Healthcare is fundamentally changing around the world. Health startups are sprouting up across Singapore. In Mexico, the government is tackling diabetes with a holistic approach, including instituting community glucose-monitoring centers and soda taxes. Saudi Arabia is modernizing its entire health system, rethinking where and how care is delivered. In India too, mobile health initiatives are helping leapfrog over traditional healthcare systems into tech-based care.
These efforts are a response to a global shift in the healthcare landscape, which has been accelerated by advances in technology. The way healthcare is being delivered is changing. Consumers’ desires and needs for care, and the level of trust they have in the organizations delivering care, are also disrupting the industry. Adding to the list of changes and challenges, chronic diseases continue to harm the population and spread to previously unaffected regions, and resources are limited.
Global market dynamics
The global healthcare industry does not show any signs of slowing down in 2019. The global MedTech market was valued at USD 425.5 billion in 2018 and is expected to reach USD 579.6 billion by 2024, growing at a CAGR of 5.4 percent, estimates Fortune Business Insights.
The cardiology market is expected to grow at 6.4 percent per year to USD 72.6 billion in 2024. Diagnostic imaging will be one of the slowest-growing device areas, with an expected CAGR of only 3.7 percent between 2018 and 2024. Growth in the orthopedic sector is expected to remain sluggish, with a CAGR of just 3.7 percent.
MedTech companies worldwide will spend USD 39 billion on R&D in 2024, with an expected CAGR of 4.5 percent. The R&D investment rate, as a percentage of sales, is expected to decline to 8.1 percent in 2024.
The emergence of personalized medicine, increased use of exponential technologies, entry of disruptive and non-traditional competitors, the demand for expanded care delivery sites, and revamped payment and public funding models are all impacting the financial performance of the healthcare ecosystem.
Companies with market expansion plans should be prepared to face fiercer competition from emerging market players. Cost can be a factor while selecting MedTech products manufactured in emerging markets – the lower-end range of prosthetic limbs from the Western countries cost up to 40 times more than those made in a developing country. However, increasingly, the development of devices and related initiatives that make it feasible and easy to use in emerging markets are driving these choices.
Companies need a strong underlying understanding of local infrastructure, healthcare systems, and users to develop the right type of technology. Limited infrastructure and lack of skilled healthcare professionals in emerging markets make the use of standard medical devices challenging.
Even as rural health initiatives grow with data connectivity and technology, infrastructural gaps and the lack of healthcare professionals will continue to be challenges in emerging markets. There is a need for the right MedTech to support care, carried out in rural facilities as they pick up on local demand for healthcare.
Indian market dynamics
The Indian MedTech market offers a great opportunity not only by its size, but also because of encouraging policies and regulations introduced by the government over the last couple of years. It continues to record robust growth despite a hardened stance on pricing for essential devices.
The Indian MRI equipment market for 2018, is estimated at Rs 1700 crore, and 346 units, by volume. The premium systems 3T and 1.5T, continue to dominate the market with an approximate combined 89 percent share. The discerning customer continues his drive to upgrade the 1.5T systems to 3T MRI systems. The 7T systems continue to evade the market. The 0.2–0.5T MRI machines and refurbished machines cater to the cost-conscious, smaller hospitals all over the country.
The Indian ultrasound equipment market in 2018 is estimated at Rs 1361 crore. It is forecast to grow at a double-digit rate in 2019, buoyed by the government’s efforts to expand healthcare coverage, increasing private sector spending on healthcare, and a growing medical tourism industry. Government spending on healthcare has also upped its allotted spending by 22 percent. As India’s population continues to surge, the long-term ultrasound market seems promising.
The Indian CT scanners market in 2018 is estimated at Rs 1042.49 crore, translating to 755 units in quantity terms. The 1–16 slices category dominated with a 38 percent market share. The other popular categories were 17–63 slices and 128–160 slices at a combined 23 percent share each. Refurbished machines continued to take a hit and were a mere 4 percent share in 2018. 2019 is expected to show de-growth. 1H2019 had sales of 295 units, valued at Rs 369.34 crore as against 755 units, valued at Rs 524.29 crore in 1H2018, a 37 percent decline in value terms.
The Indian X-ray equipment market in 2018 is estimated at 13,000 units, with value estimated as Rs 860 crore. The CR machines dominate with a 40 percent share, DR contributes 34 percent and analog 26 percent, by value. As expected, by quantity, the analog systems have a 50 percent share, CR constitutes 44 percent, and DR 6 percent.
The Indian endoscopy equipment market in 2018 is estimated at Rs 725 crore, with the rigid endoscopes segment estimated at Rs 385 crore and the flexible endoscopes segment at Rs 320 crore. Capsules contributed Rs 14 crore and balloon another Rs 6 crore. In unit terms, it is estimated that in 2018, 600 numbers of flexible and 2500 numbers of rigid endoscopes were sold in the Indian market.
In 2018, the Indian cath labs market is estimated as Rs 675 crore, at 280 units. The biplane segment continues to be a premium segment, procured only by a handful of institutions. In the flat-panel digital segment, the systems with average unit price in the vicinity of Rs 2.5 crore dominate with an approximate 43 percent market share.
The Indian market for patient-monitoring equipment in 2018 is estimated at Rs 525.74 crore, and 66,842 units. The premium segment has an 11.97 percent contribution by value and a 2.98 percent contribution by volume. The 100 units of super-premium systems, selling at an average unit price of Rs 130,000 have been clubbed with the premium segment. High-end systems constitute 24 percent share in value terms and 9.94 percent in volume terms. Although the belly of the segment continues to be the competitively priced mid-end and low-end systems, and dominate with a combined share of 87.06 percent in volume terms and 64 percent in value terms, there is a gradual shift in favor of mid-end equipment.
The Indian ventilators market in 2018 is estimated at 9250 units, valued at Rs 487 crore. The imported equipment continues to dominate the segment with a 79 percent share by value, and a 63.8 percent share by units. The imported segment saw an 18 percent increase over 2017 and the indigenous segment by about 15 percent. The transport and ambulatory segment, in spite of the directive that every ambulance must be equipped with a ventilator, saw only a marginal increase in 2018.
The Indian ECG equipment market in 2018 is estimated at Rs 268.48 crore. In value terms, the high-end machines account for a 60 percent share, albeit only a 26 percent share by volume. By volume, the 3-channel systems lead the market, contributing 34 percent to the market. In spite of declining demand, the single-channel ECG equipment continues to have a stronghold in the market, with a 52 percent share, by value. In the high-end ECG segment, the 12-channel ECG machines contribute 72 percent, by value and 84 percent, by volume. The low-end stress-test ECG machines are also popular with an 11 percent share, by value and 8 percent share, by volume. The low-end Holter, the high-end Holter, and the high-end, stress-test ECG machines, each have a market share in the vicinity of 5 percent, by value.
The Indian anesthesia equipment market in 2018 is estimated at Rs 193.26 crore, at 5000 units.
The Indian defibrillators market in 2018 is estimated at Rs 151.91 crore, and 11060 units. Biphasic defibrillators, the highest priced in this segment, dominate the market with a 68 percent market share by value and 50 percent market share by volume. 25 percent of the segment is constituted by biphasic models priced at an average unit price of Rs 350,000, which also offer the CPR function. The monophasic defibrillators market continues to decline at about 10 percent every year. The AEDs market continues to grow by 20 percent in volume terms; in value terms the segment continues to hover in the vicinity of Rs 28 crore.
In 2018, the Indian hospital beds market is estimated at Rs 750 crore with 125,000 units. The hospital beds contribute 50 percent to the total hospital furniture industry. The high-end and mid-end segments continue to dominate the market with a combined 44 percent share, by value. Apart from being basic 5-function beds, they incorporate advanced features as being AC-powered, hydraulic adjustability, and powered patient rotation. The low-end, semi-automatic and manual beds in unit terms continue to command a 50 percent share by volume and are primarily bought by new, smaller hospitals and nursing homes in metros and in Tier-II and Tier-III cities. This segment is expected to continue to grow at 10–12 percent year-on-year, with 120,000–130,000 beds added every year.
In 2018, the Indian OT lights market is estimated at Rs 243 crore, with 6000 units; with imported lights at 1800 units and indigenous brands at 4200 units. Value-wise the imported segment is estimated at Rs 180 crore and Indian at Rs 63 crore. The imported lights have a 30 percent share when compared to the imported OT table segment at 16 percent, in volume terms.
In 2018, the Indian OT tables market is estimated at Rs 204 crore with sales at 5330 units. The indigenous segment with 4400 units continues to dominate with 83 percent of the total market, and in value terms it is estimated at Rs 88 crore, share being 43 percent of the market.
In 2018, the Indian biochemistry instruments and reagents market is estimated at Rs 1742 crore, with reagents continuing to dominate at Rs 1450 crore at an 83.24 percent market share. The floor-standing analyzers are estimated at Rs 85 crore and 1610 units; benchtop analyzers at Rs 82 crore and 1580 units; and semi-automated analyzers at Rs 125 crore and 15,100 units.
The Indian immunochemistry instruments and reagents market in 2018 is estimated at Rs 1722.8 crore, with reagents dominating at Rs 1551.2 crore. Elisa kits clocked an additional Rs 342 crore and rapid tests an additional Rs 315 crore in 2018.
The Indian hematology instruments and reagents market in 2018 is estimated as Rs 790 crore. Reagents constitute 63.3 percent of the market at Rs 500 crore, and instruments the balance at Rs 290 crore.
The Indian market for microbiology instruments and reagents in 2018 is estimated at Rs 425 crore.
The Indian molecular diagnostics market is estimated at Rs 263 crore in 2018. Analyzers contributed Rs 13 crore, and most were placed.
The Indian market for urinalysis analyzers and reagents in 2018 is estimated at Rs 172.6 crore. Reagents continue to dominate with an 81 percent share, valued at Rs 139 crore.
The Indian coagulation instruments and reagents market in 2018 is estimated at Rs 148 crore. The year showed a 9 percent growth over 2017. The installed base in 2018 is estimated at 4965 instruments, with semi-automated instruments at 4350 units, and fully automated ones at 615 units.
In India, till recently, medical devices had not received appropriate attention from policy makers. Currently, however, medical devices have come into mainstream policy making, albeit often with the absence of deep understanding about the domain, or without an adequately nuanced approach to factor for its hugely diverse range or spectrum.
Like in any other country, challenges in doing business of medical devices in India remain. One major challenge is price control. The government controls prices of certain medical devices by either fixing a price at which they may be sold under a formula or by restricting the ability of the marketer of the medical device to increase its price by more than a prescribed percentage at any given time. The presence of multiple regulators, which may make simple tasks (such as rectification of erroneous declaration on the label) quite a tumultuous affair, remains a challenge. Another challenge is presence of archaic laws that do not permit manufacturers and importers of medical devices to promote their product directly to the customer as cures for certain prescribed conditions and illnesses.
Transformation in healthcare
The powerful forces at play in healthcare are pushing traditional models of delivering care – siloed and static – into new models that can do a better job of anticipating people’s healthcare needs and addressing them in ways that are efficient, affordable, convenient, and highly valuable. Yet, despite the high stakes, healthcare is lagging far behind other industries in transformation. The urgency for healthcare companies to transform themselves is amplified by newer, non-industry entrants into this economy, which represent 10 percent to 20 percent of GDP in the developed countries. Technology companies have a role to play, as do telecommunications companies, retailers, and financial-services companies. Government institutions, including local municipalities and universities, also likely will serve expanded roles in addressing, in particular, the social determinants of health that play a role in prevention and treatment. But traditional healthcare organizations can also emerge as leaders in this new world of virtual care, individualized healthcare, and data management. Indeed, transformations in this new health economy are already emerging around the world.
Meeting the challenge. As the healthcare landscape continues to shift, companies face a choice: transform or risk being left behind. PwC in its recent report, Transformation in healthcare, offers a prescription to address the rapidly changing ecosystem.
Those seeking to stay competitive must begin the journey of transformation by creating a strategic identity, focusing on a single future goal rather than taking a scattershot approach. They must also design the new organisation for trust, a commodity that is shrinking among consumers in relation to all institutions, including healthcare institutions. Companies must next master the pivot from sprint to scale, gaining the capabilities to take an idea from formulation to significant size and impact. And finally, they must identify which parts of their legacy are worth keeping, which should be jettisoned, and what new legacy they should be creating.
Companies that use these four building blocks of transformation will be prepared to thrive in the changing healthcare environment. They will be able to take advantage of fast-changing technology as it becomes more adept at addressing some of the globe’s most pressing health problems. Consumers will reward those companies’ ingenuity. And governments that succeed in embracing the future of care will experience less strain on their resources and have healthier, happier populations. A transformation, in this context, is a major shift in an organisation’s capabilities and identity, undertaken to deliver valuable results that are relevant to its purpose. It doesn’t necessarily involve a single major initiative, though it could, as the organisation works to develop an ongoing mastery of change in which adaptability feels natural to leaders and employees.
The four building blocks of a healthcare transformation.
There is no single blueprint that applies to every corporate transformation. The specific steps, stages, and organizational designs will vary from one enterprise to the next. But four basic building blocks do appear in any successful transformation, including those in healthcare.
Even an industry as vast and fragmented as healthcare can apply these four building blocks to produce transformation on a significant scale. At any scale, companies should reimagine their culture with highly engaged leaders willing to take radical steps, whether in the form of partnering with entities outside of the healthcare industry or administering care beyond the traditional settings.
Create a strategic identity. Consumers have grown accustomed to receiving services and goods with a few keystrokes, so why should not they expect to make a clinic appointment or refill their prescriptions through a user-friendly app? Healthcare companies would do well to keep today’s higher customer expectations in mind as they work on this first building block. Those that have branded themselves successfully are not just attempting to adjust their business model. These organizations are looking to bionic leaders such as Apple and Google to see how they, too, can make the transition to a world of platforms, integrated technology, virtual medicine, and AI to put consumers and their preferences at the center of the experience. Making such leaps in identity and purpose require collaboration and socialization with stakeholders to ensure buy-in; consistent messaging across the organization; and a careful, consumer-centric rollout.
Design for trust. Technologies and institutions that are part of the healthcare industry are among the many entities in which public trust is declining. Sceptical consumers are demanding more information about their treatment options and expecting more from providers, which are multiplying from one or two systems to hundreds, including those in non-traditional settings. Technology could answer this call for better choices, and the sharing and mining of data could result in more targeted treatments and improved outcomes. How personal health information is handled in an era of data breaches affects the entire global healthcare ecosystem.
Trust is paramount in healthcare – from protecting privacy and data to building confidence in providers and protocols. And building trust is critical as new entrants and modes of care are introduced. The basis for building trust in healthcare must include transparency; personalization; and evidence-based outcomes.
Master the pivot from sprint to scale. Learning through experimentation and innovation in any field naturally leads to both success and failure. And in healthcare, scaling successful pilots or trials presents unique challenges amid the highest possible stakes — a situation further complicated by the industry’s current fragmented ecosystem. Healthcare companies undergoing a transformation must use data to scale up, but be vigilant in balancing access and security, and the data needs of caregivers and patients. There is an inherent tension between tech culture, which embraces fast failure, and healthcare culture, which prizes patient safety. Patient data must be able to travel safely and securely among health vendors, hospital systems, payer plans and community support providers. Those same players need access to all the methods, practices and cost-saving tools that make up the transformation. Enabling this access is no small feat in an industry with such a complex and often localized ecosystem where information is highly regulated to protect patient privacy. But the benefits of improved outcomes, quality and lower cost far outweigh the obstacles.
Treat legacy as an asset. Successful transformation requires a balance between leveraging core strengths and embracing bold new strategies. Healthcare companies that build off their strengths and establish partnerships to supplement their expertise are best positioned to succeed. When selecting partners, they need to seek a long-term commitment to change and value-adding innovation.
Of course, the size of the healthcare economy – whether it is government payer, private, or multitiered – and the maturity of the market may determine how quickly an organization can transform. In the UK, for example, which is in the process of centralizing and streamlining its hospital systems, transformation comes more slowly, much like turning a massive ocean liner. But in emerging markets such as India, transformation may come relatively quickly, with hundreds of startups leveraging technology to bridge the gap in access to care for the millions of customers living outside urban centers.
One thing is clear: consumers are driving this change, and most traditional healthcare businesses will have to transform in significant ways to meet them where they are. Ultimately, the winners of this transformation – the agile and customer-centric Amazons or Googles of healthcare – may surprise us all.
The four building blocks of transformation offer healthcare leaders the means to adapt, grow, and overcome hurdles. No matter how they are assembled, the building blocks ensure that the vision for healthcare is ambitious, is aspirational, and delivers on its promises to patients. If one has these factors on their side, they are far more likely to succeed, concluded PwC.