TechEmerge Webinar, Understanding the Basics: HealthTech in India
- 1. Understanding the Basics: HealthTech in India TechEmerge Innovator Bootcamp Series Webinar #1 In partnership with: Powered by:
- 2. Introductions • Dheeraj Batra – Co-founder and Director of Arogya Finance as well as Co- founder of DLabs at the Indian School of Business • Dr. Ruchi Dass – Managing Director of Healthcursor Consulting Group • Iris de Graaf – International Finance Corporation • Loretta Foran – International Finance Corporation • Jennifer David – Associate Director, Catalyst @ Health 2.0 2
- 3. International Finance Corporation (IFC) IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. In FY15, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity. 3
- 4. Introduction to Healthcare Dheeraj Batra Co-founder and Director of Arogya Finance, Co-founder of DLabs at the Indian School of Business
- 5. Our goal should be that every Indian should be able to afford quality Healthcare 5
- 6. But the sad reality is… INSURANCE PENETRATION IS LOW < 15% Most of the remaining are unable to pay out-of-pocket DISEASE BURDEN IS HIGH India ranks near the top in terms of the non communicable disease burden with an estimate that 60% of deaths in 2014 were due to these conditions INDIA HAS AWFUL HEALTH STATS India has among the worst mortality rates, lowest ratio of hospital beds per capita, lowest ratio of doctors & nurses per capita, etc & THERE ARE NO EASY ANSWERS @ ~1.5%, total expenditure on Healthcare as a percentage of GDP, is among the lowest in the world 6
- 7. But there are two sides to every coin 7
- 8. Sure, insurance penetration is low, but… • Lends to those who cannot afford to pay for their expenses • Ground-breaking psychometric test • Low cost micro-insurance • Innovative partnership with mobile carrier Telenor • Low cost community insurance model • Pakistan originated, now moving to India Each one of those factors presents an opportunity for innovation 8
- 9. Sure, the disease burden is high, • Low cost cardiac chain • Now expanding to include other areas • Also expanding geographically • PPP partnership to prevent and treat TB patients • Growing internationally • Low cost diagnostic manufacturer • Raised several rounds of funding from marquee investors Each one of those factors presents an opportunity for innovation 9
- 10. Sure, India has awful stats • Low-cost maternity care chain • Dramatically lower costs than traditional providers • Primary care chain • Multiple locations with a professional management team and millions raised • Telemedicine innovator to leverage existing resources more efficiently Each one of those factors presents an opportunity for innovation 10
- 11. The problems are real but so are the opportunities 1. Population - Growing middle class able to pay for services - Increasingly concerned about health issues 2. Attractive - Investment into Healthcare sector at an all time high - But still in search of good ideas with great teams 3. Government coming around - Increasing acceptance of PPP models - Willingness to engage and work with startups 11
- 12. The Indian Healthcare Industry Dr. Ruchi Dass Managing Director of Healthcursor Consulting Group
- 13. Per Capita Healthcare Spending, 2009 - 2014 Introduction to Indian Healthcare Industry • Dynamics of healthcare industry in India are largely influenced by government initiatives. These initiatives in the form of investment policies play a significant role in attracting investments from private entities both domestically and through foreign sources. • The industry was estimated to be worth INR 6,802.7 billion in 2015. • Rural India, which constitutes for over 70% of the country’s population, is a major demand source keeping in view healthcare spending as a percentage of India’s population. Per capita healthcare spending rose by about 9% over the past five years. • Spending is expected to gain further traction considering increasing per capita income levels, better access to healthcare facilities, and government’s universal healthcare plan that is aimed at providing guaranteed benefits at a cost of INR 1.6 trillion. • With increasing population and access to healthcare facilities, there is expected to be a requirement for approximately 650,000 additional beds over the next five years (over 3 million in the next 20 years). These figures suggest an investment opportunity of about INR 2.04 trillion (USD 30 billion). Source: World Bank, WHO Health Expenditure Database 13
- 14. Growth Potential • With eased FDI norms and increased investment size of private equity funds in hospital chains (from USD 15 million to USD 25 million), the hospital sector is expected to register tremendous gains in the future. • Healthcare IT, is also expected to benefit from the e-health initiative a part of Digital India drive. The Government of India’s ‘SEHAT’ initiative, a common service platform to empower rural citizens regarding telemedicine is a major determinant of the segment’s prospects, considering the contribution of rural population towards the overall healthcare industry. • The medical devices sector in India is registering gains partially due to awareness among populace regarding early disease detection & prevention, changing disease prevalence patterns, and socio-economic inclusion of rural population. • However, major growth driving factors such as the development of healthcare infrastructure, increased FDI inflows, and product development & manufacturing outsourcing to India shall allow for a more sustained growth. India Healthcare Expenditure, 2014 & 2020 Source: IBEF, AIMED, Dept. of Pharmaceuticals, IRDA, NABH, Dept. of Health & Welfare, Dept. of Commerce, WHO, KoL Interviews, Company Annual Reports 14
- 15. Market Segmentation India Healthcare Expenditure by Sector, 2012-2020, (INR Billion) Source: IBEF, AIMED, Dept. of Pharmaceuticals, IRDA, NABH, Dept. of Health & Welfare, Dept. of Commerce, WHO, KoL Interviews, Company Annual Reports 15
- 16. Healthcare Delivery • Healthcare delivery services in India is highly dominated by the private sector which accounts for nearly 70% of the overall services. As of 2013, overall government hospitals numbered at nearly 59,300 or approximately one quarter of the available facilities. • The private sector over the past has attracted investments in the form of FDI, and high levels of integration, mergers, and joint ventures along the primary, secondary, and tertiary care levels. Recent initiatives include Apollo Hospitals’ venture with Datar Genetics and Sanofi’s USD 13.5 million investment in Apollo Sugar Clinics. India Government Healthcare Services, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 900.5 970.0 1,122.8 1,554.7 1,989.1 2,425.2 2,861.9 3,298.6 3,733.6 India Private Healthcare Services, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2,438.1 2,443.9 2,615.3 3,579.7 4,527.4 5,456.9 6,366.4 7,254.9 8,119.2 • Traditionally, government spending on healthcare delivery as compared to private has been substantially lower, accounting for 30% of the overall expenditure. As of 2013, of nearly 2 million government hospital beds, only 28% of them accounted for rural hospitals considering nearly 68% of the population lives in rural areas. • Private healthcare delivery services are the dominant segment with their value estimated at over INR 2,500 billion in 2014. Eased FDI norms and increased private sector investment size are key driving factors for the private hospital services market growth. • Major hospital chains are actively increasing their bed capacities and expanding into Tier II and Tier III cities. Hospital spending patterns suggest that majority of their expenditure is aimed at improving bed capacities in rural and suburban areas either through acquisitions or through joint ventures with foreign healthcare delivery firms 16
- 17. Major Trends • Shift from communicable to ‘lifestyle’ diseases With the increasing pace of life and growing urbanization, many modern day problems like obesity, hypertension, blood sugar etc. are emerging as major ailments shifting the disease profiles from infectious to lifestyle diseases. • High demand here has been an exponential growth in demand for high quality and specialized healthcare services in tier II and tier III cities and smaller towns and the Government of India has also relaxed the tax burden on hospitals in these areas for the first five years (IBEF, 2011). • Emergence of tele-medicine and technology driven healthcare services Supported by the robust ICT sector in India, tele-medicine is rapidly growing in most parts of the country. Several major providers like Apollo, AIIMS, Narayana Hrudayalaya etc. have adopted telemedicine services and a number of others have also developed private-public- partnerships (PPP) in this domain. • Increase in investor interest and rising private equity and merger and acquisition (M&A) activity In the last decade, this sector has also seen a high interest from investors especially in new product development, research, as well as the introduction of specialized delivery models. • Evolution in delivery models New delivery models to reach un-serviced areas are also being developed and some have already demonstrated sustainability while others are informative pilot projects. 17
- 18. Technology Spend - Medical Devices India Medical Expenditure by Govt. Hospitals, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 Disposables 22.7 25.3 32.7 37.9 44.6 52.4 61.7 72.5 85.3 Medical Electronics & Equipment 30.7 35.8 39.9 46.7 54.2 62.9 72.9 84.5 97.9 Implants 4.6 5.8 6.8 8.3 10.1 12.1 14.6 17.6 21.1 Surgical Instruments 9.0 12.8 15.1 17.7 21.2 25.3 30.1 36.0 43.0 Others 4.8 6.3 6.8 8.1 9.5 11.0 12.9 15.0 17.5 Total 71.8 86.1 101.3 118.8 139.5 163.7 192.2 225.5 264.7 India Medical Expenditure by Private Hospitals, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 Disposables 56.7 62.6 80.0 91.9 107.1 124.7 145.3 169.2 197.1 Medical Electronics & Equipment 77.7 89.8 98.9 114.5 131.3 150.7 172.9 198.2 227.4 Implants 12.9 16.1 18.8 22.8 27.3 32.5 38.9 46.4 55.3 Surgical Instruments 20.5 28.9 33.6 39.0 46.1 54.5 64.2 75.9 89.6 Others 15.5 20.3 21.6 25.6 29.6 34.1 39.4 45.4 52.4 Total 183.3 217.7 252.9 293.8 341.4 396.6 460.7 535.2 621.8 Source: IBEF, AIMED, Dept. of Pharmaceuticals, IRDA, NABH, Dept. of Health & Welfare, Dept. of Commerce, WHO, KoL Interviews, Company Annual Reports 18
- 19. Technology Spend - Diagnostics India Diagnostic Services Expenditure by Hospital, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 Government 58.5 49.3 41.6 64.4 88.7 114.3 141.4 169.8 199.6 Private 207.6 172.4 143.2 212.8 280.9 347.7 413.0 477.0 539.6 Total 266.1 221.8 184.8 277.2 369.6 462.0 554.4 646.8 739.2 Source: IBEF, AIMED, Dept. of Pharmaceuticals, IRDA, NABH, Dept. of Health & Welfare, Dept. of Commerce, WHO, KoL Interviews, Company Annual Reports • Diagnostics market in India is marked by the presence of very large unorganized sector. In FY 2014-2015, there were nearly 100,000 Diagnostic Laboratories in the country out of which Pathology service accounted for around 70% and Imaging Services for 30% of the total market share. • SRL Diagnostics (Fortis Healthcare) accounts for nearly 9% of the total India’s Diagnostics sector and for nearly 40% in the organized sector. Lack of stringent government regulations in the diagnostics sector, low per capita healthcare expenditure, and lack of reimbursement infrastructure are the key reasons for the presence of unorganized diagnostic services. • Due to the presence of such a large unorganized sector Government and Private hospitals accounted for a mere 35% collectively of the total Diagnostics services. Of which private hospitals accounted for the majority of the market share. 19
- 20. Technology Spend - Healthcare IT Healthcare IT Spending by Govt. Hospitals Access to technology in government facilities is limited to central govt. hospitals and medical institutions that provide healthcare delivery services. In order to enhance capabilities of govt. hospitals and integrate their services to a large rural base, the Government of India has initiated policies such as Health Management Information System (HMIS) portal through Digital India drive. Healthcare IT Spending by Private Hospitals From a private sector perspective, hospitals entering into alliances with IT & KPO giants such as GE Healthcare, IBM, HP, TCS and Cisco for better integration of IT services with healthcare to provide e-health and m-health platforms are also to drive the segment growth over future. Access to technology among private healthcare facilities is highly prevalent with is significantly higher among hospital chains that aim to centralize their database and offer a single window access to patients. One of the major factors driving healthcare IT spending among private hospitals is the increasing penetration of smartphone usage in India. Access to internet and smartphone applications enables healthcare service providers to connect consumers through e-health and m-health platforms. India Healthcare IT Expenditure by Hospital, 2012-2020, (INR Billion) 2012 2013 2014 2015 2016 2017 2018 2019 2020 Government 6.2 7.2 8.6 10.1 11.7 13.3 15.1 16.8 18.5 Private 45.5 50.3 57.3 64.5 71.6 78.6 85.6 91.4 97.1 Total 51.7 57.5 65.9 74.6 83.3 92.0 100.7 108.2 115.6 Source: IBEF, AIMED, Dept. of Pharmaceuticals, IRDA, NABH, Dept. of Health & Welfare, Dept. of Commerce, WHO, KoL Interviews, Company Annual Reports 20
- 21. Foreign Healthcare companies • Not conducting market research- not been able to understand the ground realities. • Not able to create viable offerings. • Getting the business model wrong. • Not being able to change the fundamental profit formulas and operating models, consigning these companies to sell largely in the highest income tiers, which in most emerging markets aren’t big enough to generate sufficient returns. • Following a non- systematic process for reconceiving the business model • Not seeking local assistance and guidance related to IP protection and other legal matters. Factors that affect market entry, adoption, scale, growth and overall success includes: 21
- 24. Market Entry Barriers for Foreign Medical Device Companies in India Source: HealthCursor Primary research,, KoL Interviews 2016 24
- 25. Opportunities for Foreign Medical Device Companies Source: HealthCursor Primary research,, KoL Interviews 2016 25
- 26. Guidance Required- Medical Device Companies Source: HealthCursor Primary research,, KoL Interviews 2016 26