Healthcare innovation market in India could double to $60 billion by 2028: Bain & Co

According to Bain, India’s growing scientific and technological expertise will increase its importance as an innovation hub for Big Pharma.

The Indian healthcare innovation market is anticipated to reach an estimated $60 billion by FY 2028, with Indian companies increasingly leveraging emerging technologies to add new innovation vectors, including new business models, software-led solutions, and products, according to a report by consulting firm Bain & Co and HealthQuad.

Currently valued at $30 billion, the sector is predominantly led by pharma services and health tech entities, with biotech and med tech sectors in their early stages but exhibiting initial signs of growth, according to the report titled “Healthcare Innovation in India”.

Historically recognised for pioneering cost-effective services and products, the Indian healthcare industry has ventured into new realms of innovation, leveraging emerging technologies, the report said.

This shift aligns with the global trend of pharmaceutical companies increasingly outsourcing discovery, development, and manufacturing processes, with Bain research projecting a rise from 58 percent to 61 percent in outsourcing expenditure by 2027.

India, with a diminishing focus on China and its expertise, is poised to become an attractive outsourcing destination, the report added.

“Over the last few years, Indian players have gained expertise in chemical synthesis (especially for more complex products), injectables, and fermentation. Additionally, India’s growing technology expertise in areas like advanced analytics, AI/ML, and AR/ VR has spurred more pharma services players to offer these solutions and encouraged the creation of technology “innovation hubs” in international pharma companies’ India-based global capability centers (GCCs),” the report noted.

Healthtech, constituting around 25 percent of the healthcare innovation market in FY 2023, has witnessed significant growth, reaching $7 billion from $3 billion in FY 2020.

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The sector encompasses over 10,000 start-ups and has experienced heightened activity during the Covid-19 pandemic, expanding both in consumer-facing and enterprise-facing segments. Global expansion is a notable trend among healthtech players seeking to broaden their patient base, the report said.

According to Bain, India’s growing scientific and technological expertise will increase its importance as an innovation hub for Big Pharma.

“Twelve of the top twenty global pharma companies have established GCCs in India. While these units were originally set up as shared service centres with a tactical focus on support functions, several evolved into innovation hubs focused on deep R&D (pre-clinical, development, and clinical trials) and technological innovation (e.g., AI/ML, AR/VR, and advanced analytics). This trend will likely grow in the coming years, with Indian GCCs playing a key role in driving the innovation agenda,” said the Bain report.

It added that Biotech start-ups are incorporating cutting-edge technologies like cell and gene therapy, oligonucleotide therapy, protein biologics, gene editing, and next-gen sequencing to develop innovative products.

Noteworthy examples include Zumutor Biologics' work on natural-killer cell receptor monoclonal antibodies for cancer treatment and Bugworks' development of novel anti-microbial therapies. While commercialisation of these technologies is still in the early stages, promising results are being seen. For example, ImmunoACT received marketing authorisation for its CAR-T cell therapy in late 2023 and has started deploying it through a network of partner hospitals in the country.

Pharmaceutical research takes a long time to be converted to products ready for sale in the market. They also require high technical expertise and have an equal chance of success and failure in the initial stages. However, investor caution, driven by lengthy R&D cycles and monetisation processes, binary outcomes, and a lack of technical expertise, is undergoing transformation, said Bain.

The emergence of sector-focused funds, technologically savvy family offices, and new investment/exit constructs is reshaping investor attitudes, evident in notable deals such as Sun Pharma's investment in Agatsa, Cipla's investment in Achira Labs, and Biological E's investment in Eyestem.

The future trajectory of innovation in the healthcare sector is expected to be shaped by the consumerisation of health, realignments in the global healthcare value chain, deepening Indian scientific and technological expertise, and favourable regulatory developments, the report added.

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