by Nandini Agarwal
Increasing participation of women in work force, rapid urbanization and an emerging middle class, while shaping the economic growth of the country, also have important social connotations. Changing lifestyles, preferences and aspirations that transcend beyond the boundaries of a traditional Indian family system are defining the growth trajectory of the In-vitro fertilization (IVF) industry in India.
There is a new generation of young, professionally oriented women who are prioritizing their career over marriage and children. Increase in the age of marriage is one of the major factors contributing to infertility, in addition to higher prevalence of contraceptive use and other medical factors. While most Indian households would attribute the cause of infertility to women, male fertility is on the rise and accounts for 30%-40% of the cases. Rising levels of tobacco and alcohol use are risk factors that are strongly associated with male infertility. Additionally, sedentary lifestyles and easy food options have driven the obesity count, making India the third-largest obese country after US and China. Increasing obesity levels and sexually transmitted infections also lead to increased infertility in both the genders.
The confluence of the above factors has resulted in India staring at a huge infertility burden. Infertility is a medical condition has a high prevalence affecting nearly 10-15% of married couples in India. It is estimated that there are 22-33 million couples in the reproductive age suffering from lifetime infertility in 2015.1 With the risk factors not showing any signs of improvement, the burden is only expected to rise further.
Current Infertility market in India
The social stigma attached to infertility and low levels of awareness has resulted in only ~1% of infertile couples coming forward for evaluation. The treatment market for infertility is estimated at ~100,000 in-vitro fertilization (IVF) cycles in 2015, and has grown at a CAGR of ~18% in the last decade from 19,000 cycles in 2005. While the growth has been fast, the penetration of the IVF market is significantly low in India compared to other countries, with only ~2800 cycles/million infertile women in the reproductive age (20-44 years) compared with ~135,000 in Japan, ~46,000 in US and ~6,500 in peers such as China.1
Key challenges that have limited treatment in India include
• Low awareness: of ART procedures among Indian couples
• High cost of treatment: IVF treatments on an average cost INR 150,000 – INR 200,000 including medicine, treatments etc. India has low average household income levels with ~20% of households having an annual income >INR 200,000. Majority of public and private insurance programs do not cover infertility
• Access to qualified IVF specialists: India has a small pool of senior IVF specialists with limited brand portability. Also, there is limited organized training or fellowship programs for building a pool of skilled IVF specialists and embryologists
• Assurance and Trust: Success rate is low with most couples having to undergo an average 1.5 cycles for successful pregnancy. Couple also have concerns on quality and safety in the absence of a regulatory framework
• Lack of regulatory framework: Currently the sector is unregulated with the ART bill 2014 pending with the government. There is no legal registration required for infertility clinics and not mandatory to report details on success of the procedures. There are also issues around surrogacy which need to be addressed such as number of pregnancies allowed for a surrogate mother, compensation, rights of a child born through surrogacy
Growth potential of the market
Notwithstanding the challenges, the market has tremendous potential given the huge infertility burden and under-penetration. Assuming an average price of Rs 150,000 and 1,00,000 cycles p.a., the market is estimated at ~INR 1,500 cr (~USD 230 mn) in 2015. As more infertile couples come forward for treatment, the IVF market is estimated to grow by ~20% to reach ~260,000 cycles by 2020. Assuming a moderate growth in pricing of 5% over the next few years, the market will reach ~Rs 5,000 cr (USD 760 mn+) by 2020.
Another factor fuelling the IVF industry is the huge demand from international patients. India is fast becoming a hub for fertility tourism attracting nationals from Britain, the United States, Australia and Japan, to name a few. The combination of the low cost of infertility treatment in India and the modern ART available here make India a top choice for infertility treatments. An average IVF cycle in the US cost USD 10,000 whereas in India it is available for about USD 3,000. The easy availability of egg donors and surrogates in India has also encouraged international patients to consider India as one of the suitable countries to pursue their treatment. However, the ART bill proposes to narrow the surrogacy services to Indian couples or a foreigner married to an Indian citizen.
IVF has also found flavor with investors globally and has emerged as a preferred choice for the fertility treatments. IVF centers offer attractive dynamics such as high volumes (as IVF becomes more acceptable and treatment costs are reduced), better margins and lower capital intensity. The global IVF market is expected to reach USD 11.3 billion by 2021, at a CAGR of 10.8% from 2015 to 2021. Changing lifestyles, delayed pregnancy, commercialization of cost-effective treatments and emerging medical tourism are expected to drive the market. In terms of number of IVF cycles performed, Asia-Pacific region dominates the global IVF market with China accounting for majority of the market.2 Australia is at the forefront of IVF market with two companies (Monash and Virtus) witnessing successful IPOs on the Australia Stock exchange giving exit to the PE investors.
Operating models in the industry
The lack of a regulatory framework requiring registrations or reporting of clinical outcomes has resulted in the industry being largely unorganized. The market is highly fragmented with host of solo practitioners setting up shops. Most IVF clinics operate at sub-optimal levels performing less than 100 cycles per annum. It is estimated that there are ~1,000 IVF clinics with the organized clinics accounting for 75% of the IVF volumes.1
However, there are few chains that have been able to achieve scale (table below). Most of the successful names have tie-up with international chains or headed by a reputed doctor. Notably, the major players in the industry have raised private equity money to fund their expansion plans. Bourn Hall India is backed by private equity firm TVM Capital MENA and Goldman Sachs is an investor in Nova Medical Centers.
Even hospitals have forayed into IVF to cater to the growing need of IVF services. Tertiary hospitals such as Apollo, Max have IVF centers as well as specialized secondary hospitals such as Cloudnine offer IVF services. Manipal entered the IVF space through the acquisition of Ankur Healthcare to expand into the lucrative single specialty segment.
The ART Bill aims to regulate the IVF industry providing for safe and ethical practices and disclosures on outcomes. We believe that the new regulatory standards should drive consolidation and make the market more organized (with small players unable to cope up and forced to shut down). Also international chains will increasingly look at India increasing the competition in the industry. Sweden’s Medicover has already announced plans to launch its fertility centers in India with an investment of USD 100 mn to open 50 clinics. The population dynamics and the huge infertility burden alone make India a difficult market to ignore. Thus, in the long run, only those domestic firms that meet the regulatory guidelines, follow transparent and ethical practices with standard operating procedures for scalability will survive in the high growth IVF industry.
1. Call for Action: Expanding IVF treatment in India, EY July 2015
This article first appeared in the MEDGATE magazine – print version – in the month of November 2016