As a key sector of the economy, healthcare offers significant synergy for both the United States of America and India. Healthcare represented an important subject of discussion during the recently concluded “Idea Summit” organised by US-India Business Council (USIBC) in New Delhi, while emphasizing the need for greater engagement and trade relations between the two countries.
America’s healthcare expenditure is one of the highest in the world with US$12,300 spent per person per year, while India spends about US$ 230. Let us look at how India can help the US to reduce its substantial healthcare cost? And can US companies help India improve access to healthcare to sections of the population where it is needed the most?
The Indian generic drug industry serves many countries around the world. The US is the biggest importer and contributes to 30% of our exports of US$ 24 billion. The US generic drug market is around US$123 billion and India’s share is around US$7-8 billion (6.5%). India has tremendous potential to be the major supplier of generic drugs beyond the existing level. It will spur significant new investments in the expansion of domestic manufacturing, creating new jobs and encouraging companies to invest in Active Pharmaceutical Ingredient (API) production leveraging government incentives. Supplies to the US also encourage Indian companies to remain focused on continuous quality improvement and on ramping up innovation. This can make Indian manufacturing cost and quality competitive on a global scale.
At the same time, the US is one of the biggest market and producer of medical devices and diagnotics equipment. The US medical device industry is expected to reach US$262Bn by 2028 (US$ 140 billion today). India’s need for medical devices is growing significantly with the addition of new hospitals and the upgradation of primary healthcare centres, thanks to the Ayushman Bharat initiative. As of May 2021, the medical devices market is estimated to be at US$ 12 billion in India. India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally. The Indian medical device industry has a 75-80% import dependence with the US making up US$1 billion or 15% of imports.
The US share of this pie can go up significantly with the growing market in India creating the need for additional capacity in both the US and in India. The US can use India as a research and manufacturing hub for their domestic market leading to a reduction in costs for its own consumers taking advantage of growing competence here and greater potential for sell-through. This has been successfully demonstrated by US companies with R&D facilities in India for products like baby warmers and ultrasound equipment leading to a reduction in costs for US consumers and skill-transfer and better quality goods for Indian consumers.
Since India’s independence, US-India relations have seen a gradual upswing. Though there have been some setbacks during the Indian nuclear program in 1974 and then in 1998, Indian premiers, through their continued engagement with the US, have successfully brought them back to normalisation. Since, President Clinton’s visit to India in 2000 and his focus on globalisation, there has been a shift in engagement between the two countries resulting in the growth of trade relations. Since then, many milestones have been achieved which include Energy Security Dialogue, signing of the defence framework and draft civil nuclear deal.
In 2014, India’s trade relations with the US got a new impetus. The Modi government invited American corporations to manufacture their goods in India taking advantage of the huge captive market and competitive cost of goods. The US reciprocated by considering India as strategic and defence partner.
Since then, bilateral trade has seen a steady uptick reaching a record of US$119 billion in 2021-22, more than double that of what we had seven years ago. India imports items such as crude oil, defence supplies and chemicals from the US and exports gems, jewellery, pharmaceuticals and services leaving trade deficit of US$33 billion. It is important to note that goods traded between the two countries are important but not strategic; they do not define trade relations as indispensable. India has always spread its risks on oil and defence supplies. At the same time none of the products being imported by the US makes India an indispensable partner.
Making the trade in pharmaceuticals and medical devices easier for both countries by removing any tariff and non-tariff barriers will kick-start growth and competition leading to reduced costs. US technology suppliers need to be assured of IP protection and further streamlining India’s Intellectual Protection (IP) regime will go a long way not only in healthcare, but in all areas where technology plays a major role. Healthcare touches human lives and relations thus developed can weather geo-political upheavals.
Both nations are committed to strong democratic values, a large Indian diaspora is integrated in the American cultural fabric, thousands of Indian students in US universities and Indian workers in the US tech industry contribute to a sustainable and steady relationship between the two countries. These components define people to people relations.
The process of the Indo-US Strategic Health dialogue is a step in the right direction. More needs to be done. Embassies on both sides must have seasoned health experts actively resolving the issues and building mutual trust. An empowered working group with representation from key ministries and industry bodies can be created on platforms like the USIBC or similar bilateral trade body to resolve issues on a real-time basis.
India has demonstrated that our manufacturing acumen, research and infrastructure can fight major health issues like the recent pandemic alongwith major advanced geographies. As an example, our in-house development of the COVID vaccine by ICMR and scaling it up by an Indian company almost at the same time when large global companies introduced their products.
Healthcare diplomacy, done right, can create something akin to a single market in pharmaceuticals and medical devices allowing both US and Indian consumers to benefit from lower costs and greater access. US and Indian companies can accelerate this process through policy support from their respective governments. The partnership will unlock massive value, job creation and address major health challenges and bring sustainable relations.
Rakesh K. Chitkara has led public policy practice for major US corporations, including Abbott Lab, General Electric, Dow Chemical and Monsanto.