Health care in India faces several challenges including inadequate access, low insurance penetration and a growing chronic disease burden. At the same time, traditional business models have found it hard to show attractive returns on investment, except for a few large providers. Technology infusion — along with expanded infrastructure and efficiencies from process improvements — could help improve health care accessibility and affordability, according to experts who spoke about emerging trends in that industry at the 2020 Wharton India Economic Forum, held this month in Mumbai.

Despite its shortcomings, India’s health care sector has a lot going for it on several fronts. A government-led push to get health care providers to embrace electronic medical records is enabling artificial intelligence (AI) to extract insights from patient data to deliver better treatment. The availability of telecom bandwidth is making medical expertise reach underserved rural markets through telemedicine and tele-consulting programs, delivered over mobile phones.

The Indian government’s ‘Make in India’ initiative is encouraging domestic manufacture of medical devices and helping lower the prices patients pay for products such as stents and implants, which in the past were imported. At the same time, in India the policy environment and regulators need to accommodate technological interventions such as the growth of online pharmacies with the requisite controls in place, according to the panelists. Health care innovation in India could serve as a global model for a shift from treating the sick to preventive care and wellness, given the size of its underserved populations, they said.

Health care has the potential to lead to economic growth and to provide employment, but it also is a crucial sector in terms of “protecting the health and the wealth of the nation,” said Sangita Reddy, joint managing director of Apollo Hospitals, a chain of health care facilities, and president of the Federation of Indian Chambers of Commerce & Industries.

Health care offers the opportunity to find ways to make medical services “more understandable, affordable and accessible,” said Gaurav Agarwal, co-founder and chief technology officer at 1 mg, an online pharmacy and digital health care platform. The three-year-old firm, based in Gurugram in India’s northwestern state of Haryana, has already seen 85 million customer visits annually to its platform, which allows patients to not just buy medicines but also make bookings for lab tests or doctor consultations.

India’s health care industry is becoming more and more attractive for investors, with technology-led innovations helping penetrate second- and third-tier markets, said Puncham Mukim, managing director at Everstone Capital Advisors in Mumbai. The firm has investments across health care investment categories including hospitals and medical device makers, and has invested $400 million in the past couple of years, he said.

Changing the Dialogue

In laying out India’s health care challenges, Reddy noted that across the entire supply chain from the general medical practitioners to tertiary care hospitals and government-run facilities, “everybody is working on incremental access.” At the same time, she said the country has “high quality health care,” and that the private sector provides more than 76% of such care. She described that scenario as “islands of excellence in an ocean of inadequacy.”

“Care is shifting from the hospital to the clinic, from the clinic to the home and from the home to a 24/7, ubiquitous access to care, driven by the mobile phone.” –Sangita Reddy

A significant portion of the country’s population is underserved in health care, Reddy said. India has a doctor-to-patient ratio of 1:10,189, some 10 times lower than the 1:1,000 recommended by the World Health Organization, according to a report by The Center for Disease Dynamics, Economics and Policy, a Washington, D.C.-based research organization. The country’s doctor-to-patient ratio must see an increase with a doubling of the number of doctors; India needs three times as many nurses and five times the paramedics it now has, she said.

While these challenges are daunting, they provide “a tremendous opportunity to disrupt traditional health care models,” Reddy continued. She called for a shift from what has traditionally been “sick care” to wellness, and said that provides opportunities “to flip the health care paradigm and focus on prevention.” A two-pronged approach, “which is to grow the [health care] infrastructure, improve the methodology, the efficiency and the way we do things; and reduce the burden of disease” will address the supply-side constraints, she said. “If we do these things together, we might not just help solve India’s health care problems, but we will show a model for the world.”

Agarwal noted that India has a chronic disease burden or non-communicable diseases burden of almost 20% of its population, where nearly 200 million people have some chronic disease. Of that, just diabetes and hypertension afflict some 100 million people, and that patient population is growing by 13% a year, he said. To make matters worse, the rate of patient adherence to prescribed treatments is abysmally low, he added.

According to a paper by the All India Institute for Medical Sciences, patient non-adherence to medication ranges from 24% for cardiac patients to between 50%-80% for hypertension patients. The reasons include complex medication regimes, exhausted medication supplies and adverse drug reactions, it noted.

At the Tech Altar

Agarwal saw technology as the imperative to address some of the inadequacies, and listed a few of those. “Unlike the west, which has evolved into this massive care-driven health care ecosystem, India has a consumer-led health care ecosystem,” he said. “If you go to any hospital, you see patients walking around with their files. Insurance penetration in India is at 15%. There’s zero outpatient insurance, which means that when you go see a doctor for your day-to-day needs, there is no insurance available whatsoever. So from a cost improvement perspective, the payer as the patient is incredibly motivated to figure out how to reduce his or her disease cost burden on a monthly basis.”

At the same time, in India, the patient owns the health data, which Agarwal saw as “extremely fascinating” – it happened to be the germ of the idea behind founding his online pharmacy 1 mg. “In the U.S., my health care data was digital, but nobody had any access to that data,” he said, recalling his decade-long stint as an engineer in the San Francisco Bay Area. “But in India, we own our data and we are actually fairly okay with people having access to that data.” Such a data-rich country could provide the opportunity to do pioneering work on disease progression models and the like, and share them with the rest of the world, he added. “Health care will become consumer centric. India will drive that revolution.”

In September 2018, India launched its National Health Protection Mission called “Ayushman Bharat Yojana” with the aim of providing 100 million poor and vulnerable families (approximately 500 million beneficiaries) health care insurance coverage up to Rs. 500,000 each ($7,150 approximately) for secondary and tertiary care hospitalization. “From a large swathe of population that was hitherto untreated and undiagnosed, Ayushman Bharat [provides] large swathes of the population the opportunity to get diagnosed,” said Mukim.

Mukim noted, however, that sufficient capacity does not exist in terms of primary and secondary health care even in Tier 1 markets, or those with a population of 1,000,000 or more, which typically are large metropolises like Mumbai or Chennai (Tier 2 and Tier 3 markets are defined by progressively smaller populations). Most of the existing health care facilities are in those markets, and they attract most of the new investments in capacity as well, he added. Some pockets are coming up to speed with the need, though. Hyderabad and Chennai, for instance, are no longer “under-bedded,” he noted.

A major hurdle to expanding access to health care is a mismatch between the capital costs of building hospitals and the ability for those to generate sufficient returns for investors, said Mukim. Further, approvals and permits to build hospitals consume “a lot of time,” he added. The cost of setting up a hospital is not vastly different across markets, whether it is Tier 1, 2 or 3, he noted. But patients’ ability to pay gets progressively lower from urban to semi-urban and rural markets “because it’s all out-of-pocket” in the absence of insurance, he pointed out. “There has to be some help on that [front] to reduce cost of putting up capacity.”

To-do List for Technology

The first tier of technology-driven gains in productivity would come from efficiency enhancements, according to Reddy. Inventory management would be a prime focus area, since hospitals need to stock tens of thousands of different items, she said. The second tier is simplification of processes to improve accessibility for patients, she said. “Can they have the predictability of an appointment? Can you do basic scheduling for doctors? Can you minimize waiting time when you come in?” Her company’s app, AskApollo, facilitates about 7,000 appointments daily and guarantees wait times for a doctor of no more than 20 minutes, except in cases of emergencies.

“Around 20% of consultations on 1 Mg are actually done by an AI doctor. They’re just as accurate as a panel of six doctors.” –Gaurav Agarwal

The app helps bring an “efficiency layer across the spectrum” where, for instance, housekeeping staff could turn around rooms faster and the admissions desk knows which rooms are available at the press of a button, said Reddy. Electronic health records help its doctors “manage and move data” related to patients. The next layer is in establishing care protocols for hospital processes, she said. For example, such protocols allow “the newest doctor in Apollo to operate at the efficiency of someone with 20 years experience,” she explained.

Next, electronic medical records (EMR) make it possible to improve the quality of service, among other benefits, Reddy noted. “Once you have digitized [hospital processes] you can take the collated data, look at outcomes and build AI models that can be applied across the ecosystem,” she said.

The Three Bs of Health Care

Reddy identified “three Bs” that are changing health care. The first is “biology,” where technology could help lower the costs of genetic testing and facilitate new business models around targeted treatments, precision medicine and preventive care, she said. Her second ‘B’ refers to “bytes” or the steady drop in the cost of computing, driven by Moore’s Law (the number of transistors on a microchip doubles every two years while the cost of computing in that period is halved). The third front is “bandwidth” in digital communications, which along with India’s growing tele-density could expand health care access for rural India. It could facilitate tele-monitored surgeries, tele-education, tele-medicine and video consultations with doctors. Technology has also helped bring efficiencies in areas like CT (computed tomography) scans, such as better images and faster diagnosis, she said.

Other shifts are also underway thanks to technology. “I see care shifting from the hospital to the clinic, from the clinic to the home and from the home to a 24/7, ubiquitous access to care, driven by the mobile phone,” said Reddy.

Agarwal had his own technology war story where it helped 1 Mg overcome initial hiccups. As an online pharmacy, the company operated in a two-sided marketplace with patients requesting medicines on the one hand and retail pharmacies that dispense those medicines on the other. Barring the large retail chains, pharmacies had digitized their operations, which meant they had few records of the drugs they carried. India is a branded generic drugs market with between 80 and 100 brands “for each drug that has been discovered,” which translated into a monthly demand on the 1 Mg platform for up to 25,000 unique medicines each month, said Agarwal. “An average pharmacy stocks only 3,000 of those [25,000 medicines], and they didn’t know which 3,000 they stocked,” he added. “They knew the top 100 but they didn’t know anything after that.”

An AI-based predictive inventory model that 1 Mg developed found for it a way out of its frustrating experience in trying to match consumer demand with supplies from pharmacies. The model worked on two simple assumptions but worked well for 1 Mg. It assumed that if a pharmacy actually dispensed a certain drug in one week, it was likely to do so in the following week as well. Similarly, it also assumed that if a pharmacy did not dispense a certain medication in one week, it was unlikely to sell that in the following week. “That was a first use of AI and machine learning in our system, where we actually achieved 75% to 85% fill rates, based on zero inventory accuracy from our vendors,” said Agarwal.

When 1 Mg later added diagnostic testing services to its offerings, it again tapped technology in the form of a mobile app for patients to make bookings online. The phlebotomists it deploys to collect blood samples follow a specific protocol and use bar coded stickers with patient identification information that they stick on collection vials. Telemedicine is another tech-driven foray at 1 Mg, and it does nearly 5,000 of those daily, said Agarwal.

The firm also built an AI model for doctor consultations. The AI doctor comes up with a diagnosis and treatment plan that 1 Mg doesn’t share with the patient. Instead, it shares that with a real doctor, who then validates it or invalidates it. “Around 20% of consultations on 1 Mg are actually done by an AI doctor,” said Agarwal. “They’re just as accurate as a panel of six doctors that have varied levels of experience in [a given] field.”

Indian health care’s unique characteristics have called for custom solutions. For instance, handwritten doctor prescriptions are common, and 1 Mg uses an AI machine to decipher about half of such data, making it ready for further analytics. “A lot of the technology for health care in India was actually just in aping the west,” said Agarwal. “The challenge is that the ecosystem in India is very different. We’re now starting to see health care tech which is very India-centric.”

“The [Indian government’s] ‘Make in India’ campaign has actually worked for medical devices.” –Puncham Mukim

Notwithstanding the technology innovations by online pharmacies such as 1 Mg, regulators and courts in India have frowned on them, egged on by public interest litigants. The latest roadblock came last November from India’s drugs controller, who issued an order to stop online sales of medicines until regulations were put in place. “Every third day you have complaints against online retailers saying that they’re selling medicines without prescriptions, and that they should be shut down,” said Mukim. The reality is vastly different, he argued. “If you walk into any brick-and-mortar pharmacy in India, 50% of the time you would probably be able to get a medicine without a prescription. [However], if you try to buy from the larger online retail pharmacies, there is a 0.01% chance you’ll be able to get medicines without a prescription. The people who are flouting the rules are creating nuisance value for those who are following the rules — and the cost of following the rules is very high. There ought to be a policy framework to come into place [to regulate online pharmacies]; we’ve been waiting for long.”

Mukim batted for India’s nascent online pharmaceutical retail industry, saying that it has in three-four years achieved a market penetration that brick-and-mortar pharmacies have failed to do. “[Online pharmacies] have gone deep into Tier 2 and Tier 3 markets,” he said. “Medicine availability has been a huge problem in rural India and they’ve solved that problem.”

Elsewhere in the health care industry, regulators seem to have gotten it right. Three years ago, India’s drugs regulator brought price controls on coronary stents, slashing prices by some 85% (it has since accommodated marginal increases). “The cost of manufacturing a drug-eluting stent is Rs. 6,000 to Rs. 7,000 ($85 to $100), but it [was being] sold for Rs. 150,000 ($2,140) in India,” said Mukim. He blamed middlemen in the trade channels and “clinicians who were hand-in-glove with them in pushing the cost so high for patients.” The price cap on stents has given a great boost to domestic manufacturers of stents, and they are now supplying their products to some multinational brands as well, he added.

Mukim noted that the lower prices of health care in India relative to those in developed countries have made it attractive for international patients, especially those from the Middle East and Southeast Asia.

Investors such as Mukim appreciate the disruptive effect of price caps on stents, and see early signs of that mindset spreading elsewhere across the health care sector. Domestic stent manufacturers have begun supplying to Tier 2 and Tier 3 markets that were hitherto overlooked, he noted. More cath lab capacity is being added in the industry, as lower price points have resulted in a business boom for diagnostic services, he added. Furthermore, more and more higher-end technology in implants, and in drug-eluting stents, is starting to come into India, and foreign manufacturers of such devices are looking to set up capacity in India, he added. “The [Indian government’s] ‘Make in India’ campaign has actually worked for medical devices.” He slipped in a request to regulators to tweak the import duty structure for especially higher-end medical device equipment.

Pointers for Policy and Regulation

Data privacy is the next frontier for which Indian health care practitioners have to prepare. Health care data privacy is covered in the European Union by the GDPR (General Data Protection Regulation) that took effect in May 2018 and in the U.S. by the so-called HIPAA rules. Agarwal said India needs data privacy regulations, “but not at the level of say HIPAA or GDPR.” He suggested “something which is much more reasonable and takes into account the growing needs of the country.”

Reddy said “a modified level of data privacy [regulation] is not just good for health care companies, but is good for the country, and it’s essential.” Ideally, data privacy regulation must also recognize the advantages that analytics could offer. Reddy called for a focus on “standardization of data capture,” so as to avoid information sitting in silos across different organizations. “That lack of standards is what will impede us from collating our data and building new predictive models,” she said.