India’s healthcare innovation market may hit $60 bn by FY28: Report

Bengaluru: India's healthcare innovation market may double to $60 billion by fiscal year 2028, according to a report by Bain & Company and HeathQuad.

This growth is likely to be driven by increased consumer demand, changes in the global healthcare value chain, advancements in Indian scientific and technological capabilities, and favorable regulatory conditions, said the report titled ‘Healthcare Innovation in India’.

In FY23, the overall Indian healthcare market was around $180 billion with healthcare innovation accounting for $30 billion, or 15% of the market. While the healthcare innovation market is largely dominated by pharma services and healthtech, biotech and medtech are also some of the emerging areas that show promise.

The Indian pharma services market, which was valued at about $16 billion in FY 2023, saw 85-90% of revenue driven by exports. Within this segment, CDMOs or contract development and manufacturing organizations received a big boost as it benefitted from a number of factors including global supply chains shifting away from China and improvement in capacity.

Healthtech market more than doubled in a span of three years to $7 billion in FY23. This growth, fueled by covid-19 pandemic and efficiency needs in healthcare, has seen healthtech claim roughly 25% of the overall healthcare innovation space, the report said.

Vaccines and biotech market, valued at about $4 billion in FY23, accounted for about 15% of the total innovation market. Its growth in the last three years was largely driven by exports with India being a vaccine powerhouse that catered to about 60% of the global vaccine demand.

India's medtech industry, a $11 billion market overall, saw nearly 80% of its revenues come from imports. Players within the industry accounted for about $2.5 billion in FY2023, up from about $1.8 billion in FY 2020, the report said.

Meanwhile, investments in the healthcare industry have been fairly consistent with 80-90% of deal volume in seed and early stage VC rounds, 3-7% in late-stage rounds and less than 5%in late-stage PE and other deals. 

Some prominent investments in this space include online pharmacy player PharmEasy, which raised a total funding of more than $2 billion across more than 10 rounds, and digital health and wellness player HealthifyMe, which raised more than $110 million across five rounds.

However, in recent times, investors' emphasis on positive unit economics have increased as higher interest rates and global macroeconomic uncertainties have led to more cautious investments.

Enterprise-facing segments solving operational efficiencies or supply chain constraints saw particular investor interest due to their potential for strong unit economics, high total addressable market, and robust market acceptance. 

This was seen in deals such as Medika-bazaar, a B2B e-commerce player, that raised about $65 million in FY 2023, while clinical data analytics firm THB raised about $20 million in the same time period.

While the last few years have seen the growth of innovation across segments, there may also be consolidation across segments for those smaller businesses that are not sufficiently funded or without a clear path to profitability, the report said.