Here is a report done by my friend
Sumit Mukerji on
How India and the Indian Corporate can tap the emerging global healthcare market.
Please do post your comments here or click on Sumit Mukerji’s name send him a
mail.
How India and the Indian
Corporate can tap the emerging global healthcare market.
The Indian
pharmaceutical sector has come a long way, being almost non-existent before 1970
to a prominent provider of healthcare products, meeting almost 95% of the
country’s pharmaceuticals needs.
The face of global
healthcare is changing and presenting new challenges for governments,
corporations and industry professionals. Increasing longevity in
the developed world places additional strain on healthcare budgets.
Pharmaceutical companies are facing challenges not previously encountered as
governments invoke emergency laws to override patents and consumer sentiment
encourages companies to introduce new pricing initiatives. Medical professionals
around the world are seeking to provide integrated medical and social solutions
to their patients and communities.
India is well
positioned to tap the top end of the $3 trillion global healthcare industry
because of the facilities and services it offers by leveraging the brand equity
of Indian healthcare professionals across the globe.
The domestic
pharmaceutical sales have increased from Rs.4 billion in 1970-71 to over Rs.200
billion in 2002, at a CAGR of 13.7% per annum. The total Indian production
constitutes about 1.3% of the world market in value terms and, 8% in volume
terms. The per capita consumption of drugs in India, stands at US$3, is amongst
the lowest in the world, as compared to Japan- US$412, Germany- US$222 and USA-
US$191. India spends 5.2 percent of its GDP on healthcare, which is comparable
with most other developing countries, which spend between five and seven percent
of their GDP on healthcare. These numbers indicate the enormous scope of the
healthcare industry open to India only to be tapped primarily because of the
skill set and talent of Indian professionals.
Indian pharmaceutical
industry is mounting up the value chain. From being a pure reverse engineering
industry focused on the domestic market, the industry is moving towards basic
research driven, export oriented global presence, providing wide range of value
added quality products and services. Government policies will play an important
role in defining the future of the pharmaceutical industry. The product patent
regime coming into effect from January 2005 will lead to long-term growth for
the future.
In the present
scenario, the growth of a domestic pharmaceutical company is critically
dependent on its therapeutic presence. The old and mature categories like anti-infectives,
vitamins, analgesics are de-growing while, new lifestyle categories like
Cardiovascular, Central Nervous System (CNS), and Anti Diabetic are expanding at
double-digit growth rates. Increased generic penetration, intense competition,
fragmentation of the industry has negatively impacted the overall value growth
of the domestic pharmaceutical market. In this scenario, to grow in the domestic
market, pharmaceutical companies have to constantly eye for innovation,
introduction of new value added products, product life cycle management and
enlarging their market reach. Indian companies are getting their act together to
tap the generic drugs markets in the regulated high margin markets of the
developed countries. The US market will remain the most lucrative market for the
Indian companies led by its market size and the intensity of blockbuster drugs
going off patent. An estimated US$45bn of drugs expected to go off patent by
2007 in US alone. Outsourcing in the fields of R&D and manufacturing is the next
best event in the pharmaceutical industry. Spiraling cost, expiring patents, low
R&D cost and market dynamics are driving the MNCs to outsource both
manufacturing and research activities. India with its apt chemistry skills and
low cost advantages, both in research and manufacturing coupled with skilled
manpower will attract a lot of business in the days to come.
The healthcare
industry employs over four million people, which makes it one of the largest
service sectors in the economy of our country. As medical costs skyrocket in the
developed world, countries like India have immense potential for what is called
“Medical Tourism”. India, with outstanding human resource talent and the setting
up of world class medical facilities, is now poised to take leadership in the
fast emerging arena of healthcare management which is witnessing the first signs
of globalization.
The healthcare
outsourcing market can be primarily divided into four major blocks of providers
(hospitals and physician groups), payers (healthcare insurance companies, third
party administration, etc), drug manufacturers (clinical research and bulk drug
outsourcing) and pharmacy chains.
New role
of diagnostic centres
In the changing scenario, the scope of diagnostic centres is expanding to
include new functions and address the needs of different clientele.
· Outsourcing
of diagnostic services is expanding to services including ambulatory/outpatient
surgery, women’s services, emergency care, rehabilitation therapy, clinical
laboratory services, and industrial medicine.
· Clientele
include hospitals, long-term care facilities, physicians’ offices and clinics.
The impetus for this arose from cost containment pressures in the healthcare
industry. Providers increasingly turned to outsourcing clinical services in
order to reduce overhead costs, ease administrative burdens and to obtain access
to current technology, clinical support, departmental management services and
allied healthcare personnel.
Diagnostic Service centres have the option of being
· Joint
partners with hospitals to operate diagnostic out-patient departments
· Non
hospital based diagnostic centres offering integrated services
· High
profile specialised diagnostic clinics in specific areas such as women’s
diseases, osteoporosis clinics, orthopaedic clinics.
The once much hyped
medical transcription is looking down, but outsourcing in imaging, disease
management and claim processing are the new areas to look out for. Estimates
show that the revenue of medical transcription industry in India is expected to
drop from $38 million in 2002 to $26 million in 2006, a nine per cent loss per
annum. But according to the National Association of Software and Services
Companies, by year 2005, the Indian BPO companies will be able to grab business
worth $800 million from the US healthcare companies alone. Significant
opportunity awaits Indian outsourcing service providers in this field thanks to
growing competitive business environment and technological and legislative
changes that are taking place worldwide
However, the recent customer demand for new
products and services, increase in competition and a real-time business
environment are making BPO an important toll for achieving success for
healthcare majors, a NASSCOM report says.
With the global healthcare industry
increasingly under pressure due to regulations and the need for cutting cost,
there is a huge potential for Indian IT companies to tap this market,
particularly in the more advanced areas of healthcare such as imaging, disease
management and claims processing. India’s inherent strength is the quality of
our human resource pool. We have the analytical thought process that is required
to develop complex applications and manage complex process, which is of utmost
importance for the healthcare BPO particularly. Also, the Indian companies have
an edge as they can offer a large number of value added services like diagnostic
analysis by highly qualified medical professionals at a much cheaper cost.
Several Indian
companies are presently providing solutions such as customer management systems,
maintenance of electronic medical record services, etc. to healthcare service
providers, health insurance companies and life sciences and medical equipment
firms.
On the opportunity for Indian BPO companies
in the healthcare sector most Indian companies have not yet evolved in terms of
developing a global outlook. Customers are today looking for service providers
who can give them multiple options like a multi-shore model to deliver to any
need from applications to consulting and from processes to managing the
infrastructure. Unless we have the ability to service these multiple needs, a
BPO provider would not be viewed as adding value and Indian BPO companies would
come of age only when they build these capabilities.
Other areas which the Indian companies can
tap relate to clinical research organisations that conduct various pathology
test on patients of new drug development. Companies are also getting their
facilities accredited by the College of American Pathology, the global standard
for pathological governance.
A model which is being well
recognized by the world healthcare market is of lot of significance to India.
The new ‘hub
and spoke’ model is a means of continuing efficient and high quality provision
of specialist services in selected locations, while at the same time improving
access to general service support functions over a wide region including smaller
towns. Under this model, highly specialised service will be maintained in few
select locations known as ‘hubs’ and high volume lower complexity services will
be provided through a network of several widespread locations called ‘spokes’
Hubs
‘Hubs’ are tertiary healthcare providers that deliver specialised health care
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. The
objective of setting up hubs rather than specialist hospitals is to reduce the
average number of days of inpatient stay, thereby reducing number of beds
required and maximising patient turnover for specialist services.
Spokes
‘Spokes’ form the primary / secondary level of healthcare where a diagnosis is
made of patients’ illnesses and the patient is referred to ‘hubs’ for
specialised treatment of critical illnesses. Other general procedures are
performed at the ‘spokes’. These procedures require low technology, less
sophisticated equipment and general physicians’ services. ‘Spokes’ provide
services such as primary care, physician consulting services, orthopaedics, ENT,
general surgery and referral specialists. ‘Spokes’ provide improved access to
patients in all geographic locations.
Opportunity for India
There is an opportunity for hub and spoke centers to enter India in the near
future. This is due to the following:-
· The
‘spokes’ will improve accessibility to standard healthcare to the small town
populace in India who currently have inadequate health services. These will
serve as reference centers for ‘hubs’ located in highly populated metros.
· At the
‘hubs’, patients receive immediate sophisticated healthcare for critical
illnesses and do not unnecessarily pay for bed usage where same day discharge is
an option. Providers benefit due to better utilisation of high technology
equipment and lower investment on beds.
· Players
wishing to be tertiary providers offering specialized services will prefer to
set up a ‘hub and spoke’ network rather than a specialty hospital. They will
have to invest only in ‘hubs’ and can form relationships with existing players
who will act as ‘spokes’. In addition, they will be able to target a larger
customer base, thus making it easier for providers to break-even.
Diagnostic Centres
Currently, there are only few stand-alone diagnostic centres in India; most
exist as a part of a hospital. Traditional Diagnostic centres will emerge in
India in the medium to long term.
· The need
for diagnostic centres will arise when hospitals face cost containment pressures
and seek to outsource certain services.
· Diagnostic
centres may be set up in conjunction with ‘hub and spoke’ networks. A ‘spoke’
may choose to refer patients to a diagnostic centre instead of providing the
service itself.
Retail pharmacies
Currently there is only one large chain of pharmacy retail outlets in India. RPG
has entered into a joint venture with Hong Kong based retailing major ‘Dairy
Farm International’ to set up a chain of healthcare product retail stores
‘Health & Glow’ similar to drug store chains in Hong Kong, Malaysia and Taiwan.
RPG plans to set up about 75 stores in major cities in the next 5 yrs.
Large pharmacy retail outlets and chains will be prevalent in India in the near
future, since: · Pharmaceutical retail will come to be regarded as part of
healthcare service by patients following the trend in developed countries, S.E.
Asian countries. Healthcare providers will give them more importance.
· The quality
of products, nature of service, health education offered by pharmaceutical
outlets will become important. Brand value will be associated with retail
pharmaceutical outlets and chains.
· Pharmaceutical manufacturers will prefer large pharmaceutical outlets since it
will make distribution easier for them. Pharmaceutical chains will be set up for
better distribution and networking.
As the NASSCOM report puts it; while the
India was quick to plunge into ITES solutions for the healthcare industry in the
form of medical transcription, now Indian vendors have to work on improving
their know how and domain knowledge to tap into the high potential offered by
the global healthcare industry.
Recent Comments