Indian Healthcare Industry
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INDIAN HEALTHCARE INDUSTRY November 2012 Index S.No. Table of Contents Page No. I. Executive Summary 4-5 II. Market Overview – Indian Healthcare Industry 7-8 – Market Segments 9 III. Indian Hospital Industry – Industry overview 11 – Porter‘s Five Forces Analysis 12 – Growth Drivers 13 – Operating Business Models 14 – Innovative Delivery Formats 15 – Growth strategies in the Industry 16 – Key Trends 17 – Opportunities 18 – Challenges 19 – Government Initiatives 20 1 Index S.No. Table of Contents Page No. – Risk Factors of Hospital Care 21 – New-age Healthcare solutions 22 – Senior Assisted Living In India 23-25 – Deals in the Hospital Industry 27-31 – Major Players 33-35 – Profile of Major Players 36-44 IV. Indian Pharmaceutical Industry – Industry Overview 46 – SWOT Analysis 47 – Porter‘s Five Forces Analysis 48 – Growth Drivers 49 – Demand Drivers 50 – Key Trends 51 – Opportunities 52 – Challenges 53 – Government Initiatives 54 2 Index S.No. Table of Contents Page No. – Major Risk to Indian Pharma Companies 55-56 – Global Pharma Market 57 – Pharmerging Economies 58 – Deals in Pharma Industry 60-62 – Major Players 64-68 – Profile of Major Players 70-96 V. Indian Health Insurance Industry – Industry Overview 98 – Risk Cover Structure 99 – Challenges in Health Insurance 100 – Major Players 101 VI. Corporate Profile DCA (Dinodia Capital 102 Advisors) 3 Executive Summary (1/2) The Indian healthcare industry, valued at ~US$65billion in 2012, is highly fragmented and dominated by private players The industry has witnessed tremendous entrepreneurial activity over the last few decades across the entire value chain as demonstrated by strong growth in its various sub-segments In the future, demand for Healthcare services in India is poised to grow exponentially to cater to a growing old age population, with rising incidence of lifestyles diseases, rising incomes and affordability, and increased penetration of health insurance A global survey on healthcare costs suggests that India spends only 4.2% of its GDP on healthcare, compared to an average of 8.5% globally, and lower than other emerging countries such as Brazil (9.0%), China (4.6%), and Russia (5.4%) In general government-run facilities have inadequate equipment and poor quality, and as a result private players can capitalize on this opportunity. The private sector is expected to contribute 80% - 85% of the US$86billion investments required in healthcare till 2025 Indian Hospitals are exploring various innovative models to improve their performance and profitability, viz. introducing telemedicine, focusing on specialty centers and day care centers 4 Executive Summary (2/2) The sector has attracted several private equity players, who have been playing a significant role in various strategies of Indian hospitals, including organic & inorganic growth Another key segment of the Healthcare Industry is the Pharmaceutical Industry that contributes a significant portion of the overall revenues in the Indian Healthcare Industry. India has also emerged as a global R&D hub for the Pharmaceutical Industry and as a result is a large market for clinical trails and central lab services It is also interesting to note that India has the highest number of US Food and Drug Administration (FDA approval) plants outside the US, followed by Italy and China In the last decade, health awareness and increasing healthcare costs have increased the demand for health insurance in the country, especially from the younger population who are more aware and demand better quality care Also healthcare education and awareness have led people in the country to take precautionary steps to fight lifestyle and other diseases Other minor segments of the Healthcare Industry include the medial equipment suppliers and diagnostics centers that play a role of support systems to hospitals and pharmaceutical companies 5 Market Overview Indian Healthcare Industry 6 Indian Healthcare Industry (1/2) The Indian healthcare industry has witnessed a massive spurt in healthcare spend and is expected to reach US$100billion1 by 2015 from the current ~US$65 billion in 2012, growing at a CAGR of 20% a year India currently faces a chronic shortage of healthcare infrastructure, especially in rural areas and Tier II and Tier III cities, and it is expected that India will have potential requirement of 1.75 million new beds by the end of 2025 The industry is adopting innovative business models to work in the sector but still needs high upfront investments, has long gestation periods and faces ever-rising real estate costs In the present scenario, high entry barriers such as huge capital requirements and a cash crunch amongst most big business houses will favor existing players to pursue accelerated growth in the segment The healthcare industry in India is attracting a significant amount of capital from investors and de-centralized healthcare delivery models are the flavor of the season among private equity investors 7 1Source: PWC Report, 2012 Indian Healthcare Industry (2/2) At present, chains of diagnostic centers, chains of single specialty hospitals (such as eye or dental clinics), chains of pharmacies, day-care surgery centers — are all witnessing significant growth opportunities Several unique initiatives have been undertaken by the state governments such as those in Tamil Nadu, Andhra Pradesh and Chattisgarh*, have proved successful in providing access to good quality healthcare for the economically challenged section of society through public-private-partnership schemes * Discussed later in the report Growth in the Healthcare sector is dominated by private players in India, unlike increased government dominance in developed nations 8 Healthcare Market Segments Government Hospitals – Includes Healthcare centers, district hospitals and general Hospitals Hospitals Private Hospitals – Includes nursing homes, mid- tier, and top-tier private hospitals Includes the manufacturing, extraction and packaging Pharmaceuticals of chemical materials to be used as medicines for human & animals Comprises of businesses and laboratories that offer Healthcare analytic or diagnostic services including body fluid / Diagnostics Market blood analysis Includes establishments primarily engaged in Medical manufacturing medical equipment and supplies, such Equipments as surgical, dental, laboratory instruments, etc Medical Covers an individual‘s hospitalization expenses and Insurance medical care bills incurred due to sickness 9 Indian Hospital Industry Indian Hospital Industry 10 Industry Overview The hospital segment holds a major share of the healthcare industry and is outpacing the overall industry growth The size of the private hospital industry in India is estimated to be around US$25billion as per Assocham and growing at a CAGR of 20% The demand for hospital services has been consistently soaring in the country, with every class of the society demanding better quality and standards of healthcare Realizing the continuous growing demand, many investors worldwide have expressed their keenness towards investing in the Indian hospital service market. The country is making strides in the right direction as evident from the 100% allowance of FDI in the hospital segment under the automatic route, since January 2000 According to “Indian Hospital Services Market Outlook” by RNCOS Industry Research Solutions, the country needs to cover the cumulative deficit of around 3 million hospital beds to match up with the global average of 3 beds per 1000 population 11 Porter‟s Five Forces Analysis Hospital Industry in India threat threat of new Entrants of Substitutes . High capital requirements in order • Home care and natural treatments to build hospitals only allows serious players in the sector . Hospitals are heavily regulated by the government bargaining bargaining Hospital power of Suppliers Industry power of Consumers Attractive . Hospitals face some . Consumers have little power and threat from medical basically cannot negotiate on equipment companies pricing as they could choose rivalry not to sell their equipment, but there among Competitors are a fairly large number of suppliers . Hospitals face less competitive available rivalry because there are usually not many hospitals in a given area and most people are brought to nearest hospital or where they know a doctor 12 Growth Drivers Growing Policy Increasing Demand Support Investments Increasing Lifestyle Related Issues and increasing population Rising Initiatives to Foreign Direct Increase Sector Investment Affordable Treatment Investments Cost and Increasing Inviting Result Disposable Income Medial Tourism and Reduction of Lucrative improving health Custom Duty on M & A insurance penetration Equipment Opportunities Faster Diagnosis leading to early treatment Increasing old age population will drive demand for hospital services 13 What are the Operating Business Models? 1 Hub & Spoke Model Spoke . Under a hub and spoke model, a super specialty hospital (hub) is established in a major city of a region, with smaller multi- specialty hospitals/day care centers in surrounding towns Spoke HUB Spoke . Enhance profitability by ensuring better treatment at the spokes, and transfer of patients of hubs only if required, increasing occupancy etc. Spoke 2 Operating Maintenance Contracts Manages . A corporate chain (like Fortis or Apollo) operation, marketing, financ e and other functions takes over management of a hospital owned by a trust Corporate Target . In return, the corporate hospital gets a fixed Hospitals Hospital