” said Vazirani.

He said, “We have been able to maintain 30-40% of our operations. This is not the case with smaller companies. We are able to manage right now because the demand is low - about 25%. As the lockdown gets lifted, there’ll be a spurt in demand and we won’t be able to keep up for at least two months.”

Sahajanand Medical Technologies (SMT) CEO Ganesh Sabat also mentioned that the company’s inventory is depleting fast and it will be difficult to survive beyond two months.

Most companies in the sector keep inventory for a month or two. If the lockdown extends, many companies won’t be able to sustain. According to Vazirani, 25-30% of companies may even go bankrupt. But even if the lockdown is lifted and the disruptions in import continue, India not being self-reliant, will be in a vulnerable position.

The current market size of the medical devices industry in India is estimated to be $11 billion.

“Indian medical device market is not large enough to attract investments. There is also negative perception for India-made products. Even various tenders from Government hospitals mandate imported products,” Sabat said. “Manufacturing of medical devices is highly technical, where multi-disciplinary approach coupled with experience is a necessity for product development. We never tried to build an eco-system and now we can expect miracles to develop new devices overnight,” he added.

Sunil Khurana, CEO & MD, BPL Medical Technologies said there have been issues with production, but he does not foresee a ‘huge shortage of medical equipment’.

“The challenge will be two-fold, firstly on account of increase in prices -- since medical equipment have import dependency, we are seeing manufacturing cost going up due to a surge in global demand. This would lead to increase in prices for end customer to the tune of 10-15%. Secondly the lead times for supply for some of the equipment might go up,” said Khurana.

“The lead times, which in a normal situation vary between 2 and 4 weeks, are taking 6-10 weeks, depending on the products. Due to this surge in demand, we are witnessing price increase from various suppliers from across the globe. The cost of logistics service providers have also gone up significantly due to the unavailability of manpower,” he added.

This imbroglio, along with a stronger US Dollar, will lead to cost escalation of over 10%, putting the device makers in a probable fix.

According to Dr. GSK Velu, Chairman & Managing Director, Trivitron Healthcare, conventional business is down by over 70%.

“Though there are opportunities for offering COVID-19 testing and medical devices, we may not be able to overcome the revenue loss of the whole company with these limited opportunities,” he said.

Vazirani mentioned that many vendors may also pack up and it will be a challenge to find alternate sources for supplies. “When the lockdown ends, It will take time for things to catch up. By the time the factories gear up, there is going to be a shortage of medical equipment for a month or two."