Connect with us

Daily News

Health-Tech Sector Seen Generating Significant Value Over the Next Decade

The Indian healthcare market is deep (USD 140 billion in 2016), growing rapidly (11 percent CAGR since 2011), and profitable (15 percent industry EBIDTA). While the majority of VC and PE dollars invested in the domestic healthcare space so far have been in healthcare services (69 percent in 2017); there is also tremendous opportunity in the relatively under-explored healthcare enabler space (areas adjacent to healthcare services, such as finance, insurance and pharma distribution). While 75 percent of healthcare spend is in services, growth is higher in the enabler space. These are markets with high scalability, capital efficiency, and deep profit pools. Some opportunities that are exciting include:

Pharma distribution

It is extremely fragmented. There are, 80,000-plus distributors in India, with very low concentration compared to markets such as the US and China. Consolidation is led by GST and tech adoption (leading to improving margins through better inventory management and fulfilment). While margins in pharma distribution are challenged, technology is helping disruptors manage product mix and forecast demand more accurately.

Healthcare insurance

Specialized plays are nascent and can prove to be profitable e.g.:

  1. Micro-insurance:Benefits-based coverage for a nominal daily or monthly fee, along with access to basic healthcare services.
  2. Disease-based cover:Diabetes plans are now mainstream; similar specialized coverage for other chronic illnesses offers another opportunity.
  3. Low-cost basic cover: By using analytics to reduce underwriting cost for new policies, and developing better fraud algorithms, one can enable no-frills low-cost basic coverage.

Healthcare finance

Specialized healthcare finance is largely untapped. Most healthcare spending (~65 percent) are out-of-pocket. Formal credit forms a negligible portion of this. Non-savings healthcare expenditure comes from friends and family, informal credit (at often usurious rates), or disguised as personal loans. An estimated 21 percent of families having a debt burden, do so because of healthcare-related loans. While challenges in healthcare lending are well known (lack of data, difficulty in selecting procedures to underwrite, inconsistent origination of loans at hospitals and clinics), there are clear indicators of this being a large market ready for disruption.

Improving hospital and clinic throughput

Finally, the perennial challenges of Indian healthcare—low doctor density, and low hospital bed density, can be eased by improving hospital throughput through tech-enabled tools.

  1. Tools that focus on improved hospital efficiency e.g., reducing length of stay in intensive-care units (ICUs) through the creation of “step-down” wards.
  2. Opportunities to help doctors monetize down-time and increase reach through remote patient communication e.g., using tele-medicine platforms.
  3. Triage systems for tertiary care that help hospitals deal with only the most urgent cases, filtering out patients for whom primary care is more suitable.

The health-tech and health-enabler segments of the market are still in their early stages, and we firmly believe there will be significant value-creation in these spaces over the next decade. – Livemint