Healthcare around the globe is going through a wave of transformation with a focus which is more patient- centric, outcomes-driven, preventive and speciality oriented. Chronic disease is becoming a global epidemic, and driving health care cost inflation to unsustainable levels. At the same time, health is finally entering the digital age — unlocking information, empowering patients, enabling real-time analytics and bringing much-needed focus on prevention.
The startup ecosystem, in countries like India is creating a significant opportunity to disrupt the healthcare delivery landscape. India’s population by 2028, as projected by United Nations will reach 1.45 billion, making it the world’s most populous nation, surpassing China. India’s current population, of 1.27 billion is 17.5% of the world’s population. 50% are below the age of 25 years and more than 65% below the age of 35 years. It is estimated that by 2020 the average age of an Indian will be 29 years compared with 37 years for China. India currently spends 4.2% of its GDP on healthcare, with the government contributing to this spend a mere 1% and the private sector contributing 3.2%. If India were to leverage its demographic dividend than it is imperative that it nurtures a healthier population. The next decade is therefore critical for India to transform and grow its healthcare sector.
The journey towards equitable, efficient and universal access to healthcare has been travelled by many countries and the economic crisis of East Asian countries has proven that the fundamentals of healthcare provision is not necessarily a singular focus of financial protection but should be driven by strengthening primary healthcare, creation of appropriate infrastructure, and an acceleration in training of both medical and paramedical healthcare workforce. The Indian healthcare sector has undergone a radical transformation phase in the last decade and is one of the most promising sunrise industries in terms of revenue, growth and employment. The sector, which was a $14.8 billion industry in 2002 is forecast to reach $160 billion in 2017, accounting for about 4.2% of GDP, and is poised to grow to $280 billion by 2020. India’s growing population coupled with increasing purchasing power of the middle class and rising awareness about chronic diseases have contributed to this growth. India currently has 1.3 beds per 1,000 people, as against a WHO recommendation of 3.5 beds per 1,000, which provides a huge untapped potential for healthcare providers.
Growth potential
The growing contribution of the private sector to the healthcare industry, whose share has grown from 60% to 80% of total expenditure over the last one decade, has further boosted growth. Employment-wise, the healthcare industry is today the fifth largest employer providing direct employment to 5 million people, which is slated to rise to 7 million by 2022. India has the largest numbers of medical colleges in the world (355) and it produces the largest numbers of doctors among developing countries (44,250). The country has added 11 years to the average life expectancy at birth in three decades raising it from 55 years in 1980 to 66 years in 2013. India’s billion-plus population turns out to be an enormous challenge for the service providers. However, the huge growth potential that the industry possesses also offers enormous opportunities for the medical community and other service providers.
The private sector has emerged as a vibrant force in India’s healthcare industry, lending it both national and international repute. The share of the private sector in healthcare delivery which was around 66% in 2005 is expected to increase to almost 80%. The private sector’s share in hospitals and hospital beds is estimated at 74% and 40%, respectively. Driven by increased domestic demand, the healthcare sector has attracted huge investment in recent times. India needs an additional 17.5 lakh beds by 2025 for which an estimated investment of $ 86 billion would be required. Huge private sector investments will significantly contribute to the development of hospital industry. Most Indian metros have hospitals with world-class infrastructure, processes and outcomes. However, 70% of the healthcare infrastructure is confined to the top 20 cities of India. In order to reach the remaining population, innovations both in healthcare services and delivery are required. Less than 30% of the Indian population has some form of health insurance coverage, either private voluntary or as part of the government sponsored health insurance schemes. This presents a window of opportunity to global health insurers with a big potential market. The proportion of imports is high in the Indian medical equipment and medical implants segments, contributing approximately 85% of the market.
According to WHO, although the total expenditure on healthcare in India is only about 4.1% of GDP, in which government expenditure is less than 1% of GDP quite evidently private sector investments will have to play a vital role. On an overall, India’s dynamic healthcare sector assures to be an area of expansion, with high prospective for both private equity and venture capital investment.
The healthcare sector is broadly categorized to include hospitals and clinics, life-science companies, medical devices, pharmaceuticals, diagnostics, biotechnology and insurance firms. In 2015, private equity (PE) investments in healthcare and life sciences across 50 transactions touched $1.5 billion of which investments in hospital chains absorbed $291 million and diagnostic services $154 million. As the healthcare sector continues its swift growth, it is likely to realise an accompanying rise in the levels of PE involvement. The challenges the Indian healthcare industry faces of providing access to healthcare services at an affordable price can be met by appropriately planned single specialty or service focused business models.
Startup effect
The healthcare sector in India is being increasingly invaded by startups who have seized the digital high ground and are creating innovative customer centric models of healthcare delivery. The startup consumer healthcare services and technology companies in India have received $338 million in investments out of which $285 million has been invested in 2015. Interestingly the ecosystem already has 87 companies — across technology, home healthcare services, genetics, and new diagnostic devices which have been significantly funded. The outcome of these investments will be a new generation of healthcare companies — in India which will define a new healthcare delivery ecosystem. These dynamic changes require patients, payers, providers, governments and life science companies — everyone within the health ecosystem — to think differently.
(The author is the Chairman of Medwell Ventures)