Innovating Around India’s Health Care Challenges

Delivering affordable health care to India’s billion-plus people presents enormous challenges and opportunities for the medical community, insurers and other service providers. Innovative technologies, processes and partnerships forged by the Indian government and private companies have begun bridging the health care gap, according to participants in a recent Wharton India Economic Forum panel discussion.

Advances are underway on several fronts, from expanding health insurance coverage for the poor and building hospitals in smaller towns, to using technology for safer drinking water and improving treatment outcomes, according to participants in the panel titled, “Health Care in India: An Evolving Market for Founders and Investors.” Examples of progress offered by the panelists included heart surgeries in India that cost less than a tenth of what they would in the United States; and health insurance that costs less than a dollar for an entire family, thanks to technology, talent and creative government programs.

At Apollo Hospitals, a Hyderabad-based company that runs a network of 50 hospitals, administrative costs have been contained to 7% of a patient’s bill, compared to the U.S. average of 25%, according to panelist Sangita Reddy, Apollo’s executive director of operations. She credited the cost containment to internal processes, and carefully structured alliances with insurers and other health care service providers. “There is a direct allocation of money to medicines, to materials and to people — and it is sustainable,” she said. In the 27 years since its founding, Apollo has built a track record of about 90,000 hospitalizations with a success rate of 99.4%, she added.

Reddy was particularly proud of Apollo lowering the cost of a heart bypass surgery to about US$2,300. She described Apollo’s expertise in the so-called “beating-heart surgery” process that allows for “quicker recovery and lowers costs.” Conducting heart surgeries to repair blood vessels while the heart is beating requires highly skilled surgeons, she noted. Apollo conducts beating-heart surgery in about 90% of such procedures, compared to 5%-7% internationally.

“[However,] all these are islands of excellence in an ocean of inadequacy,” Reddy said. “We need to focus on scaling what we do to reach out to a billion people, with a sustainable model [that overcomes] the challenges of geography.” She named maternal and infant mortality as two of the biggest challenges for India’s health care providers. Apollo has responded by transitioning from building hospitals in larger cities to constructing facilities in smaller towns, and by enhancing its health care services by forming partnerships with insurers and technology firms.

Apollo recently launched a telemedicine service, with health insurance that costs 2.5 US cents a day for a family of five, in an Andhra Pradesh village of 50,000 people. India’s National Insurance Corp. and Oriental Insurance Corp. provide coverage for patient care up to US$300, with Apollo bearing the cost above the premiums. In this effort, and for another telemedicine venture operated through community service centers, Apollo has partnered with Cisco, GE, Wipro Technologies and the Indian Space Research Organization (for satellite communication facilities).

Panelist Bhargav Dasgupta, executive director of ICICI Lombard, India’s largest private sector general insurer, referred to another innovative government-sponsored, public-private effort to provide health insurance to India’s poor. For 70 US cents a year each, families receive US$700 in medical care; as they use the services, the money is deducted from their accounts using a cashless process that involves “smart” cards with embedded technology. The government will pay premiums to participating insurance companies, and has allocated about US$1 billion over five years.

The program, called Rashtriya Swasthya Bima Yojana (or national health insurance program), was launched in late 2007, and has so far enrolled nearly 15 million families, and 4,384 hospitals, in 26 of India’s 28 states. India has about 83 million poor families who make up about 37% of its population, according to the government’s Planning Commission. ICICI Lombard is enrolling about 2,000 families each day, and controls about 45% of the low-income market, according to Dasgupta. “Private insurance companies bid for [providing coverage in] districts each year, and it is their responsibility to enroll families and ensure that a network of providers is set up,” he added.

Dasgupta expects the national health insurance program to grow over time to cover more of India’s poor population, and also facilitate the creation of a database of health incidents. With the government picking up the insurance premium tabs, financing is available to create a network of providers in rural India, he pointed out. “We are seeing private investors wanting to set up small hospitals in rural India,” he noted, and the public-private partnership model is already attracting interest from the World Bank, and Pakistan and Bangladesh want to replicate it.

Meanwhile, India’s Tata Group is working on health solutions from the ground up, bringing technology to provide clean drinking water, according to panelist Homi Khusrokhan, an advisor to the Tata HBM Health Care Fund, which supports innovative enterprises. An innovation center at Tata Chemicals recently launched what Khusrokhan called “a water filter appropriate for the needs of the country.” The technology uses burnt rice husks with nano-silver as a filter for water, making it 99.8% free of harmful bacteria and also some viruses. “Burnt rice husk is available in huge quantities in India and used as a fuel,” Khusrokhan noted. Indian families are also acquainted with the cleansing properties of silver; many households drink water from silver glasses, and eat food on silver plates.

Khusrokhan also described the Tata group’s efforts in developing new drugs to meet India’s health care needs. Advinus Therapeutics, a drug development firm in Bangalore and Pune focused on metabolic and inflammatory diseases, has developed a novel compound to treat diabetes, he said. Going forward, the Tata Group wants to focus on personalized medicine, building on “India’s huge gene pool,” Khusrokhan added.

Health Care Convergence

Khusrokhan wears many hats as a corporate advisor, one of which acquainted him with an ambitious telemedicine and emergency-response enterprise set up by Ramalinga Raju, the disgraced founder and CEO of India’s IT services company Satyam Computers in Hyderabad. In January 2009, Raju confessed to inflating Satyam’s profits by more than US$1 billion over eight years. Khusrokhan was part of a panel that looked into the wrongdoings at the company.

Despite that, “Raju actually succeeded in saving 600,000 lives in Andhra Pradesh through telemedicine and emergency response,” Khusrokhan noted. The service fielded up to 35,000 calls a day, which is more than the National Health Service in the U.K. receives. “Three things struck me,” he stated. “One, it was an IT company doing this. Two, [the service] was getting a remarkable number of calls. Third, it was able to give pretty good medical advice on the phone [about] how to handle common symptoms, using scientific medical algorithms.” Khusrokhan also learned that Raju had set a goal for the emergency-response service of reaching an accident spot within 15 minutes of a call, and personally tracked its performance daily.

Stephen Sammut, a senior fellow at Wharton Health Care Management and the panel’s moderator, pointed out that Indian health care services providers are “truly innovating, and not modeling (their offerings) after the U.S.” Reddy said innovation is the only way to deal with the size of India’s unmet health care needs. “We have to do things differently,” she stated. “Yesterday’s or today’s methodology to practice health care does not work for tomorrow.”

Reddy stressed the importance of “convergence of health care” as “the biggest thing we can do.” She described the immense possibilities that could result from bringing together health care, IT and mobile phones. With 560 million mobile-phone users countrywide, “almost 80% of adult India has a cell phone,” she pointed out. “How can we use that to heighten health awareness and prevention, and provide appropriate access to the right health care? The mobile phone can’t do bypass surgery, but it can do something to prevent cardiac surgery, at least to a degree. It can help people know where to go [for care], or to call an ambulance.”

Faced with the challenges of providing health care in India, “you get disillusioned, but also get encouraged with small victories,” noted panelist Vijai Kumar, president and chief medical officer of Excel Life Sciences, a Chicago-based firm that administers clinical trials in India and offers pharmaceutical consulting services. He suggested that while India has emerged as a destination for drug development, a key obstacle moving forward is matching the priorities of the drug developer with those of the physician and the patient in clinical trials.

“Informed consent” from patients participating in trials is as high as 98% in the United States, but that process faces hurdles in India, stated Kumar, who is also a physician. Most Indian patients are accompanied by family members when they seek care and “you have to convince the family to let the patient participate in the clinical trial,” Kumar said, noting that every patient that drops out of a clinical trial costs a pharmaceutical company significantly.

India has much to be proud of in health care, according to panelist K. J. Singh, a senior program officer at the Bill and Melinda Gates Foundation focusing on developing innovative new vaccines and cost-effective clinical trials. The country has produced “world class companies” that account for more than 80% of the global generic drugs supply, he pointed out. He also commended India’s health care providers for delivering “high quality, low-cost care,” and highlighted India’s success in attracting “medical tourism,” in which people from Western countries travel there for surgeries and other medical procedures in order to take advantage of lower health care costs.

The ‘Buts’ in India’s Health Care Gap

“But — there is always a ‘but,'” Singh continued. “The gaps are huge. Our vaccination ratesare very low, that is unconscionable for a country with the profile, aspirations and the installed health care base we have. Look at mortality rates, especially from trivial diseases — the list is long and people still suffer diseases like cholera.”

According to Singh, India’s health care industry needs managers with “knowledge about the reality at the ground level” to help grapple with those challenges. He said leaders also need to understand the scope of India’s health care gaps, work to build infrastructure to reach rural pockets, and to create innovative financing to deliver health care to the underprivileged.

Creating incentives for local companies, roping in support from global players and putting in place public-private partnerships ought to be the thrust areas for the Indian health care services industry, he added.

Dasgupta called for government spending on programs to increase substantially. India’s government spending on health care is less than 2% of GDP, among the lowest worldwide, although it is high when compared to other developing nations. Even though India’s private health insurance industry grew its business volumes by 35% annually in recent years, 85% of the population remains uninsured, he noted. About 65% of Indians that incur expenditures on major health problems become indebted for life.

Although India and other emerging economies have “the highest growth opportunity from commercial and innovation perspectives,” the country has yet to develop enough investment appeal for big pharmaceutical companies to locate research hubs there, stated panelist Rajeev Dadoo, a partner at GlaxoSmithKline’s venture fund SR-One. GlaxoSmithKline, for example, spent a year-and-a-half analyzing opportunities in India and China for setting up a full-fledged R&D center. The company considered macro and micro factors including scientific and technical talent, infrastructure, government involvement, and existing hubs of innovation such as biotechnology parks. Eventually, GlaxoSmithKline decided to set up its R&D center in China. “The scales got tipped by just a couple of factors, but India certainly is a large component of the GSK strategy,” Dadoo added. “While we found a lot of activity in India in drug discovery, innovation is still at the cusp.”

Apollo’s Reddy disagreed — “Innovation in services is way beyond the cusp in India; it’s been deep and consistent.” She emphasized that the constant challenge her industry faces is to provide quality health care that is also affordable. She said that imperative gets brutally stark at times. “If you know somebody sold their land to finance a bypass surgery for their father, you are going to do everything you can to make sure the cost is low.”

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