It is hard to believe how uniquely slow government response can sometimes be.

It was 25 years ago that a geeky group of doctors and engineers in Thiruvananthapuram made India’s first biomedical implant – a heart valve for children born with rheumatic heart disease. Virtually every scientific institution of some repute contributed to its development. In March, TTK Healthcare, which had licensed the technology from Shree Chitra Tirunal Institute, sold the 100,000th unit.

In the quarter century since, despite many false starts, India did not set up a medical device regulator.Something had to give – device makers never got the home court advantage. On the contrary, for a long time, Indian manufacturers were left out of public procurements because the specs were such that the locals almost never qualified.

A beginning to end that existential crisis of medtech products – which no single ministry takes full ownership of but at least four of them exercise some control over — is now in sight.

A draft Medical Device Rules [PDF] is seeking expert opinion toward drafting a Medical Device Bill. If July 11 meeting of senior bureaucrats before the Prime Minister’s Office yields any result, the Bill will be tabled in the winter session of Parliament.

In addition, the Modi government earlier this month sent out an advisory to all state governments and Central health agencies to include Indian regulator approved medical devices for consideration in procurements and not insist on the US FDA approvals as benchmark.

If we assume that some, even if not all, of the proposed changes will get enforced, in phases at least, then the ball is lobbed back into the entrepreneurs’ court. In this import-dominated market – 60% of disposables and 90% of medical electronics are imported – medtech companies must get a few things right to win at the competitors’ own game.

Let me list three, in order.

Clinical feedback in, founder hunches out

As I wrote last week, one of the reasons Perfint Healthcare couldn’t get a proper product market fit – yes, the inevitable jargon – is because whatever on earth they did in the name of market research was horribly wrong.

Around 2013-14 when Perfint was reversing its sales and returning money to the banks, there was another medtech start-up in Chennai which was following a similar trajectory. (The chief executive doesn’t want his company or its venture capitalist to be named.)

Nearly Rs 45 crores in investment from a Chennai-based institutional investor had gone up in smoke in about 18 months. This medical device services company had switched to making products when some of its potential clients suggested “instead of sourcing why don’t you make products for us”. Without enough ground research on the kind of products they’d make, or any manufacturing roadmap, or even a professional chief executive in place, the start-up switched to making products. It blew all its cash without any product in hand.

These are probably extreme examples. And to be fair, medtech has a particularly stiff challenge. The cliche’ ‘customer is always right’ remains a cliché. Because between the end user and the product maker there are many variables – hospitals, insurers, patients, families, nurses, technicians, and a few others in the supply chain – each of which influences the product acceptance and adoption.

So, getting the correct clinical market inputs is the first important step. Not a priori market research that may throw a monkey-wrench of information and fail to capture how real users experience needs. What is needed is research that tells the truth, not what an entrepreneur wants to hear.

Cardiac surgeon MS Valiathan, under whom Tirunal Institute emerged as the first, and for a long time the only, government institution to develop several medical technologies to reach the market, told me recently most medtech innovators trip here.

“Very few bioengineers listen to doctors and which is why very few Indian medical technologies become successful,” he said. “There are hundreds of technologies sitting in various institutions for decades.”

Could there be a business opportunity in listening?

An interventional radiologist who tried Perfint’s product and later partnered with an engineering company to build a similar product, says he has no way to find out what radiologists in other parts of the country want.

He wants to know if he can hire a professional services company to truly assess users’ interest before he enters into manufacturing. “I have some radiologists in Chennai coming to my centre to try out my prototype. But that tests the market only in a limited way,” he says.

No medtech can cut its way to growth without really identifying a well-characterised clinical need. It’s proven now that medical device innovation particularly fits into the “brainstorming and rapid-prototyping cycle” that lies at the heart of design thinking approach, says Paul G Yock. An authority in bioengineering, Yock has run the popular programme in Biodesign at Stanford University for several years.

R&D costs can’t guide pricing

To cite Perfint’s example again, distributors would tell its sales executives that if they reduced the price from Rs 1 crore to Rs 10-20 lakhs, they could garner sales of Rs 100 crores or thereabouts. (It has been the elusive sales number for the founders for some years.)

Owing to healthcare’s overall complexity, where most medical decisions are rife with trade-offs and uncertainty, the standard formula of adding up all costs and working out margins can’t ensure correct pricing. Perfint management has always harped on their high cost of R&D. Is that the reason why its products were priced high and failed to get wide adoption?

The answer is both yes and no. Since the product is not a good clinical fit, lowering price wouldn’t have helped; and since the price is high, it is not bundled with other devices and sold as a package to increase usage.

Many times the price the user is willing to pay has nothing to do with the cost of R&D. Doctors say if economics doesn’t come in the way for a patient then they choose a product that gives her least discomfort. Say, a catheter, that has good tactile feel and is not traumatic to tissues while draining urine from the body.

If entrepreneurs think from users’ viewpoint and work out pricing backwards, they have a higher chance of success. That would help them keep costs under check, which is a good differentiator because governments and service providers today are forced to take a nuanced view of health economics and comparative effectiveness to keep the cost of healthcare low.

To that effect, last month the Indian government brought cardiac stents under the National List of Essential Medicines and capped their prices for the first time. (It’s another matter that domestic manufacturers are happy because the decision ends the wide price disparity between local and imported stents in a given category.)

Steady state of skills supply

That brings me to the third thing medtech entrepreneurs must take into account – ensuring a steady supply of technical skills. One way to do that is to organize as Germany’s Mittelstands [PDF], the mid-size wonders of industrial efficiency.

Given the specialised nature of these products, which require expertise from both engineering and medicine and together must understand healthcare regulations, medtech companies would do well if they fostered a culture of apprenticeship common in Mittelstands.

What these German entities have shown is that to become world class you don’t have to be big.

Since medtech in India lacks turnkey generic infrastructure which enables development costs to drop close to zero, finding an anchor teaching research institution solves the problem to an extent. Unlike corporate, a research institution is not fixated on enhancing a product line.

For nearly three decades Tirunal Institute has been such a catalyst around Thiruvanathapuram. This year alone it has added five new institutions where it’d steer 35 medtech projects of the Department of Science and Technology.

Now, entrepreneurs have to make sure these projects don’t get flubbed, but convert into products. For instance, Perfint has secured a substantive grant, close to Rs 10 crores, under the Prime Minister’s Uchchatar Avishkar Yojana to develop a new robotics product in association with IIT-Madras.

It may not be apparent, but more than professional investors today it is the government agencies which have the will, and wherewithal, to support new medical technology.  Understandably, it will lean towards technologies that will solve problems of the largest number.

Need vs Want

And that brings me to the fourth point, and one which is still open ended.

Should innovators in emerging economies restrict themselves to solving problems of the masses? Should it always be about the well-characterised clinical need or should entrepreneurs work on aspirational products which may become essential products in future?

More than noble aims, what works in entrepreneurship is the passion for solving a problem.

Aswath Ramani, who heads research and development at the TTK group, says he started work on Chitra heart valve not because six out of 1000 children were born with rheumatic heart disease and could not afford treatment, but because it was a great engineering problem to solve. At 77, he still works on new technologies but his advice to young entrepreneurs remains the same.

(As an aside, the infant food formula was developed at Mysuru’s Central Food Technological Research Institute in the 1950s but it became an epic success and an enduring brand like Amul because Verghese Kurien was passionate about it.)

Whether to fund aspirational products in India or not is a question, I’ve learnt, even the government funding agencies are grappling with.

For device makers, whatever the nature of the product, the clinical need must be addressable through a market.

“Walking every day is one of best medicines for my mother but can I address it through a market and make my mother walk? A medical device is not a consumer product; lots of people buy iPads but don’t use it [and that doesn’t materially impact Apple],” says Mohan Sivaprakasam, director of Healthcare Technology Innovation Centre at IIT-Madras which was set up a few years ago to develop and deploy medical technologies.

That explains why, Embrace, the low-cost infant warmer developed at Stanford for emerging economies which should have been a killer product in India with nearly 26 million new-born babies every year, hasn’t turned out to be so.