Download - Healthcare Tech Startups in India, Part 2-Putting Digital ... · Putting Digital Health Services in Context Deborah Weinswig Managing Director ... $53 billion, according to estimates

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DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

1) India’spercapitahealthcareexpenditureisoneofthelowestintheworld:privatepercapitaexpenditurewas$188in2014andpublicpercapitaexpenditurewas$81,foratotalof$269—about3%ofthepercapitaexpenditureintheUS.

2) India’spopulationishighlyunderservedintermsofhealthcare,withlessthanonedoctorandonehospitalbedavailableper1,000people.

3) Indians’out-of-pockethealthcareexpenditureisoneofthehighestintheworld,withsome62%oftotalhealthcarecostspaidforbyIndianconsumersthemselves.

4) TheIndiangovernmenthasimplementedapolicytoprovideuniversalhealthcoverageforIndiansby2020,andhaslaidoutspecificgoalsforvariousaspectsofthehealthcaresectorinordertoachievethis.

Healthcare Tech Startups in India,

Part 2: Putting Digital

Health Services in Context

Deborah Weinswig

Managing Director

FGRT

[email protected]

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

September20,2017

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TableofContentsTableofContents............................................................................................................................................2

ExecutiveSummary.........................................................................................................................................3

Introduction....................................................................................................................................................4

TheSizeandScaleoftheIndianHealthcareSector..........................................................................................4

CharacteristicsofIndia’sConsumerHealthcareSector....................................................................................61.India’sPopulationAppearstoBeAgingSlowly,butSeniorsAreGrowinginNumber.................................62.India’sPopulationIsHighlyUnderservedintheHealthcareSector.............................................................73.India’sOut-of-PocketHealthcareExpenditureIsOneoftheHighestGlobally............................................84.IndiaHasaLargeRuralPopulation...............................................................................................................9

WhattheIndianGovernmentIsDoingforHealthcare....................................................................................10

WhatWeThink..............................................................................................................................................10

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ExecutiveSummaryIndia’seconomyisgrowingrapidly,butanumberofchallengesarehinderingprogressinvarioussectors,includinghealthcare:

1. India’sseniorpopulationisgrowinginabsolutenumbers(itcurrentlystandsat77million),althoughitremainsarelativelysmallproportionofthetotalpopulation(about6%).

2. India’spopulationishighlyunderservedintermsofhealthcare,withlessthanonedoctorandonehospitalbedavailableper1,000people.

3. Indianspaysomeofthehighestout-of-pocketcostsforhealthcareintheworld.Some62%ofthepopulation’stotalhealthcareexpenditureisnotcoveredbyinsuranceandisnotreimbursed.

4. About67%ofIndiansliveinruralareas.Thishastraditionallylimitedmanyconsumers’accesstocertainkindsofhealthcareservicesthatareviableonlyinareasofhighpopulationdensity.

SeveralIndianstartupsarecreatingsolutionstoaddressIndia’suniquehealthcareproblems,andthegovernmentisworkingtomakehealthcareaffordableandaccessibletomorepeople.ThegovernmentplanstoprovideuniversalhealthcoverageforIndiansby2020,increasepublichealthcarespendingatthenationallevel,widenstatebudgetsallocatedtohealthcareandgrowthehealthcareworkforceinIndia.

Indianhealthcaretechstartupsarecreatingnichesolutions,manyofwhichcenteronpreventivecareandconvenience.ButtogainglobalrecognitionandhelpsignificantlyreduceIndia’shealthcarecostburden,startupsneedtocreatecurativesolutions.Toencouragethedevelopmentofthese,theIndiangovernmentmightconsiderprovidingbenefitsspecificallydesignedtosupportcapital-intensivehealthcarestartups.

Source:iStockphoto

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IntroductionIndiahasapromisinghealthcaresectorwithanumberofinnovativestartupscreatingcutting-edgesolutionsthataddresschallengesinhealthcareprovision.WeexaminedsomeofthenotablestartupsinfiveemerginghealthcaretechcategoriesinourfirstreportintheHealthcareTechStartupsinIndiaseries.Inthis,oursecondreportintheseries,weconsiderthesize,scaleandcharacteristicsofIndia’shealthcaresectorandwhatthegovernmentisdoingtopromoteitsdevelopment,andofferourtakeonthesector.

Indiaiscurrentlythesecond-fastest-growingeconomyintheworld,andtheInternationalMonetaryFund(IMF)estimatesthatitwillgrowby7.2%thisyear.Butintermsofhealthcare,thecountryfaresratherpoorly.Ithasoneofthelowesthealthcareexpenditurespercapitaandoneofthehighestout-of-pockethealthcareexpenditurespercapitaintheworld.Thereisasignificantshortageofmedicalpersonnel,too,withlessthanonedoctorforevery1,000people:theWorldHealthOrganizationrecommendsa1:1,000doctor-to-populationratio.

Indiaalsohasoneoftheyoungestpopulationsintheworld,buttheseniorcohortisswellingrapidly.Seniors,whomwedefineasthoseaged65andolder,formednearly6%oftheIndianpopulationin2016,andthatproportionwillincreaseto8.5%by2030,basedonUnitedNations(UN)data.ThatmayseemlikearelativelylowproportioncomparedwithcountriessuchasJapan,whereolderpeopleconstitutemorethan26%ofthepopulationandnumber34million,butintermsofabsolutenumbers,India’sseniorpopulationissignificantlyhigher,at77million.

TheSizeandScaleoftheIndianHealthcareSectorAsisthecasewithotherconsumer-drivensectorsinIndia,thehealthcaresectorisvastandlargelyunorganizedinthecountry.Whilemodernmedicine,alsotermedallopathy,dominateshealthcareacrossthecountry,alternativemedicinesystems,suchashomeopathy,andIndianmedicinesystems,suchasAyurveda,SiddhaandUnani,arealsowidelyusedinthecountry.

HealthcareexpenditureinIndiahasbeengrowingsignificantly.Between2008and2016,privatehealthcareexpendituregrewbyaCAGRof10.5%,to$80billion,andpublichealthcareexpendituregrewbyaCAGRof18.1%,to$53billion,accordingtoestimatesfromTechSciResearchandBMIResearchandtheIndiaBrandEquityFoundation(IBEF).

BasedonthefiguresshowninthegraphbelowandtheWorldBank’sGDPdataforIndia,privatehealthcareexpenditureinIndiarepresentedabout3.5%ofGDPin2016andpublichealthcareexpenditureabout2.3%.Thelatterfigurelookssomewhathigh,giventhattheIndiangovernmenthasstatedthatitsexpenditureonhealthaccountedfor1.1%ofGDPin2015.

Whicheverofthesefiguresweuse,Indialagsdevelopedeconomiesinspendingonhealthcare.WorldBankdataindicatethatUSprivatehealthcareexpenditurerepresentedabout8.9%ofUSGDPin2014andpublichealthcareexpenditureabout8.3%,whileUKprivatehealthcare

http://www.fungglobalretailtech.com/research/healthcare-tech-startups-india-part-1-bringing-digital-health-services-underserved-dispersed-population/

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expenditurerepresentedabout1.5%ofUKGDPandpublichealthcareexpenditureabout7.6%inthesameyear.

Figure1.India:PrivateandPublicExpenditureonHealthcare,2008vs.2016(USDBil.)

Source:TechSciResearch/BMIResearch/IBEF

India’spercapitahealthcareexpenditureisoneofthelowestintheworld.Below,wecompareittothepercapitahealthcareexpenditureinselectedlargeglobalmarketsandotherBRICnationsinordertoprovideasenseofscale.

IntheUS,forexample,privatepercapitahealthcareexpenditurewas$5,032in2016andpublicpercapitaexpenditurewas$4,860,totaling$9,892,accordingtodatafromtheOrganisationforEconomicCo-operationandDevelopment(OECD).

InIndiain2014(thelatestyearforwhichdataareavailable),privatepercapitahealthcareexpenditurewas$188andpublicpercapitaexpenditurewas$81,totaling$269—equivalenttojust3%ofhealthcareexpenditurepercapitaintheUS.

Figure2.SelectedCountries:PrivateandPublicHealthcareExpenditureperCapita,2016(USD)

*Latestavailabledataarefrom2015forRussia,from2013forBrazil,andfrom2014forChinaandIndia.Source:OECD

36

14

80

53

PrivateSector PublicSector

2008 2016E

5,032

974 872 856 718 526 445 324 188

4,860

3,6263,320

4,695

3,801

825549 409

81

US France UK Germany Japan Russia* Brazil* China* India*

Private Public

CAGR=10.5%

CAGR=18.1%PublichealthcareexpenditureinIndiaconstitutesanestimated2.3%ofGDP,whereasitrepresentsabout8%ofGDPintheUSandtheUK.

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InIndia,privatefirmsinthehealthcaresectorreceivedsomeofthehighestinvestmentfundingcomparedwithfirmsinothersectorsuntil2016,whentherewasaslowdown.Accordingtogovernmentstatistics,foreigndirectinvestmentinflowsintotheIndianhealthcaresectordecreasedby21%,to$1.6billion,intheyearendedFebruary2016.Manyanalystsattributethisslowdowntostartupsbeinginbetweenfundingstages,andmanyexpectthesectortoseeincreasedfundingthisyear.

CharacteristicsofIndia’sConsumerHealthcareSectorWhilethehealthcaresectorisreceivingsignificantattention,thereareseveralchallengesuniquetoIndiathathealthcaretechprovidersmustaddresswhencreatingsolutions.Theseincludethecountry’sgrowingseniordemographic,inadequatehealthcareresources,highout-of-pockethealthcarecostsandlargeruralpopulation.

1.India’sPopulationAppearstoBeAgingSlowly,butSeniorsAreGrowinginNumberIndiaappearstohavearelativelyyoungpopulationcomparedwithmanyofthelargeeconomiesoftheworld.Onlyabout6%ofIndianconsumerswereaged65andoverin2016,accordingtoUNdata,andevenin15years,thatproportionwillnotchangesubstantially,giventhescaleofIndia’spopulation(currently1.3billion).Inabsolutenumbers,however,thenumberofpeopleaged65andoverisprojectedtogrowfrom77millionin2016to128millionin2030.

Source:iStockphoto

Overthesameperiod,thegrowthinChina’sseniordemographicwilllikelybemoredramatic.Peopleaged65andoverconstituted10.1%oftheChinesepopulationin2016,andthatproportionwillgrowto17.1%in2030.Inabsoluteterms,thenumberofseniorsinChinaisprojectedtojumpfrom142millionin2016to246millionin2030.

Meanwhile,Japanisforecasttohaveoneofthefastest-agingpopulationsintheworld,asseniorsconstitutedoveraquarter(26.6%)ofthetotalJapanesepopulationin2016andareprojectedtoform30.3%ofthetotalpopulationin2030.

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Amongthecountriesshowninthegraphbelow,BrazilistheonlycountryasidefromIndiathatseemstohaveaslowlyagingpopulation,withtheseniordemographicexpectedtogrowfrom8.2%ofthetotalpopulationin2016to13.6%in2030.

Figure3.SelectedCountries:AdultsAged65+(LeftAxis,Mil.Individuals;RightAxis,asaPercentageofTotalPopulation)

Source:UN

2.India’sPopulationIsHighlyUnderservedintheHealthcareSectorHealthcareresourcesinIndiaarecurrentlyinadequatetoservetheneedsofthepopulation.

TheWorldHealthOrganizationstatesthatatleastonedoctorisneededtoserve1,000peoplesufficiently.Indiahadnotmetthisratioby2014(latestdataavailable).Itlagsmanyothercountriesintherelativenumberofhospitalbeds,too.

142.1

76.9

48.4

33.9

19.9 17.4 17.1 12.5 12.1

245.9

128.0

72.2

36.8

27.222.0

30.6

16.2 15.5

10.12

5.81

15.03

26.56

13.79

21.27

8.25

19.3518.35

17.06

8.46

20.37

30.30

19.33

26.79

13.57

23.90

21.96

0

5

10

15

20

25

30

35

0

50

100

150

200

250

China India US Japan Russia Germany Brazil France UK

65+(2016) 65+(2030) 65+%(2016) 65+%(2030)

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Figure4.SelectedCountries:HospitalBedsandDoctorsper1,000People,2014

Country HospitalBeds Doctors

India 0.5 0.7

Brazil* 2.3 1.9

UK 2.7 2.8

US 2.8 2.6

China 3.6 1.7

France 6.2 3.3

Germany 8.2 4.1

Russia 8.8 4.2

Japan 13.2 2.4

*Brazildataarefor2012.Source:WorldBank/OECD

InordertoreachtheWorldHealthOrganization’srecommendedlevels,thenumberoftraineddoctorsinIndianeedstogrow,andforthattohappen,thenumberofmedicalcollegesinthecountryneedstogrowconsiderably.Currently,thereare426medicalcollegesinIndia,offeringatotalof63,835seatstopursueabachelor’sdegreeinmedicine(calledanMBBS),accordingtonewswebsiteIndia.com.

3.India’sOut-of-PocketHealthcareExpenditureIsOneoftheHighestGloballyOut-of-pockethealthcareexpendituresarepaymentsforhealthcaremadebyconsumersthemselves,includingpaymentsthatmaynotbereimbursedbyinsurance.WhileIndiahasoneofthelowesthealthcareexpenditurespercapitaglobally,ithasoneofthehighestpercapitaout-of-pocketexpendituresproportionally.Out-of-pocketspendingaccountsforasubstantial62%oftotalhealthcareexpenditureinIndiaduetothefactthathealthinsurancecoverageisnotverycomprehensiveinthecountry.Government-runclinicsandhospitalsexist,butthecountrydoesnothaveanationalhealthinsurancepolicyorauniversalhealthcaresystem—andmosthealthcareisprovidedbyprivatelyruninstitutions.

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Figure5.SelectedCountries:Out-of-PocketExpenditureasaPercentageofTotalHealthcareExpenditure,2014

Source:WorldBank

4.IndiaHasaLargeRuralPopulationIndia’seconomyisgrowingstrongly,andtheIMFestimatesthatGDPgrowthinthecountrywillhit7.2%thisyear.However,urbanizationlevelsremainrelativelylowinIndia:in2016,nearly67%ofthepopulationlivedinrurallocations,comparedwith43%inChina.

ThisdispersalofthepopulationhastraditionallymitigatedagainstaccesstohealthcareprovisioninIndia,asacriticalmassofpeopleinonelocationistypicallynecessarytojustify,say,buildingahospital.However,somehealthcareservicesareleveragingnewtechnologiestoconnectpatientsandhealthcareprovidersdigitally,andthereforebetterserveconsumersinruralareas.

Figure6.SelectedCountries:PercentageofTotalPopulationthatLivesinRuralAreas,2016

Source:WorldBank

62.4%

45.8%

32.0%

25.5%

13.9% 13.2% 11.0% 9.7%6.3%

India Russia China Brazil Japan Germany US UK France

66.9%

43.2%

25.9% 24.5%20.3% 18.2% 17.2%

14.1%

6.1%

India China Russia Germany France US UK Brazil Japan

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WhattheIndianGovernmentIsDoingforHealthcareChangesinthehealthcaresectorcancontributetotheongoingdevelopmentofIndia,andtheIndiangovernmenthasimplementedapolicytoprovideuniversalhealthcoverageforIndiansby2020.Thegovernmenthaslaidoutspecificgoalsforvariousaspectsofthehealthcaresectorinordertoachievethis.Forexample,ithasoutlineditsgoaltoincreasepublichealthcarespendingfrom2015’slevelof1.1%ofGDPto2.5%ofGDPby2025.PrivateresearchagenciesTechSciandBMIResearchestimatethatpublichealthexpenditureinIndiawas$53billionin2016,representing2.3%ofGDP.

Thegovernmentalsohopestoincreasehealthcarespendingatthestateleveltomorethan8%ofthebudgetforeachstateby2020andtodecreasehouseholdspendingonhealthcareby25%by2025.

Inaddition,theIndiangovernmentaimstoincreasethehealthworkforceinIndiaandimprovethecountry’stechnologyinfrastructureinordertoenableittomovemedicalrecordsonlineby2025.

WhatWeThinkIndia’shealthcaresectorhasreceivedsignificantglobalattention,butitisriddledwithchallengesthatmustbeaddressedbeforeanyimpactfulchangecanbeeffected.Forexample,inordertoincreasepublichealthcareexpenditure,thegovernmentmayhavetodecreasespendingelsewhereorsomehowraisesubstantialcapital.Andtoincreasethenumberofhealthcarepersonnel,thegovernmentneedstogrowthenumberofstudentsintraining.

Authoritiescanalsoencourageinnovationinthehealthcaresector.ManyofIndia’shealthcarestartupsfocusoneitherpreventivecareorprovidingconveniencetoconsumers,butcompaniesinthesectorneedtoinnovatewithnewproductsthattreatmajorconditionsinordertoreducetheoverallcostofhealthcareinthecountry.Thegovernmentneedstocreateastrongersupportsystemforstartupsthathavethepotentialtoprovideinnovative,cost-effectivesolutionsthatcanbescaledandhaveapositiveeffectontotalhealthcarespending.

Healthcarecompanies,suchasthosethatdevelopdrugs,tendtorequiresignificantinvestmentintheearlystagesandtobreakevenonlymuchlater;thisisincontrasttocompaniesinotherconsumer-drivensectors.TheIndiangovernmentalreadyprovidesbenefitssuchastaxbreakstostartupsacrosssectors,butitmightconsiderhealthcarestartupsonacase-by-casebasisandprovideadditionalbenefitstothosethatshowpotential.Suchbenefitsshouldencourageinnovatorstocreatenewsolutionsandhelptakethesectorforward.

Inthenextreportinthisseries,wefeatureexcerptsfromourinterviewswiththefoundersoftwoIndianhealthcarestartups,GrowFit’sJyotsnaPattabiramanandPorteaMedical’sMeenaGanesh.

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DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comSwaroopraniMuralidharResearchAssistant

HongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com