Doctor’s Orders: Look East
Everyone’s eyes are on the healthcare industry. Many are placing bets on future technology that will revolutionize this space. Ranging from biometric factors such as therapeutics, data, and diagnostics; to individual circumstances such as mental wellbeing, daily diet, and activity; to socio-economic conditions such as online resources, education and community, future technology is beginning to address the entire ecosystem.
Through this revolution, it’s important not just to look at what’s happening but where it is coming from and what kind of investments are being made. Looking at a broad spectrum ranging from developed economies to emerging markets, it’s particularly interesting to see how two contrasting countries for instance, such as the US and India approach healthcare innovation.
Investing in healthcare
Without a doubt, America has been the leader in terms of healthcare spend. The US spends about $8,713 (17.7% of GDP) per person on healthcare annually, which is much higher than Norway coming in second by spending about $5,670.
Illustration: Spending the most on healthcare doesn’t reflect life expectancy
By contrast, India spends less than $1000 per person. The contrast here between America and India is intentional.
A large chunk of tech-fuelled innovation is coming out of the United States. The way America innovates is disruptive and the way India innovates is frugal; these two together can make powerful complements. For example, in America, technology is revolutionizing surgical procedure with the likes of da Vinci surgical robots, where doctors are able to perform minimally invasive and extremely precise surgeries with the help of robotic systems. However, each of these machines can easily cost over $2 million with further maintenance costs. In India, an example of frugal innovation comes from Narayana Health, a hospital that is famous for its ‘production line’ heart surgery. Built on the principle of disassociating health with wealth, they perform around 150 surgeries a day with the highest standard of care. The cost of a bypass surgery comes close to $1500 compared to $144,000 in the US. Another best in class example is Aravind Eye Care System in Madurai, which brings the same level of care as the US — but for the fraction of the cost.
America and India share an interesting relationship when it comes to healthcare aside from the outsourcing relationship the two shared successfully for many years. America contributes to advancing the industry, and India contributes to making products and services more accessible.
Reverse engineering
For example in the pharmaceutical industry, around 40 years ago, a number of Indian generics manufacturers were set up. A country with an abundance of chemists and engineers discovered new ways of manufacturing drugs at a significantly lower cost. A large source of revenue for India was using reverse engineering on US patents to create the same products via different processes.
India is currently the word’s third largest manufacturer of pharmaceuticals by volume. This has been extremely valuable for the B2B side of the pharma ecosystem in the US. These drugs have also made a drastic impact in other parts of the world, like Africa where 80% of the drugs used to treat HIV/AIDS are generic drugs made in India.
Effectively the US is bearing the cost of innovation for the whole world. There are some companies charging US patients and the healthcare system enormous amounts of money especially for pharmaceuticals. For example, Gilead charges $84000 per year for treating Hepatitis C with a drug called Solvaldi (Sofusbovir). But thanks to Gilead granting royalty free licences for their patents for use in third world countries, this drug is now available at very low costs so that it’s more widely accessible and affordable.
Reverse innovation
Many multinationals are starting to design and develop products and services for emerging markets, then making them a bit more international upon introduction worldwide. This way, companies are able to benefit from both developed and developing economies. This reverse innovation is a great way to bring costs down and also seems to come as a result of the world’s current obsession with glocalisation. GE Healthcare has taken a leap and has demonstrated this adaptation can become a reality and an efficient model to carry out. Initially, GE Healthcare imported a high end CT imaging system but by manufacturing the machine (for the first time) in Bangalore, the price was cut down by 10%, reducing the waiting period as well as boosting sales. Continuous evolution can keep improving the product and bring costs down even further. The vision behind this was to make more systems in India for Indian customers.
Several consumer products have been largely successful in adopting this non-traditional approach to innovation. Coca-cola, Nestle, PepsiCo, Procter & Gamble are only few examples where this has been largely successful. Many other industries are starting to embrace this, however in the healthcare industry there is still a vast disparity from West to East.
Regulatory limitations aside, there are several opportunities for global companies to leverage innovation from emerging markets and advances from western markets to make healthcare more accessible worldwide. There has to be a way for the US to cut costs through emerging market partnerships and initiatives yet continue to champion technology fuelled innovation. By 2025, $1 of every $5 spent in the US will be on healthcare. But, an intervention with the mindset of frugal innovation could radically change this prediction.
Illustration by Akshitha Victor
Mallika Reddy is a Content Strategist at Wolff Olins London. Follow her @mallikareddyg
Originally published at www.wolffolins.com.
