A recent article in the Economist surveys the drive toward frugal innovations in the Indian health care marketplace. This brief, compelling review describes the strategies and entrepreneurial activity being applied to identify and develop affordable approaches to a range of businesses in the health sector – from the delivery of advanced surgical care, to medicines, to insurance, and services.
The article notes how major India health companies, like Ranbaxy and Apollo – long focused on the upper classes – are now racing down the pyramid and helping stir up a powerful mix of cheap, innovative and radical solutions that will leapfrog the rich world. Not surprisingly, consulting firm Technopak Healthcare estimates that spending on health care in India is expected to rise from $40 billion last year to $323 billion in 2023.
Successful firms are rejecting technology whose costs don’t justify the benefits, and focusing on tools and techniques that spare resources and improve outcomes. The head of Fortis, a Delhi-based hospital chain, told the magazine, “We got out of this arms race a few years ago.”
In fact, several examples illustrate how new outfits are providing basic approaches, embracing economies of scale, and enthusiastically adopting health information technology and reshaping their services around it, increasing efficiency and cutting errors and costs at the same time. (LifeSpring Hospitals – an increasingly well known and funded chain of maternal and child health hospitals is given as an example). The article also describes the tendency for innovative new firms to leverage the sliding scale – subsidizing care for the poor by charging affluent customers more.
I witnessed this type of pricing a number of years ago among Indian pharmaceutical companies. At the time, most offered lines of asthma medications targeting different socioeconomic segments of the population. It is a business model that brings to mind durable goods, but was (and remains) largely unfamiliar to people in high income countries. In India, old oral medications, such as theophylline, are still widely used by practitioners who prescribe them specifically to patients at the lower end of the market; expensive newer drugs never reach the public hospitals or the bulk of the population. Cipla, for example, manufactures an inhaled combination of beclomethasone and salbutamol. Neither of these are the most efficacious medications currently available in their classes but they are both generic, low-cost compounds. Cipla representatives call the combination – sold under the trade name Aerocort – “the poor man’s Seroflo,” in reference to the company’s top of the line fluticasone and salmeterol combination product. As one executive told me: “Aerocort is much cheaper and it’s the same type of combination. So, a lot of people use that.”
Paul Yock, head of the bio-design laboratory of Stanford University, is quoted in the Economist piece as saying that the international med-tech giants have so far “looked at need, but been blind to cost,” and argues that the industry will find inspiration in India.
Perhaps GE already has. The company recently launched their Healthymagination campaign, a US$6 billion effort to re-strategize how the organization develops medical technology in order to emphasize the delivery of affordable equipment. A full post on that to come.
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