Mumbai: Dr. Pankaj Jethwani, Executive Vice President of W Health Ventures spoke Dawn Light of ETHhealthworld On the emerging ecosystem of Indian health Start-ups Compared to the US market and why established healthcare stakeholders are investing in these upstart ventures.
How can start-ups disrupt healthcare with established players and how does it benefit both?
Pre-COVID, for most patients in India, accessing healthcare meant visiting a doctor or pharmacist or informal providers at a clinic or hospital when someone was ‘sick’. While this is still largely true after COVID, we are seeing healthcare services move closer to home and patients will be able to talk to doctors over video or chat via WhatsApp). Companies are creating solutions for the patient experience and new disease-focused care models are gaining market share.
Healthcare start-ups are trying to solve access and cost issues by innovating in clinical models, technology and business models. Healthcare incumbents are generally resistant to change but are slowly starting to work with these new-age start-ups. We have seen this play out many times in our portfolio. Many traditional healthcare set-ups benefit from trusted digital players that educate patients about their healthcare conditions and act as channels of acquisition.
Lack of specialists and healthcare infrastructure is a well-known problem in the rural interior of India. 70 percent of our population lives in Tier II cities and beyond while 70 percent of our doctors live in Tier I cities, often leading to healthcare institutions grappling with underutilization. Healthcare start-ups are bridging the gap in the supply of doctors and specialists in the country and digitally connecting them with patients across the country.
Moreover, start-ups are using their digital touchpoints to grow Customer experience For patients and complete the care continuum loop. This has helped healthcare providers improve customer engagement, retention and lifetime value. Start-ups also benefit from this symbiotic partnership by gaining the trust of patients by associating with well-known hospital brands. Additional commercial interests accrue—lower customer acquisition costs by tapping providers’ large patient base built over years and revenue from digital health services.
What is the scope of start-ups in the healthcare domain, what are the challenges faced when it comes to sustainability and how can they be addressed?
The scope of healthcare start-ups is constantly evolving. Designed to address the changing and growing issues of supply business-to-business (B2B models) and demand side (business-to-business-to-consumer). [B2B2C] and business-to-consumer [B2C models]), his field of work is influenced by macro factors such as changes in healthcare-seeking behavior, digital innovation, and adoption by healthcare providers and patients.
On the supply side (B2B models) – multiple artificial intelligence (AI) developers are creating solutions to improve accuracy, turn-around times, physician productivity and overall efficiency of standard healthcare processes adopted by hospitals. AI providers gain access to many large hospital groups by being on the platform. Start-ups are also bringing efficiency to pharmacy supply chain Solving problems such as long delivery times, product expiry management, reverse logistics and reconciliation process and limited inventory choices. On the demand side—the pandemic forced employers to provide comprehensive healthcare to their employees.
B2C start-ups have taken advantage of the increased digital adoption among Indians to go direct-to-consumer (D2C) by offering comprehensive solutions for their medical needs. Going D2C allows start-ups a targeted marketing approach to problems that cannot be solved by big players. Building trust between patients/customers is paramount in healthcare – one of the biggest challenges faced by healthcare start-ups. Brand building and marketing requires a huge amount of time and money to get millions of consumers to trust a digital start-up for their healthcare needs. Moreover, start-ups in healthcare are also tempted to offer deep discounts early in their journey. Both can lead to significant ‘burn’ and poor unit economics in the early days. The path to profitability is key for any company to measure and create shareholder value. Once companies identify their execution playbook early on, operating leverage can help them scale sustainably in later years.
Why do corporations invest in various healthcare domain start-ups? Could the lower risk factors involved in R&D and investment be the reason? If others specify.
Today, there are more than 7,600 health-tech companies in India with a total funding of over $7 billion. As the ecosystem matures, there is increasing interest from corporates to invest in or acquire these digital health companies.
Hospital groups invest in or acquire start-ups that complement or enhance their scope. This could be by improving patient lifetime value, improving operational efficiency through EMRs and Tele-ICUs, or improving customer acquisition, particularly by providing better patient engagement by providing pre- and post-IPD procedures.
Pharmaceutical companies invest in digital health start-ups that have remote touchpoints with patients that help measure and improve medication adherence, provide them with patient-level data and conduct pharmacovigilance studies.
Medical device giants invest in start-ups that help save lead time on R&D, acquire new IP, or enhance their existing offerings through software and hardware that complement the device giants’ existing product portfolios.
Consumer health product companies buy fast moving consumer goods (FMCG) and wellness brands over-build, so they can save lead time on developing products that are a natural extension of their existing suite of products. Another reason to invest in start-ups, especially direct-to-consumer (D2C) start-ups, is the level of last-mile customer data that offline distribution-heavy conglomerates do not have.
Technology giants invest in healthcare start-ups because it allows them to quickly enter healthcare and access the growing technology talent in this space.
What percentage of the funding you are looking to back (through its $100 million fund) to 15-20 early-stage health tech/care start-ups in the US and India will be targeted at the Indian market? Will these start-ups get more funding once scaling is finalized?
We invest in outcome-focused, health-tech start-ups in India and the US that solve major healthcare problems through clinical, product or business model innovations. Investment in India will be around 65 percent of our corpus. Our portfolio companies are committed to helping them grow by investing pro-rata in follow-on rounds as they scale. Through our investments, we aim to positively impact 100 million lives across two geographies and help build inclusive, equitable and effective healthcare systems.
In addition to investing in companies that have product-market fit, we will also invest in building ground-up companies with the right mission-driven founders. To do so, we are building internal capabilities around manufacturing and commercialization that can benefit many companies. This venture factory or venture studio will build companies in care delivery for India and the rest of the world.
How does the Indian health tech industry compare to its US counterpart? extended.
There are some significant differences between the Indian and US health sectors:
Insurance coverage in the US is very high and consequently, the out-of-pocket expenditure (OoPE) is very low- Insurance coverage is much higher in the US and consequently, OoPE is much lower. 91 percent of Americans are covered by insurance against only 37 percent of Indians. This leaves patients paying 66 percent of healthcare costs in India out of pocket compared to only 9 percent in the US. Because of this gap in healthcare financing, most US healthcare start-ups have adopted a B2B2C model where they sell to employers and payers and through them reach end consumers.
A tighter but more reliable regulatory landscape in the US- The US regulatory landscape is more stringent as compared to India. Obtaining FDA approval is more difficult than any Indian regulatory approval, however, the struggle is rewarded as an FDA-approved solution gains greater acceptance and acceptance not only in the US market but globally.
Quality healthcare in the US is more expensive Annual healthcare expenditure per capita in India is less than $100, compared to over $10,000 in the US. This is driven not only by more people seeking healthcare in the US but also by the high cost of healthcare services in the US. For instance, an RT-PCR test can cost over $200 in the US while it is less than $10-15 in India.
Healthtech Innovation in India is still in its infancy- Healthtech innovation in India is synonymous with telehealth and e-pharmacy while more comprehensive interventional care models remain at an early stage, unlike in the US where vertically-integrated platforms and value-based care models are seeing rapid growth.
