The Indian Healthcare Challenge
Providing high quality yet affordable healthcare to our 1.3
Billion citizens is one of our biggest challenges. Several distinctive
characteristics of our existing healthcare system are well known. It is
city-centric, with the availability of medical support poor in rural India.
Qualified doctors and other manpower are rarely willing to serve in rural
locations. As a result, the government network of Primary Health Centres set up
across the country rarely functions effectively. There has been a large shift to
private doctors and hospitals, even though patients can ill afford their
services in the absence of a widespread health insurance infrastructure. Just
one major health setback in a family can drive that family into a financial
catastrophe. India is at the top of countries when it comes to “out-of-pocket”
payout for medical services.
New Initiatives
In recent years, this problem has been well recognized and a
whole slew of initiatives have been launched by the government as well as the
social entrepreneurs. These include the National Rural Health Mission of the
Government of India, low cost medical insurance schemes by state governments,
new models of affordable healthcare provision (e.g. Aravind Eyecare, Lifespring
Hospitals, Narayana Hrudayalaya, etc.) and the use of information technology
and traditional practitioners to provide primary healthcare services (e.g.
Sughavazhvu Healthcare).
Medical Devices
Contemporary healthcare provision is strongly dependent on
the use of powerful diagnostic and curative methods. Medical devices, drugs and
vaccines are at the core of this. While India has made a name for itself in the
pharmaceutical industry thanks to the reverse-engineering and
process-engineering capabilities of our local drug companies, the medical
devices sector has received relatively less attention. At the high end, medical
devices are predominantly imported. And, the cost of imported devices pushes up
the cost of healthcare.
In recent years, given the size of the market and the
obvious need, there has therefore been a lot of interest in building a local
medical devices industry. The focus has been on affordability and ease-of-use,
with a particular focus on making the devices usable by people without
sophisticated medical education. In the diagnostic field, efforts are being
made to put intelligence into the system using heuristics and algorithms so
that detection is less dependent on the skills of the user of the equipment.
At one end, programmes like Stanford India Biodesign seek to
create the next generation of medical equipment designers who will build
devices ground-up based on an identification of needs and creative solutions to
these needs. At the other, several major multinational companies including GE,
Siemens and Philips have major initiatives to develop low-cost devices out of
India (and China). Prominent areas of such devices include ECG machines,
ultrasound scanners, patient monitoring systems and infant incubators.
Somewhere in-between is a new set of Indian enterprises. These
have attracted investor interest and industry bodies like FICCI have tried to
kindle interest in them. In this post, I look at three of the prominent
enterprises to get a picture of where this activity is headed.
Perfint Healthcare
Perfint has a nice niche, it specializes in solutions for image-guided
cancer therapy. For example, one of its new products called Maxio, is a CT
accessory that “helps a physician see, plan, treat
and verify during CT guided procedures like tumour ablation.” Perfint was
recently in the news for this product getting the approval of the US Federal Drug
Administration (FDA). That’s an important milestone for being able to sell the
product globally, particularly since India lacks a strong and transparent
mechanism for the testing and certification of medical devices.
Several things about Perfint are noteworthy. First, the core
team that set up Perfint came out of GE. This has always been one of the hopes
of encouraging MNCs to invest in India – that these MNC subsidiaries will be incubators
for Indian entrepreneurs. Second, the company has been able to raise a fair amount of capital – more than $30m in four rounds so far. This shows the faith
of investors in the company, considering its revenues are reported to be only
in the region of $6-7 m and raises some questions about our usual assumption
that it’s difficult to raise capital for high tech startups out of India.
Third, the company has been granted three patents so far, with more
applications pending. Fourth, the company already has a global footprint with
more than 2,000 patient procedures being conducted on its equipment across the
world last year.
Perfint appears to be more in the advanced technology game
than in the affordable healthcare arena. While it’s safe to assume that
Perfint’s development costs would be lower than its foreign competitors since
its R&D is predominantly based in India, clearly it is competing in the
global healthcare market based on the quality of its solution. In fact, when I
was reading recent accounts of its achievements, the company sounded more like
a typical Israeli technology company than an Indian one!
Clearly, at this point, the major challenge before Perfint
is commercialization. Press reports indicate that the topline goal is in the
region of $100m. Such a sales number will have to be achieved fairly quickly in
order to justify the quantum of investment that has gone into the company.
While the sales challenge is obvious, interestingly the company sees talent
(particularly in product engineering and management) as a possible obstacle to its
future success. Interestingly, this echoes some of our findings in the pharma
sector where we found that the absence of certain specialized skills is a
barrier to new drug development out of India.
Skanray
Skanray Technologies was founded in 2007, and is based in
Mysore. It focuses on high frequency X-ray systems and some other critical care
products. Interestingly, the Skanray team is also ex-GE. Like Perfint, Skanray
has a host of international certifications including FDA approval for some
products.
Skanray is more focused on affordable healthcare. The
company’s dream is to provide healthcare to Indians at a cost of Rs. 100 per
person per month.
Skanray has made a few interesting strategic moves. In 2009,
they tapped into the support available from the government of India by obtaining low cost funding (a loan for Rs. 4.7 crores) for commercialization of
technologies from the Government’s Technology Development Board. Earlier, in
2008, they integrated backwards through a joint venture with CEI of Italy to
manufacture X-ray tubes. The company sees this backward integration as
important to fulfilling its promise of “Advanced Techology and Affordability.”
But, by far, the most interesting move by Skanray was to
acquire the medical instruments business of Larsen & Toubro in November 2012. (Under AM Naik, L&T decided some years ago to hive off some of its
non-core businesses.) Fortuitously for Skanray, L&T’s medical business was
also located in Mysore. The acquisition of this business gives the company a
broader product range, and an established distribution and service channel.
Skanray has also attracted private equity investment. I
couldn’t find Skanray’s financial numbers, but it’s safe to assume that Skanray’s
investors will also put pressure on the company to scale up rapidly. Recent
reports point to entry into the Brazilian market, and the creation of an
Advanced Technology Centre in Europe.
Panacea
Panacea Medical Technologies is another interesting company
in this space that has received investor interest. Their main focus is on Digital
X-ray machines. They have also launched a Digital Telecobalt machine (called
Bhabhatron), in collaboration with the Bhabha Atomic Research Centre of the
Department of Atomic Energy. Panacea’s goal is to offer complete solutions for
oncology centres.
They received the Technology Development Board’s award for
technology commercialization in 2010. Unfortunately, the founders seem to be
quite media-shy: there is no mention of their names on the company’s website
and they have very little web presence. But their website suggests that they
have machine installations across the country.
Wrapping Up
Companies like Perfint, Skanray and Panacea constitute the
core of a newly emerging medical device industry. It looks like they have
chosen appropriate strategies – if you are trying to be at the edge of
technology, you need to internationalize rapidly (like Perfint), but if you
want to pursue the affordability plank, you need to focus more on lowering
costs through the supply chain, distribution and service like Skanray. It’s
good to see these companies attracting capital, I only hope that they are able
to retain the interest of investors by sustaining growth. But, I suspect we
still don’t have enough local players to constitute a critical mass of
companies in this sector. I hope I am proven wrong!
[All information in this post has been obtained from sources
in the public domain, including company websites. The views expressed by the
author are personal.]
Nice article , Thanks.
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