Healthcare sector may see further consolidation in 2019 with the tightening of regulatory environment set to make it difficult for small players to stay afloat in a highly competitive market.
Industry players also expect more partnerships in the new year between public and the private sector in the healthcare space, which they feel is 'under-invested'.
Already, Malaysia's IHH Healthcare has scalped 31.1 per cent stake in Fortis for Rs 4,000 crore after months of intense competition and is in process of taking another 26 per cent stake. Besides, KKR-backed hospital management firm Radiant Life Care has announced the acquisition of a majority stake in Max Healthcare through a merger to create a combined entity valued at Rs 7,242 crore.
"We have seen many mergers and acquisitions in this field and will probably see the consolidation of health care by a few large players like other fields in business," Manipal Hospital Chairman H Sudarshan Ballal told PTI.
Manipal Group, backed by global investment firm TPG, was also a contender for acquiring Fortis.
Ballal said demonetisation, GST, tightening of cash transactions and regulatory issues have certainly impacted some of the smaller establishments making them unviable.
"All in all as I see it, the future healthcare will be a high-volume, low-margin venture, inching towards universal health care with an active role played by the government. It will also be a highly regulated accountable system and people and organisations that do not adapt to this new philosophy will perish," he added.
Given these circumstances, consolidation of health care by large chains and closure of some individual-driven smaller facilities is likely to happen, Ballal said.
There were five contenders to invest in cash-strapped Fortis: Manipal Group, IHH Healthcare Berhad, Chinese investor Fosun International, Radiant Life, which was backed by global private equity firm KKR, and a consortium of Indian business families the Munjals of Hero Enterprise and Burmans who own Dabur.
The deal between Radiant Life and Max will be carried out through a series of transactions and will see KKR becoming the majority shareholder while Radiant Life Care promoter Abhay Soi will lead the combined company as Chairman. Max Healthcare promoters led by Analjit Singh will step down.
The merged entity will operate over 3,200 beds throughout 16 hospitals across India.
Wockhardt Hospitals MD Zahabiya Khorakiwala said that in the coming year more meaningful partnerships between the public and private sector should be expected to ensure that the near-universal healthcare rolled out in the country becomes a ground reality.
Apollo Hospitals Vice Chairperson Preetha Reddy said the country still remains under-invested in health infrastructure.
"We have a scarcity of doctors and nurses and are vastly under-insured as a nation. Other challenges that remain are access to primary and quality healthcare, changing disease patterns, GST and price regulations on treatments and medical devices - which remain areas of debate and consensus building," she said.
In the pharmaceutical sector, industry veterans expect a good recovery in the domestic market.
"We expect a good recovery for the pharma sector in the domestic market. The Indian pharma market growth is likely to be in double digits and we will see the introduction of new products consistently," Glenmark Pharmaceuticals Chairman and Managing Director Glenn Saldanha said.
The US generic drugs market is expected to remain challenging owing to increasing competitive intensity and price erosion, he added.
"We expect growth rates of generic drug companies in the US to remain under pressure. However, several leading Indian pharma companies have invested in developing speciality products and we will see some of these products getting commercialised, which may help offset the sluggish growth in generics," Saldanha said.
A Mumbai-based company is also in process of making a transition into the specialty products segment in the US and will have some of its speciality products in dermatology and respiratory space in the market next year, he added.
Another large pharma player in the generics segment, Lupin is looking at complex generics, biosimilars and speciality medicines to be the main drivers of growth going forward.
Industry body Organisation of Pharmaceutical Producers of India (OPPI) said it will continue to focus on four critical areas including creating a culture of quality and - fostering an ecosystem that rewards innovation, in 2019.
"OPPI will continue to advocate for policies that accelerate access to new technologies by eliminating regulatory delays and roadblocks standing between patients and new medicines; reduce costs by eliminating taxes and tariffs on life-saving medicines and partner to improve health by identifying public-private partnership opportunities," OPPI President A Vaidheesh said.
The segment also witnessed some large ticket acquisitions this year, including Hyderabad-based Aurobindo Pharma buying the dermatology business and three manufacturing units of Sandoz, the generics unit of Swiss drug maker Novartis, for as much as USD 1 billion.
Advanced Medical Technology Association (AdvaMed), which represents medical devices segment, said 2019 could be the most defining year for the industry.
"With healthcare at the forefront of policymaking, we are hopeful that this sector will receive its rightful place in the overall healthcare continuum," it said.
AdvaMed believes 2019 could be a game changer if the government accepts a scientific approach such as trade margin rationalisation from the first point of sale (sale to distributor) to address inefficiencies in the healthcare delivery system that burdens patients, it added.
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