Insight into refurbished market

The demand for refurbished medical supplies has been increasing in developing countries with high penetration in level II and III towns

By Vivek Tiwari

The Indian medical sector underwent an 18% growth from 2010-16, a period in which its valuation increased from $59 billion to $160 billion. More so, the industry is expected to grow at a rate of 15% from 2016-20 with an expected valuation of $280 billion by the end of FY2020.
Indian states such as Chennai-also known as the ‘Health Capital of India’-has become one of the most sought-after places for medical tourism, attracting 45% of the world’s health tourists. The population residing in tier 1 and metro cities of the country are recipients of world-class medical facilities provided by multi-speciality and super-speciality facilities, using medical supplies most of which are imported and require huge capex to acquire. However, the other side of the loop is that there are healthcare establishments in tier II and III cities and rural areas that are operating on shoe-string budgets to provide patient care. This is where refurbished medical products come to their rescue. A rise in lifestyle and non-communicable diseases has called for the need for more complex medical treatments which can be only done via innovative and technologically advanced medical equipment. However, such equipment comes with high manufacturing, maintenance, and R&D expenses which cannot be borne by many mid-level hospitals in India.

A total of 2,800 refurbished medical equipment were imported from 2014-16 in India.

Purchasing refurbished medical equipment assists healthcare establishments with financial constraints in saving almost 50% of their expenses which is dedicated to the procurement of medical supplies. Additionally, as they can procure a diverse range of refurbished supplies, it enables them to provide diagnosis and treatments for medical problems which were previously unserviceable for them. Through the purchase of refurbished medical supplies, hospitals can keep themselves updated with the latest innovations and technologies in the medical industry. According to a 2016 news report by Business Wire, the demand for refurbished medical supplies was increasing in developing countries with high penetration in level II and III towns. The report added that in 2015, refurbished medical supplies accounted for 15-20% of the global medical devices market.
However, the Association of Indian Medical Device Manufacturers (AiMeD) wants a complete ban on import of pre-owned and refurbished medical equipments, fearing incorrect diagnosis and accuracy and also that it can hamper ‘the Make-in India’ Initiative. Even the Inter-Ministerial Committee of Government of India has sought feedback from various stakeholders for restricting import of refurbished medical equipment.
However, developing economies can be said to be tailor-made for refurbished products. Even if a technology is obsolete in some parts of the world or even domestically, it can still serve useful path breaking healthcare delivery change for certain ailments specially in tier II & III regions, specially as the paying capacity is low with lesser volumes, and where high-end latest equipment may not be needed now and hospital owners defer purchase decisions for expensive capital purchase which ultimately hampers the health of the region for lack of any such equipment. Also we have to be conscious of the fact that discarding equipment if it can still be properly used can negatively harm the environment due to harmful nature of the equipment waste.

The AiMeD wants a complete ban on import of pre-owned and refurbished medical equipments, fearing incorrect diagnosis.

Apart from mid-tier hospitals, refurbished equipment (especially laboratory equipment) are also being used as a contingency in the multi and super-specialty hospitals as well. Developing countries are high-cost economies for capital equipment where manufacturers are continually trying to reduce their capital costs. This makes them fertile markets for refurbished supplies in the medical as well as other industries. But the concerns of AIMED is genuine and steps to ensure safety and accuracy and even certifying suppliers is essential, keeping in mind health and safety of patients.
At this juncture, it is imperative to note that regardless of a favourable market trend for refurbished equipment, there is an ongoing debate as to whether they are safe to use or hazardous. The ones who are vying for refurbished equipment make a point of financial savings along with the benefits mentioned above. The opposing party, however, states that such equipment poses safety issues such as patients and doctors getting exposed to potential radiation (for example with refurbished radiology equipment and even inaccurate results if not properly calibrated). There is this concern of availability of spare parts always for old equipment.
Both sides hold valid points. However, the most pivotal aspect here is choosing the right vendor. Hospitals must purchase refurbished equipment from certified manufacturers. Bona fide refurbished products involve operational processes such as overhauling the equipment with genuine parts, guarantees and warranties of quality and safety along with maintenance services. Refurbished products sold by unlicensed sellers come with none of the above-mentioned services and therefore can become a liability for hospitals and pose potential risks for patients.
According to news reports, a total of 2,800 refurbished medical equipment were imported from 2014-16 in India. Out of that only 120 were imported from OEMs. Approximately, 95% of refurbished products were sourced from non-OEM traders, the report added. Such statistics can justify the skepticism regarding refurbished products.
However, some organisations are working towards creating a positive opinion among Indian healthcare centres when it comes to using refurbished medical equipment. The company conducts thorough background checks on sellers after which they are allowed to sell the refurbished products. This way, patients and doctors are at a lesser risk if they use them.
When it comes to India, we have to understand one key differentiator. Many a times people are not eager to purchase or use second-hand items, no matter how good is the quality. There is a vast distinction between refurbished and used items. The former has been verified and tested for efficiency while the latter is not. However, when it comes to the consumer, the distinction line, at times, is blurred.

Purchasing refurbished medical equipment assists healthcare establishments with financial constraints in saving almost 50% of their expenses.

However, faith in refurbished products can be restored if hospitals connect with verified suppliers. It is also the manufacturer’s responsibility to recalibrate medical devices with genuine parts and try to restore it to its original state as nearly as possible. Additionally, it is also imperative that the recalibration process is transparent so that the hospital has more clarity on what they are purchasing. After purchase, manufacturers should provide the same maintenance as they would have had if the product would have been first-hand.
This way two goals can be achieved. Firstly, this will stop the sale and use of doubtful ‘branded’ refurbished supplies which are sold by traders and not by verified vendors which can lead to fatal consequences if used. Secondly, healthcare establishments and patients will be more aware and will welcome the use of refurbished medical equipment. This can, in turn, will result in reduced OPEX for hospitals and affordable healthcare for patients.
The Government has to have favourable encouraging tax incentives to further
the ‘Make In India’ strategy in medical devices specially keeping in mind the revolutionary Ayushman Bharat scheme where every second patient now will be insured and can access expensive procedures and the demand for good new medical equipment will only increase in demand, else how millions of people will be serviced under free insurance? In such cases, entrepreneurial ventures may be keen to make diagnostic equipment in India or even international brands may open manufacturing plants here.
The other point will be to not allow India to be a dumping ground for faulty pre owned or unsold equipment and have stringent policies that will be needed to strike a balance of continuing to use good working pre-owned equipment and also be able to buy incentivised brand new cost effective medical equipment.

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