Medical equipment cos wilt as clients keep off

“In the last few months, there has been a huge drop of 40-50% in my business.” These words have reverberated down many corridors with alarming regularity since the global economic slowdown made its presence felt in September 2008.

The difference this time is that they’re not coming out of the mouths of business magnates or entrepreneurs but of a New Delhi-based general surgeon.

According to the surgeon, who does not want to be named, there has been a nearly 50% drop in surgeries since the economic headwinds started blowing. The surgeon said that patients are deferring surgeries that can be postponed, such as hernia, piles, etc.
A Mumbai-based bariatric (weight loss) surgeon, who is attached to two leading hospitals, said, “Life-threatening surgeries, like those for heart and nervous system, cannot be postponed. But fairly minor ones like dental or bariatric surgeries are being postponed. People are becoming more and more cautious even while spending on their healthcare needs.”

The same is being heard from other industry experts, dispelling the notion that the healthcare segment has remained insulated from the economic crisis. The drop in surgeries, in addition to credit crunch, has slackened demand at hospitals and pathology laboratories for medical equipment.

According to A Vaidheesh, managing director of Johnson & Johnson Medical, India, several hospitals are deferring purchases of medical equipment by months due to the credit crunch. “Medical equipment and technology sector in India has been hit 15-20%,” said Vaidheesh.

Sandeep Sinha, deputy director (healthcare practice), South Asia and the Middle East at Frost & Sullivan, said capital-intensive big-ticket items such as MRI, CT scan machines, etc, which cost Rs 1 crore onwards, are seeing a decline in sales. “Hospitals can do without MRI, CT scans by sending patients to other hospitals.” But small-ticket items like X-rays, ultrasound, and patient monitoring equipment, which cost a few lakhs, are still selling.

Ankur Bharti, consultant with Technopak Advisors, said smaller hospitals usually take loans to buy equipment like CT scans, linear accelerators (for cancer treatment), etc. “Now it’s tough to get loans and so, hospitals are not buying expensive equipment,” he said.

Pathology labs, who are other major buyers of medical equipment, aren’t out shopping either. Experts say that with pre-employment medical check-ups plunging due to cuts in recruitment, they, too, are feeling the heat. There are about 50,000 pathology labs in India, both big and small, that conduct about 100 million medical tests annually.
Sushil Shah, chairman, Metropolis Health Services India, a Mumbai-based chain of pathology labs, said, “Patients are actually taking fewer tests nowadays. We have seen a 15% drop in business.”

Arvind Lal, chairman and managing director of New Delhi-based chain Dr Lal Pathlabs, added that people are undergoing tests only if they are absolutely necessary.

“But the situation will improve going forward. So we have our expansion plans intact. From 35 labs at present, we will scale up to 50 by 2010-end,” said Lal.

To stimulate sales in these tough times, Philips Healthcare India has devised a model called Pay Per Use (PPU), whereby hospitals can pay a portion of the cost of equipment upfront, and the rest as per usage.

Anjan Bose, senior director and business head, Philips Healthcare India, said, “PPU will encourage hospitals to buy despite the crunch as they can pay just a portion of the total cost upfront. This will also help us penetrate into more hospitals.”

As per estimates by research and consulting firm Frost & Sullivan and Confederation of Indian Industry (CII), the medical technology industry in the country is expected to grow at 15% per annum, and reach about $4.5 billion by 2012.