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Tackling distribution is the key to India’s MedTech industry reaching the masses

India, one of the world’s fastest growing economies is struggling to achieve its vision of providing healthcare for all its citizens. The results are alarming – nearly 65 percent of the country’s rural population have limited or no access to quality, affordable healthcare and nearly 60 percent “out of pocket” healthcare spend is the leading cause of indebtedness and poverty. The statistics below are a testimony to the huge challenges this sector faces –

  1. With a dismal 0.7 beds per 1,000 people, India is significantly lagging in comparison with the recommended 3.5 beds per 1,000 people by World Health Organization (WHO).
  2. India has only 0.7 number of physicians for every 1,000 people, half of the global average.
  3. Recent data points to an acute infrastructure shortage – 22% shortage of primary health centers (PHCs) and 32% shortage of community health centers (CHCs) in rural India.

The one sector that can be instrumental in transforming India’s healthcare ecosystem is the Medical Technology (MedTech) industry, which has grown from USD 2.02 billion in 2009 to USD 4.9 billion in 2016, at a CAGR of 17 percent, slowly tackling critical challenges of quality, affordability and accessibility. MedTech has created a huge impact on all aspects of healthcare including diagnosis, treatment and patient monitoring.

For example, in Cardiology, remote monitoring and interpretation of ECGs helps diagnose heart attacks and arrhythmia and state of the art Cath Lab equipment help cardiologists implant latest generation drug eluting stents to restore normal heart functioning rapidly, instead of the more complex open-heart bypass surgeries. Overall, MedTech can help diagnose faster & more accurately, provide safer & more effective treatment options and help reduce trauma leading to faster recovery.

Capria - Remote Mobile ECG Monitoring System

Despite the significant strides, India’s nascent MedTech industry grapples with many critical challenges, including fragmented market, regulatory policies and cost-effective distribution. Distribution is the most efficient way to reach every customer in urban and rural India.

The market is currently dominated by hybrid distribution models, wherein companies and distributors often have overlapping responsibilities. The typical distributor has limited resources and caters to local area customers only.

Due to this, MedTech companies need to hire large number of distributors for relatively small revenue streams resulting in increased on boarding, training and compliance costs. The distributors, on the other hand, often struggle with multiple responsibilities such as sales outreach, inventory & receivables management and occasional marketing support. All this ultimately leads to low productivity, high cost of distribution acquisition and management.

However, scores of startups and large corporates dotting India’s growing MedTech industry are spurring newer distribution strategies and ways of penetrating into underserved markets. A few early, promising trends are –

1. Strategic partnerships to enable national distribution

Today, most of the distributors in the MedTech space are “mom and pop” shops which have limited access and capacity to expand. A new approach that is showing favorable signs is formation of large, pan-India distributors as well as partnering with global giants and large corporate entities to scale distribution. GenWorks was created in 2015 in partnership with GE Healthcare to make quality healthcare accessible in all parts of the country, particularly tier 2 and 3 markets. In a short span, its radiology, cardiology, surgery, maternal and infant care solutions have reached over 437 districts in 26 states.

A startup’s partnership with a global giant eases many hurdles – working capital challenges, expanding reach into uncharted markets, compliance with regulatory procedures and access to high-quality, trained and experienced staff, resulting in faster upskilling of a startup’s staff and ultimately, growth.

Another great example is our investee, UE LifeSciences which too recently partnered with GE Healthcare to commercialize its flagship device, iBreastExam in 25+ countries across South-Asia, South-East Asia and Africa to enable early detection of breast cancer in the developing world at an affordable price point.

2. Electronic Marketplaces

Currently, hospitals are fully dependent on companies’ representatives to directly reach out and market their products. Companies which fail to effectively utilize this approach, get limited adoption of their technologies resulting in low market share. A virtual marketplace with physical distribution points at key locations with training back up from companies could be the answer.

Capria - online medical consultation

These will greatly enable broader and faster distribution of MedTech devices, and are likely to be the way forward in the industry. However, startups foraying in to this approach need to be vary of tackling a few inherent challenges –

  • Doctors require immense hand-holding on product/device usage. For example, stents/pacemakers that are to be implanted by doctors in an operating environment needs equipment, training and deep understanding of its usage. Thus, it’s critical for startups to find ways to train doctors on how to use their products for best clinical outcomes, as well as help customers understand the benefits of their products in comparison with competitors as also to help assess the patient conditions under which their product can come in to use.
  • The other challenge is that most hospitals refrain from buying products/devices upfront – distributors keep them on consignment and price them on usage basis. Electronic marketplaces and startups distributing their products/devices on these platforms will need to develop innovative payment solutions to address this significant challenge for faster adoption and growth.

3. Direct distribution

Established MedTech companies are experimenting with this methodology where by linking with the ERP system of the customer, product orders are automatically placed and shipped on reaching specified reorder levels. The use of bar codes and scanners helps monitor product consumption and helps to dramatically scale up productivity for both customer purchase executives and company sales force. The distributor’s role changes to focus primarily on the last mile – to eliminate pilferage and expedite payment.

Finally, for disruption to happen in the distribution space, it is important that startups embrace technology which is becoming more pervasive and affordable, manage pricing pressures without affecting service levels and have continued focus on better compliance.

This article was originally publish on ET Healthworld >

(Milind Shah is currently the partner at Unitus Ventures. He is the ex-Managing Director and VP of Indian Sub-Continent, Medtronic plc.)



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