ross18
Rohan Sanghavi
How India & Indian Corporate Can Tap Emerging Global Healthcare Market
Executive Summary
The objective of the study is to understand and analyse the current and future scenario of the healthcare sector in India. This would enable us to
provide suitable proposal to make India the healthcare hub of the world.
We looked at the 'SWOT' analysis of the health sector and gauged the underlying opportunities, thereby capitalizing on India's current proficiencies and future efficacies. The changing scenario in the Health sector was gauged, and we analysed government policies, inter-industry competition and economic structural and environmental factors. This enabled us to understand how this sector could be equipped to cope with future change. We have, thus, proposed certain measures with the use of which India can make great advancements in the healthcare field. The 'Brand Prism' is kaleidoscope that provides us with the correct perspective to analyse the health sector's offering in the view of a complete product. The brand prism helps us to identify and then suggest measures for certain pressing problems that have been plaguing the Indian health sector, the knowledge of which will help identify the key areas of improvement and further development.
The areas identified were the product, its attributes, the availability and the awareness, the services provided and the comparison between the public and private players. We sought to analyze what determines the demand of the product that is the healthcare sector as a whole and give solutions to the demand and supply problems and the problems of the shortage of certain services and the standardization of certain procedures.
Introduction
Hubs
'Hubs' are tertiary healthcare providers that deliver specialised healthcare services including same-day surgery, endoscopy, dialysis, chemotherapy, pulmonary functions, ultrasound, radiology, mammography, CT scan, specialist consulting suites, diagnostic service, pre-admission and post-discharge services. These services require high technology and specialist doctors.
Objectives
With a GDP growth of 7.8%, India is one of the fastest growing economies in the world and the perfect health-hub of the world. The fastest growing industries are: -
The healthcare sector has been growing at a frenetic pace in the past few years. The windfall began ever since the developed world discovered that it could get quality service for less than half the price.
Need of the Hour
Injecting new life into the Medical Sector
SWOT Analysis
Strengths
Weakness
Opportunities
Threats
Challenges Ahead
Structural Change
Main Players
1. Major corporate like the Tatas, Apollo Group, Fortis, Max, Wockhardt, Piramal, Duncan, Ispat and Escorts have made significant investments in setting up state-of-the-art private hospitals in cities like Mumbai, New Delhi, Chennai and Hyderabad.
2. Using the latest technical equipment and the services of highly-skilled medical personnel, these hospitals are in a position to provide a variety of general as well as specialist services.
3. These services are available at extremely competitive prices, encouraging patients not only from developing countries but even from a number of developed ones to come to India for specialized treatment.
4. In the next 10 years, tertiary care in India will be predominantly private healthcare and extensive public & private partnerships. The secondary care would be private & public healthcare and selective public & private partnerships. The primary care would be predominantly public, especially in the rural areas.
Economic Factors
So, why is there a Revolution in Healthcare in India?
First, there are economic factors that make India an exciting market.
The shortage of qualified and trained nursing staff is a factor that is affecting hospitals across the country. ICRA notes that many hospitals have been responding by operating at below-norm nurse to patient ratios, stretching nursing staff working hours, and even recruiting partly-skilled nursing personnel.
Government Factors
Patentability
The Act defines "invention" as a new product or process involving an inventive step and capable of industrial application.
The section enumerates 15 such non-patentable inventions which can be used as a ground in opposing a patent before its grant or in revocations proceedings after the grant.
The issue of patentability assumes importance as it limits the scope of inventions for which a patent can be claimed.
Road Ahead
The industry should look at the flexibilities provided within the patent system and the WTO and devise ingenious ways to apply and interpret them. By doing so, it would be conforming its practices with the Doha Declaration on Pubic Health which allows a Member Country to interpret and implement TRIPS Agreement in a manner supportive of its right to protect public health and to promote access to medicines for all.
Comparative Costs Advantage of India
A huge number of International patients are traveling to India to seek quality healthcare at a fraction of the cost back home. They are admitted at private hospitals with state-of-the-art equipment and medical practitioners trained abroad, these 'five-star' hospitals now attract a new breed of international traveller - the 'medical tourist'.
In the last couple of years, much hype has surrounded the corporatisation of health sector with mushrooming super-specialty hospital projects commissioned in various parts of the country.
An Important Question?
Are these hi-tech tertiary care hospitals paying off?
From an investor point of view, they aren't - according to recent CII-McKinsey Report on the healthcare industry. The report titled "The Road Ahead" says -
In other words, NPV is the matrix to assess the viability of a business model and a positive NPV means a viable business opportunity.
Conclusively, there is enough scope for primary healthcare players to make profits.
Proposals for Making Indian Healthcare a World Brand
1. Acceptable Product
Raw Materials Perspective
Today, many of the medicinal plants available in the market place are adulterated and are microbial contaminated. This is due to absence of
raw-material certification requirements for the industry by the FDA,
and absence of suitable post-harvest technologies, especially related to drying of medicinal plants. It is absolutely essential that ISM (Indian System & Medicines) Department sponsors and promotes regional certification facilities to set gold standards for raw drugs.
An Agmark or ISO-9000 like standard for medicinal plants can be immediately promoted by the ISM Department, to encourage quality awareness in industry and amongst consumers.
The ISM Department can also support consumer research and education organization to undertake consumer awareness campaign based on quality assessment of raw materials and finished products used by the herbal industry.
2. Relevance to Customers
Some contend that the prevailing primary care model such as GPs' clinics is not yet saturated because a lot of people still go directly to tertiary care centers for treatment. Experts believe that there is still a large number of urban rich who visit tertiary care hospitals for "quality" and "the best care".
3. Returns to Customers
This demand for "quality" and Mckinsey's estimate of a "market" corroborates opportunity for growth. But will it actually work in favour of the investors? Some industry observers feel that there is a gap in the primary care segment, the family physician concept may be a deterrent, thus, the returns to customer must be maximized.
High cost of investment and low volumes are other barriers to primary care centers, feel some. While the pioneer of "branded primary care" Max India has not set a very favourable example for other players to enter healthcare beginning with primary care, experts feel it is too early to comment on its success.
4. Increasing Accessibility
* The advantage of pharmacy chains is primarily the increased accessibility to new markets.
* Computerized lab and three channels ECG machine available on road equipped to impart health education through audio visual facilities.
5. Comparative Advantages
Open-Heart Surgery - Open-Heart Surgery in the UK can cost more than $20,000 and double that in the United States. In India, leading hospitals can perform that surgery for less than $5,000.
Competitive advantage would go to firms that best control clinical trial costs, which alone account for a third of the total cost of drug development and almost half the time taken. Most Indian pharma majors are meeting this challenge by conducting clinical trials for their drugs indigenously.
6. Response Generation through Promotion
FMRAI has been consistent in its approach towards ethical sales promotion and come out with a model sales promotion policy to be followed by every pharmaceutical company of India. FMRAI members were the first to point out the illegal clinical trials carried out by Sun Pharmaceuticals for their Letrozole brand and personnel attached to Sun Pharma were thrown out of their jobs.
7. Availability of the Product
These stores could also look into offering certain other products of daily use through their outlets. Their key proposition could be lower drug prices compared to the neighbourhood pharmacist, which would result from bulk buying discounts that the chain would command and would partly pass on to the consumer.
8. Awareness Among Customers
Value Added Services
Growing awareness levels on health conditions, urban lifestyles, higher paying power of the population and the emergence of concentrated posh neighbourhoods of the upwardly mobile population in most top cities of the country offer scope for a standardised, quality offering in the form of fitness centers.
These could typically include certain indoor sports like squash and badminton, running tracks (could be indoor), gymnasium and other facilities like aerobics, yoga and meditation. Various forms of health counseling including nutrition advice, exercising, non-medicinal cure to certain diseases would also form revenue streams for such setups.
- by Jyoti Singh & Sugandha Bhandari
Executive Summary
The objective of the study is to understand and analyse the current and future scenario of the healthcare sector in India. This would enable us to
provide suitable proposal to make India the healthcare hub of the world.
We looked at the 'SWOT' analysis of the health sector and gauged the underlying opportunities, thereby capitalizing on India's current proficiencies and future efficacies. The changing scenario in the Health sector was gauged, and we analysed government policies, inter-industry competition and economic structural and environmental factors. This enabled us to understand how this sector could be equipped to cope with future change. We have, thus, proposed certain measures with the use of which India can make great advancements in the healthcare field. The 'Brand Prism' is kaleidoscope that provides us with the correct perspective to analyse the health sector's offering in the view of a complete product. The brand prism helps us to identify and then suggest measures for certain pressing problems that have been plaguing the Indian health sector, the knowledge of which will help identify the key areas of improvement and further development.
The areas identified were the product, its attributes, the availability and the awareness, the services provided and the comparison between the public and private players. We sought to analyze what determines the demand of the product that is the healthcare sector as a whole and give solutions to the demand and supply problems and the problems of the shortage of certain services and the standardization of certain procedures.
Introduction
Hubs
'Hubs' are tertiary healthcare providers that deliver specialised healthcare services including same-day surgery, endoscopy, dialysis, chemotherapy, pulmonary functions, ultrasound, radiology, mammography, CT scan, specialist consulting suites, diagnostic service, pre-admission and post-discharge services. These services require high technology and specialist doctors.
Objectives
- Reduce the average number of days of in-patient stay
- Reduce number of beds required
- Maximize patient turn-over for specialist services
With a GDP growth of 7.8%, India is one of the fastest growing economies in the world and the perfect health-hub of the world. The fastest growing industries are: -
- Business Process Outsourcing
- Software Services
- Insurance
- Healthcare
The healthcare sector has been growing at a frenetic pace in the past few years. The windfall began ever since the developed world discovered that it could get quality service for less than half the price.
Need of the Hour
Injecting new life into the Medical Sector
- Embrace the role of IPRs in kick-starting innovation
- Develop and strengthen the base of scientists through training them in world-class drug discovery skills
- Increase interaction between industry and academia
- Pay attention to quality and leverage the global recognition earned for IT skills
- Take the path of collaborative growth through global partnerships and alliances
- Changing patent and other policies like data exclusivity help in changing scenario
SWOT Analysis
Strengths
- Expertise in reverse technology
- Support at the state government level
- Emergence of bio-tech parks
- Incentives to develop business
- Natural competitive advantages of language
- Low costs and ever-expanding educated workforce
Weakness
- The rising cost of healthcare delivery
- Limited access to life saving drugs
- Majority of private hospitals expensive for a normal middle class family
- Government is responsible to improve primary healthcare infrastructure
Opportunities
- Greater incentive for original drug discovery will create opportunities for Indian companies to develop new competencies through collaborative research and global alliances
- Big pharma and biotech companies to choose India as the preferred hub for their global R&D and manufacturing operations
Threats
- Increasing cost of drug discovery & development and the increasing time to market
- Declining R&D productivity (high attrition rates and cost of failures
- Increasing regulatory demands of the USFDA for drug
Challenges Ahead
- Complexion of the Health Science industry to alter significantly post 2005
- Global competitiveness will be the key to growth and survival under the new IPR regime
- Industry Flash: Changing Scenario in the the Indian Healthcare Sector
Structural Change
- The increase in the population share of the elderly is also causing a change in the pattern of demand for healthcare services. Such change is opening up both preventive and curative care opportunities, which the existing and new players are exploiting. For instance, in-patient capacity in cardiac care is close to the point of reaching excess supply in certain cities.
- Hospitals would organize their resources and manpower within structures that had evolved rather than been designed. The processes would be structured to ensure multiple points of control rather than patient convenience. Information capture would be rudimentary and information rarely integrated beyond that required for reporting purposes, because of which any data-based quality control would not be possible.
Main Players
1. Major corporate like the Tatas, Apollo Group, Fortis, Max, Wockhardt, Piramal, Duncan, Ispat and Escorts have made significant investments in setting up state-of-the-art private hospitals in cities like Mumbai, New Delhi, Chennai and Hyderabad.
2. Using the latest technical equipment and the services of highly-skilled medical personnel, these hospitals are in a position to provide a variety of general as well as specialist services.
3. These services are available at extremely competitive prices, encouraging patients not only from developing countries but even from a number of developed ones to come to India for specialized treatment.
4. In the next 10 years, tertiary care in India will be predominantly private healthcare and extensive public & private partnerships. The secondary care would be private & public healthcare and selective public & private partnerships. The primary care would be predominantly public, especially in the rural areas.
Economic Factors
So, why is there a Revolution in Healthcare in India?
First, there are economic factors that make India an exciting market.
- Since healthcare is dependent on the people served, India's huge population of a billion people represents a big opportunity.
- Today, people are spending more on healthcare and preferring private services to government ones.
- Hospitals in India are running at 80-90% occupancy. With the demand for healthcare far exceeding supply, India's healthcare industry is expected to grow by around 15% a year for the next six years
- Hospitals in India conduct the latest surgeries at a very low cost
The shortage of qualified and trained nursing staff is a factor that is affecting hospitals across the country. ICRA notes that many hospitals have been responding by operating at below-norm nurse to patient ratios, stretching nursing staff working hours, and even recruiting partly-skilled nursing personnel.
Government Factors
- To encourage R&D, Government extended tax holiday to R&D companies. Restriction of full exemption being limited to only 1% of last year's export, turnover is also lifted for R&D units
- The benefit of full customs duty exemption for specified equipment will be available for their manufacturing activity to the extent of 25% of the previous year's export turnover. This will help the research based companies like Ranbaxy, Cipla, DRL, etc.
- All drugs and materials imported or produced domestically for clinical trials will be exempted from customs and excise duties. This will encourage foreign companies to produce drugs in India
Patentability
The Act defines "invention" as a new product or process involving an inventive step and capable of industrial application.
The section enumerates 15 such non-patentable inventions which can be used as a ground in opposing a patent before its grant or in revocations proceedings after the grant.
The issue of patentability assumes importance as it limits the scope of inventions for which a patent can be claimed.
Road Ahead
The industry should look at the flexibilities provided within the patent system and the WTO and devise ingenious ways to apply and interpret them. By doing so, it would be conforming its practices with the Doha Declaration on Pubic Health which allows a Member Country to interpret and implement TRIPS Agreement in a manner supportive of its right to protect public health and to promote access to medicines for all.
Comparative Costs Advantage of India
A huge number of International patients are traveling to India to seek quality healthcare at a fraction of the cost back home. They are admitted at private hospitals with state-of-the-art equipment and medical practitioners trained abroad, these 'five-star' hospitals now attract a new breed of international traveller - the 'medical tourist'.
In the last couple of years, much hype has surrounded the corporatisation of health sector with mushrooming super-specialty hospital projects commissioned in various parts of the country.
An Important Question?
Are these hi-tech tertiary care hospitals paying off?
From an investor point of view, they aren't - according to recent CII-McKinsey Report on the healthcare industry. The report titled "The Road Ahead" says -
- The net present value (NPV) of the primary care market is a positive of Rs. One Crore.
- While the NPV for tertiary care market is negative.
In other words, NPV is the matrix to assess the viability of a business model and a positive NPV means a viable business opportunity.
Conclusively, there is enough scope for primary healthcare players to make profits.
Proposals for Making Indian Healthcare a World Brand
1. Acceptable Product
Raw Materials Perspective
Today, many of the medicinal plants available in the market place are adulterated and are microbial contaminated. This is due to absence of
raw-material certification requirements for the industry by the FDA,
and absence of suitable post-harvest technologies, especially related to drying of medicinal plants. It is absolutely essential that ISM (Indian System & Medicines) Department sponsors and promotes regional certification facilities to set gold standards for raw drugs.
An Agmark or ISO-9000 like standard for medicinal plants can be immediately promoted by the ISM Department, to encourage quality awareness in industry and amongst consumers.
The ISM Department can also support consumer research and education organization to undertake consumer awareness campaign based on quality assessment of raw materials and finished products used by the herbal industry.
2. Relevance to Customers
Some contend that the prevailing primary care model such as GPs' clinics is not yet saturated because a lot of people still go directly to tertiary care centers for treatment. Experts believe that there is still a large number of urban rich who visit tertiary care hospitals for "quality" and "the best care".
3. Returns to Customers
This demand for "quality" and Mckinsey's estimate of a "market" corroborates opportunity for growth. But will it actually work in favour of the investors? Some industry observers feel that there is a gap in the primary care segment, the family physician concept may be a deterrent, thus, the returns to customer must be maximized.
High cost of investment and low volumes are other barriers to primary care centers, feel some. While the pioneer of "branded primary care" Max India has not set a very favourable example for other players to enter healthcare beginning with primary care, experts feel it is too early to comment on its success.
4. Increasing Accessibility
- Pharmacy Chains
* The advantage of pharmacy chains is primarily the increased accessibility to new markets.
- Hospitals on Wheels
* Computerized lab and three channels ECG machine available on road equipped to impart health education through audio visual facilities.
5. Comparative Advantages
Open-Heart Surgery - Open-Heart Surgery in the UK can cost more than $20,000 and double that in the United States. In India, leading hospitals can perform that surgery for less than $5,000.
US ($) India ($)
Bone Marrow Transplant 400,000 30,000
Liver Transplant 500,000 40,000
Open Heart Surgery (CABG) 50,000 4,400
Neuro Surgery 29,000 8000
Knee Surgery 16,000 4,500
Competitive advantage would go to firms that best control clinical trial costs, which alone account for a third of the total cost of drug development and almost half the time taken. Most Indian pharma majors are meeting this challenge by conducting clinical trials for their drugs indigenously.
6. Response Generation through Promotion
FMRAI has been consistent in its approach towards ethical sales promotion and come out with a model sales promotion policy to be followed by every pharmaceutical company of India. FMRAI members were the first to point out the illegal clinical trials carried out by Sun Pharmaceuticals for their Letrozole brand and personnel attached to Sun Pharma were thrown out of their jobs.
7. Availability of the Product
- Drug stores chains offering services like
- Home delivery
- Assured availability of uncommon drugs
- Assurance on the genuineness of the drugs
- 24 X 7 service hours are increasingly becoming a necessity
These stores could also look into offering certain other products of daily use through their outlets. Their key proposition could be lower drug prices compared to the neighbourhood pharmacist, which would result from bulk buying discounts that the chain would command and would partly pass on to the consumer.
8. Awareness Among Customers
Value Added Services
Growing awareness levels on health conditions, urban lifestyles, higher paying power of the population and the emergence of concentrated posh neighbourhoods of the upwardly mobile population in most top cities of the country offer scope for a standardised, quality offering in the form of fitness centers.
These could typically include certain indoor sports like squash and badminton, running tracks (could be indoor), gymnasium and other facilities like aerobics, yoga and meditation. Various forms of health counseling including nutrition advice, exercising, non-medicinal cure to certain diseases would also form revenue streams for such setups.
