Asia

Expanding Hospital Markets in Asia Provides Opportunities for MedTech Manufacturers: The Hospital Markets in India and Southeast Asia (Part II)

By Ames Gross
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Asia

A review of the status and prospects of key markets in India, Thailand, Indonesia and Vietnam.

India’s Hospital Market: Surging Growth with Large Investments in the Private Sector

India is seen as a highly promising healthcare market due to its rapidly aging population of more than 1.2 billion, growing incidence of lifestyle diseases, rising incomes, and the increased prevalence of health insurance. The market has significant room for growth, with Indian per-capita health spending standing at just $267 per year, compared to $730 in China and $1318 in Brazil in 2015, according to the World Health Organization.

The overall healthcare sector is expected to surge to $280 billion by 2020—a compound annual growth rate of 23% from 2016—partly due to demand for specialized and quality hospitals and other facilities. The private sector is leading the way, fueled by large investments from existing corporate hospital chains and new entrants backed by private equity investments.

Read Part I of the series, Expanding Hospital Markets in Asia Provides Opportunities for MedTech Manufacturers: The Hospital Market in ChinaThe growing middle class is turning to the private sector as public investment in healthcare continues to lag. Private health spending in India was more than double the government’s in 2016, and the private sector is expected to contribute the majority of the $86 billion investment in Indian healthcare by 2025. According to the Indian government, the private healthcare sector attracted foreign direct investment of $593 million in the financial year ending in March 2017—a rise of 169% in the five years since the 2011–2012 year.

Indian healthcare is provided through primary-, secondary- and tertiary-care hospitals. The government manages the first two categories, while tertiary facilities are owned and managed by either the government or the private sector. Because private entities are heavily focused on profitability, most private investment in the healthcare sector goes to the big cities where people have a higher spending capacity. There is a chronic shortage of healthcare facilities in rural areas and smaller cities. India is expected to require an additional 1.75 million hospital beds by the end of 2025. Both the government and the private sector are planning several new specialty and super-specialty hospitals, as well as the modernization of existing hospitals.

The Indian hospital services market is currently valued at around $80 billion, accounting for 65% of the healthcare industry’s total revenue. The new specialty hospitals need imports of high-end equipment, especially operation theater products and training-through-simulation labs.

While there is great optimism in India’s healthcare sector, recently initiated device price controls have not been positive.

Thailand’s Hospital Sector: Solid Growth Rate with Strong Support for the Medical Tourism Industry

Thailand’s healthcare sector is growing at a solid pace, supported by private investment, government funding, a robust medical tourism sector, higher income levels, and an aging population. The sector is expected to grow to $31 billion by 2020, from $19 billion in 2015.

The public hospitals in Thailand account for about 55% of medical device purchases. Most of Thailand’s senior citizens, who are expected to comprise 20% of the population by 2035, have low income and rely heavily on public hospitals. However, most of the growth is being fueled by upgrades and replacements at specialized private hospitals. The country has 56 hospitals and specialized clinics certified by the Joint Commission International, the highest number in Southeast Asia. More than half of those facilities are located in Bangkok.

The private sector accounted for 4 billion baht ($126 million) of healthcare spending in 2016, compared to the government’s 12.5 billion baht ($396 million). Thailand has eight exchange-listed hospital groups, many of which are actively investing in growth. The country’s private hospitals generate profits as high as 700 billion baht ($22.2 billion) annually, of which about 100 billion baht ($3.17 billion) comes from foreign visitors.

The government is encouraging private hospitals to step up their investment in research and development so the country can keep its lead in medical tourism and become a regional healthcare hub. The government is also looking at ways to support medical tourism by upgrading more local hospitals to meet international standards and finding ways of offering medical care to tourists who become sick while traveling. Around 3 million people came to Thailand for medical treatment in 2016, an annual increase of more than 10% from 2014.

The Hospital Market in Indonesia: New Universal Healthcare Plan Drives Growth

Indonesia’s robust economy and rising middle class are spurring growth in its health care sector as well. Its National Health Insurance program, which aims to provide universal healthcare (albeit at a low level) to all Indonesians by 2019, is a major opportunity for hospitals and pharmaceutical companies.

Foreign investment in the healthcare sector has risen since 2017, when the government allowed foreigners to invest in general hospitals in addition to specialist hospitals. Foreign investment in Indonesia’s hospital industry rose to $14.3 million in the first half of 2017 from just $0.2 million in 2015.

Although the number of new hospitals grew by an annual average of 11% between 2011 and 2015, the country’s patient-to-bed ratio is among the lowest in Southeast Asia. Many wealthier Indonesians still prefer to travel to Singapore or other foreign destinations for advanced medical treatment.

Indonesia’s Siloam International Hospitals group, the country’s largest hospital operator, aims to double the number of its hospitals to 50 by 2019. The expansion has been partly driven by the introduction of the universal healthcare system, which should allow more low-income people to seek basic medical treatment. The company will initially open new hospitals in cities with populations of at least 500,000.

Hospitals in Vietnam: Good Prospects for Growth Following Government Reforms and Private Investment

Vietnam’s hospital sector is poorly developed, but there are good prospects for growth as the government launches reforms and encourages private investment in healthcare.

Vietnam has an estimated 1,062 state hospitals, 200 private hospitals, and 15 foreign-invested hospitals, with a total of 145,000 beds. As of 2017 there were 200 new hospitals in some stage of planning.

The government has approved a plan to develop the public health and primary care systems, as well as medicine manufacturing and supply. The plan calls for 25 hospital beds and at least eight physicians and two pharmacists to be available for every 10,000 people by 2020. The government wants private hospitals to account for 20% of the total by 2020. It also aims to have every citizen covered by the government healthcare system, modeling its plan on the one introduced by Thailand. The government currently only spends about 0.9% of the GDP on healthcare, serving about 30% of the population. More than 30,000 Vietnamese go abroad every year for higher quality advanced treatment, spending $1 to 2 billion.

The country has wide disparities in the availability and quality of healthcare. Most hospitals and specialist clinics are located in the main cities, while it remains almost impossible to get specialist care in rural areas. Public hospitals also suffer from overcrowding, with Ho Chi Minh City the worst affected. Under the current reform plan, Ho Chi Minh City is targeting an additional 5,500 hospital beds and aims to raise the number of doctors per 10,000 people to 15.

Meanwhile, private clinics are operating at only about 50–60% of their capacity, according to the Vietnamese Private Hospital Association. The association estimated that only one third of private clinics are able to make a profit, due to capital shortages, a lack of reputation, discriminatory practices by local authorities and expensive fees.

The expansion of healthcare facilities in China, India and the Southeast Asian countries is set to continue at a brisk pace in the coming years. Medical device makers will have ample opportunities to expand their market presence as Asia’s population ages and the governments continue to look to the private sector to improve their healthcare systems.

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