Health Tech – will innovation mitigate the existing gaps?

Ever thought of a wearable band that would be capable of monitoring key body statistics or a mobile app which would act as a personal coach for fitness? Sounds a bit too much for things we never know were possible – but then who envisaged daily commute to be brought down to a tap of a mobile phone or the ubiquitous ‘kiraana’ shops facing stiff competition from hyper local stores offering convenience coupled attractive discounts to the urbane consumer.

Innovation in any industry has been primarily driven by existing gaps, and more so when gaps reach a stage of severe deficit. To put things in perspective, let us take a quick look at the healthcare report card of India:

– 4% GDP spend on healthcare – one of the lowest in the world
– ~1% government spend on healthcare vs world average of 5%
– 3.2 million deficit in bed capacity to meet WHO guideline of 3.5 beds per 1,000 population
– 3 million doctors required to meet WHO guideline of 14 per 10,000 population
– 20% share in the global disease burden vs 6% share of hospital beds and 8% share in doctors
– Largely fragmented market (both on the hospitals as well as diagnostics side)
– Significant skew in geographic distribution of infrastructure (rural India which accounts for 70% of population has less than one-third of hospitals, doctors, beds)

In a country with 1.4 billion people and such glaring gaps in capacity, technology has the potential to be a great enabler. Health-tech start-ups are changing the traditional model in multiple ways, evolving as a means to address India’s deficient healthcare facilities (e.g. bringing healthcare to home thereby reducing the pressure on already burdened hospitals, remote diagnostics expanding doctor’s reach, telemedicine, online platforms for connecting consumers to nearby doctors/hospitals, apps to manage health and aid preventive healthcare etc.)

Market Size and Growth Potential

The health-tech industry is at a nascent stage. The Indian healthcare software market was estimated at USD 100+ mn in 2015, estimated to grow at a CAGR of 12% to reach USD 182 mn by 2020 (NASSCOM). The global healthcare software product is large – estimated at USD 18 bn in 2015 and growing at CAGR of 6%.
Besides healthcare software, other healthcare segments where technology is an indispensable and critical ingredient include Home healthcare (estimated at ~USD 3 bn and growing at ~20% annually) and e-pharmacies.

Key segments of health-tech that have been gaining traction are as below:

AreaDescriptionSome notable players
Administration and Management Software SolutionsDigitization and integration of patient’s medical records, cloud-based patient record keeping, hospital/Practice management softwarePracto, Attune Technologies, Insta
Healthcare Discovery
platforms/applications (Online, mobile)
Platforms that connect customers to doctors and hospitals, help them book appointments, expert advice, fitness coaching etcPracto, Lybrate, Doctrz, Pianta, See Doc
e-pharmaciesOnline ordering of medicines and healthcare equipment1mg, Netmeds
Home health servicesHomecare services in the form of doctors, nurses, care attendants, home ICU services, home chemotherapyPortea, Medwell Ventures
Healthcare analyticsSophisticated analytics to drive insight into patient behavior, risk factors, R&D Ekincare, Health Lucid
WearablesFitness products that improve health by activity, exercise, food, weight and sleepMostly dominated by MNC players (Fitbit, Garmin). GoQii headquartered in the US with office in India
Some companies are present in more than one category – e.g. Practo which offers both practice management software as well as connects consumers with healthcare professionals; 1mg (which started as an online pharmacy and has diversified to include online consultations)

The market is being driven by more focus on patient centric technologies. Key driving factors include:

  • Expand reach of healthcare system: Technology helps increase reach and accessibility of doctors and other medical practitioners; online consultations/telemedicine is aiming to bridge the rural –urban divide in India
  • Better diagnosis/quality care: Information management systems aid doctors in better diagnosis and treatment by making complete history of patients available on cloud platforms. With the digitization of records, medical data can be accessed by both patients and healthcare providers at any point of time reducing chances of errors and increasing efficiencies in delivering quality services.
  • Reduce inefficiencies in the supply chain: Medical e-commerce assists in reducing inefficiencies in supply chain and counterfeit medicines; they also offer additional benefits of discounts, convenience, online chats etc
  • Evolution of conscious, health aware consumers: Growing smart phone and internet penetration has necessitated demand for patient centric technologies- fitness devices, home healthcare, mobile health apps
  • Big data analytics: The power of data analytics to discover risk factors and deliver targeted and personalized therapies

Private Equity Investments

The health-tech market in India is extremely fragmented with small players. There are an estimated 150+ health-tech firms and few have achieved scale backed by private investment. In addition, there are a few companies that have come up in the recent past, and though small in size, they have raised early stage funding. Health-tech has emerged as one of the key interest segments for VC funding with estimated USD 600 mn+ invested in health-tech companies in the past 2 years:

Key PE/VC deals as below:

DateTargetInvestorBusinessValue (USD mn)
Jan-17PractoTencentHealthcare platform, Practice management solutions55
Apr-161mg Maverick Capital VenturesOnline medicines, e-consultations16
Oct-15Net MedsOrbimedOnline Pharmacy50
Oct-15Attune TechnologiesQualcomm, NorwestAdministration and Management Software Solutions15
Sep-15Portea Medical Accel, IFC, Qualcomm, VentureastHome healthcare38
Jul-15LybrateTiger Global, NexusHealthcare platform for online doctor bookings etc10
Source: Thomson Reuters, Press Articles

Few companies which have taken majority of investor’s money include – Practo which has raised ~USD 180 mn in successive rounds, Portea (USD 40 mn), Netmeds (USD 60 mn) and 1MG (USD 20+ mn). In addition, many players have raised early funding – e.g. Qikwell Technologies (online doctor search and booking platform); Obino (weight loss and fitness app).

While there have been limited M&A in the sector as the companies are still in infancy, we have seen a few deals by the large players trying to diversify and add to their services portfolio. For e.g. Portea – the leader in home health services, acquired PSTakeCare, an online healthcare information platform to strengthen its technology infrastructure. Practo recently acquired Fitho Wellness (digital fitness solutions) to enter in the preventive healthcare space.

Key barriers

Despite the huge potential of health-tech companies, there are some obstacles limiting their adoption.

  • Trust Factor: Need for patient privacy is paramount as healthcare is a private and sensitive matter. Customers are skeptical about filling in their medical data due to lack of transparency and trust
  • Acceptability by doctors: The best way to encourage adoption by patients is having the doctor prescribe it to the patients. For this, the technology should be easy to use and intuitive for the doctors. Health-tech companies will have to work closely with doctors for incorporating their feedback to make/evolve the product
  • Poor Internet Infrastructure: While India has the second largest number of internet users, speed and connectivity remain an issue
  • Erratic Power Supply: The reliability of power is a concern in India and poses difficulties in handling remote healthcare monitoring
  • Low health Consciousness: Despite increasing adoption, health consciousness is still not prevalent among a large segment of the population
  • Low government involvement: Low government expenditure, support for innovation and initiatives for mass awareness

Conclusion

India’s heathcare system is vast and unorganized offering ample opportunities for start-ups to create a niche for themselves. While the sector has its set of challenges, the potential of technology in expanding the healthcare system cannot be underestimated. The perception of the long-term sustainability of these business models and the potential to extract returns from investments at the point of maturity has helped these start-ups attract investors’ attention.

The potential impact of these innovators could well transform healthcare prevention, diagnosis, monitoring and treatment as we know of it currently. Technology will have to play a pivotal role in expanding the healthcare boundaries and there can be no two ways about it.