Mumbai: Dr. Pankaj Jethwani, Executive Vice President, W Health Ventures spoke with ETHealthworld’s Prabhat Prakash on the nascent ecosystem of Indian healthcare start-ups versus the US market and why established healthcare players are investing in these start-ups.

How can start-ups disrupt healthcare with established players and how does it benefit both?

Prior to COVID, for most patients in India, access to healthcare meant seeing a doctor in a clinic or hospital or a pharmacist or informal providers when one is “ill”. While this is largely true even after COVID, we are seeing health services move closer to home, with patients being able to talk to doctors via video or WhatsApp chat). Companies are looking to improve the patient experience, and new disease-focused models of care are gaining market share.

Healthcare start-ups are trying to solve access and cost issues by innovating in clinical model, technology and business model. Incumbents in the healthcare sector are generally reluctant to change, but are slowly starting to work with these new era start-ups. We have seen this happen many times in our portfolio. Many traditional healthcare structures benefit from trusted digital players who educate patients about their health status and act as an acquisition channel.

The lack of specialists and healthcare infrastructure in rural India is a known problem. 70% of our population resides in Tier II cities and above, while 70% of our doctors are in Tier I cities, which often leads healthcare facilities to struggle with underutilization. Healthcare start-ups are bridging the supply gap for doctors and specialists in the country by digitally connecting them to patients across the country.

Additionally, start-ups are using their digital touchpoints to improve the customer experience of patients and complete the loop of the continuum of care. This has helped healthcare providers improve customer engagement, retention, and lifetime value. Startups also benefit from these symbiotic partnerships by gaining patient trust through association with a known hospital brand. Additional business interests are piling up – reduce customer acquisition costs by tapping into the providers’ huge patient base built up over the years and revenue from digital health services.

What is the reach of healthcare start-ups, what are the sustainability challenges and how can they be overcome?

The scope of healthcare start-ups is constantly changing. Designed to address the changing and growing issues of business-to-business supply (B2B models) and demand (business-to-business-to-consumer) [B2B2C] and business to consumer [B2C models]), their reach is influenced by macro-factors such as changing healthcare seeking behaviors, digital innovation, and adoption by healthcare providers and patients.

On the supply side (B2B models) – several artificial intelligence (AI) developers are creating solutions to improve the accuracy, turnaround times, physician productivity, and overall efficiency of standard healthcare processes adopted by hospitals. AI providers gain access to several large hospital groups by being on the platform. The start-ups are also bringing efficiencies to the pharmacy supply chain by solving issues such as longer delivery time, product expiration management, reverse logistics and reconciliation process, and limited inventory choices, among others. On the demand side – The pandemic has pushed employers to offer comprehensive healthcare packages to their employees.

B2C start-ups have leveraged India’s growing digital adoption to go directly to consumers (D2C) by offering end-to-end solutions for their medical needs. Go D2C allows start-ups to have a targeted marketing approach towards problems not solved by the big players. Building trust between patients/consumers is paramount in healthcare – it’s the biggest challenge healthcare startups face. Getting millions of consumers to trust a digital startup for their health needs requires a large amount of capital and time to create and market the brand. Additionally, start-ups are tempted to offer steep discounts early in their journey, even in healthcare. Both can lead to significant “burn” and poor unit economy in the first few days. The path to profitability is critical for any business to scale and create shareholder value. Once companies identify their playbook early on, the operating leverage of subsequent years can help them scale in a sustainable way.

Why are companies investing in various healthcare start-ups? Could the lower risk factors involved in R&D and investments be the reason? If others specify.

Today, there are over 7,600 health technology companies in India with total funding of over $7 billion. As the ecosystem matures, companies are increasingly interested in investing in or acquiring these digital health companies.

Hospital groups invest in or acquire start-ups that complete or expand their scope. This could be by providing better patient engagement, particularly pre and post IPD procedures to improve patient lifetime value, improving operational efficiency through EMRs and tele-ICUs or improving patient acquisition. clients.

Pharmaceutical companies are investing in digital health start-ups that have a remote patient touchpoint, which helps measure and improve medication adherence, provide them with patient data and to conduct pharmacovigilance studies.

Medical device giants are investing in start-ups that save R&D time, acquire new intellectual property, or augment their existing offering with software and hardware that complements the existing product portfolio of medical devices. device giants.

Consumer healthcare companies (FMCG) and wellness brands buy oversupply, in order to save time on developing products that are natural extensions of their current product line. Another reason to invest in start-ups, especially direct-to-consumer (D2C) start-ups, is the level of last-mile consumer data available to them, which heavy offline distribution conglomerates do not have.

Tech giants are investing in healthcare start-ups as it allows them to make a quick foray into the healthcare industry and also access the burgeoning tech talent in this space.

What percentage of the funds you are looking to support around 15-20 early stage health tech/healthcare start-ups in the US and India through its $100m fund) would go to the Indian market ? Will additional funding be provided to these start-ups once scaling is finalized?

We invest in results-driven health technology start-ups in India and the United States that tackle important health issues through clinical, product or business model innovation. Investments in India will represent approximately 65% ​​of our corpus. Committed to helping our portfolio companies grow by making pro-rated investments in follow-on cycles as they evolve. Through our investments, we aim to positively impact 100 million lives in both geographies and help build inclusive, equitable and effective health systems.

In addition to investing in companies that have found product market fit, we will also invest in building companies from the ground up with the right mission-driven founders. To do this, we develop internal product and marketing capabilities that many companies can benefit from. This venture factory or venture studio will create care delivery businesses for India and the rest of the world.

How does India’s health tech industry compare to its American counterpart? Elaborate.

There are striking differences between the Indian and American healthcare sectors:

Insurance coverage is much higher in the US and as a result, out-of-pocket expenses (OoPE) are much lower – Insurance coverage is much higher in the United States and therefore the OOPE is much lower. 91% of Americans are covered by insurance compared to only 37% of Indians. Thus, 66% of health expenditure in India is paid by the patient, against only 9% in the United States. Because of this difference in healthcare financing, most US healthcare startups have adopted a B2B2C model in which they sell to employers and payers and through them reach end consumers.

Tighter but more reliable regulatory landscape in the United States-
The US regulatory landscape is stricter than that of India. Obtaining an FDA approval is much more difficult than any Indian regulatory approval, however, the struggle is rewarded as an FDA approved solution finds greater adoption and acceptance not only in the US market but worldwide .

Quality health care is more expensive in the United States. annual per capita health expenditure in India is less than $100, while in the United States it exceeds $10,000. This is due not only to more people in the United States consuming health care, but also to higher prices for health services in the United States. For example, an RT-PCR test in the United States might cost more than $200 while in India it costs less than $10-15.

Health technology innovation is still at a nascent stage in India- Health technology innovation in India is synonymous with telehealth and e-pharmacies, while more comprehensive interventional models of care remain at a nascent stage, unlike in the United States where vertically integrated platforms and models of care based on value are growing rapidly.

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