The outbreak of the COVID-19 pandemic highlighted the huge supply-demand gap in the Indian healthcare ecosystem. The World Health Organization recommends 1 doctor, 2.5 nurses and 3.5 beds per 1000 population, while India has 0.65 doctors, 1.3 nurses, and 1.3 hospital beds per 1000 population. There is also a huge disparity in terms of the distribution of health workers’ population across states and rural-urban settings. The bulk of doctors and nurses are located in major cities, leaving a significant gap in rural areas, irrespective of the fact that the demand is evenly distributed. Urban centres are home to almost 70% of the doctors and almost 65% of the country’s hospital beds despite having less than 30% of the total population.
Healthcare has come a long way and evolved over time. It is now more connected and consumer-oriented. The industry once viewed as a fragmented industry with many challenges is now undergoing rapid digitization which is increasing the demand and expectations from informed and connected consumers. This has helped in shrinking resources to fuel innovation and build infrastructure. On the bright side, the outbreak of the pandemic has accelerated innovation within the sector as it undergoes radical change to meet the growing demand in the aftermath of the pandemic; and the gap is soon likely to be closed with the implementation of technology. Healthtech is coming up now with a viable and innovative business model to address the gap. Healthcare providers are moving out of hospitals to provide teleconsultation and there is now a connected and integrated ecosystem across the globe which is actually making healthcare more accessible.
As affordability has been the issue in the Indian market, the government has put in place regulatory restrictions by capping the prices of cardiac drugs, heart stents etc. This in turn has put a lot of pressure on hospitals, as a result of which they have begun to optimize costs using tech, but at the same time have reduced investment drastically towards creating capacity.
75% of healthtech companies in India are based on the embedment of artificial intelligence or NLP, solving problems related to care quality augmentation, clinical decision support, resource or asset optimization and personal health analytics resulting in accessibility, affordability, quality and safety of the healthcare services. Similarly, in the last one year, teleconsultation has witnessed an uptick of more than 500% and e-pharmacy has seen a growth of more than 1.4x. This acceleration has happened due to the adoption of digital transformation in hospitals to improve on patient experience, clinical confidence and resource/asset optimization. Digitization has also brought about the healthcare information revolution and patient healthcare record consolidation. It has revolutionized information access, information about doctors and disease information, the complete history of the patient among others.
As all this transpires, let’s put a lens on investment from the investors’ perspective. Before the pandemic, according to VCCEdge, the private equity investments in the healthcare sector over the last three years (2017-2019) was $5.31 billion across 348 deals, while CY 20 witnessed almost half of the deal value of the last three years amounting to $2.36 billion across 108 deals. Of this, pharmaceuticals attracted the maximum deal value.
Satish Chander, Partner, True North said, “Healthcare, including pharma, has been a focus sector for True North and many other PE investors in India. Over the last few years, healthcare providers have focused on profitability and have held back fresh investment for creating capacity – leading to fewer opportunities for PE investors to fund. In the same time, few segments of pharma have seen significant opportunities. Domestic formulation market has seen strong growth and offered investment opportunities. Pharma manufacturing, including API, CDMO and complex formulations such as biosimilars, has seen tailwinds as global pharma companies look at India for diversifying their supply chain locations. This 2-3-year trend has further been boosted by covid situation. Another area of investments has been in the healthtech space where PE has funded technology-based healthcare solutions”.
Healthcare expenses in India are lower compared to the global market, but the affordability among the population is low due to the low coverage of health insurance. The government has launched Ayushman Bharat to help economically vulnerable Indians who are in need of healthcare facilities but more and more such investments are required. There is a requirement from insurance providers to make innovative insurance plans such that they play a larger role across the different facets of the consumer journey.
Last but not least, with the COVID vaccination coming into the market, there lies a greater challenge of mass vaccination. Medical professionals should strictly adhere to the protocols and guidelines given by the government and should continuously educate the customer about the vaccine. There is a requirement to develop a resilient supply chain ecosystem and there should be a proper tracking mechanism on vaccines and people getting vaccinated.
Satish Chander also added, “Administration of vaccine is a big logistical challenge in India – even if the entire population is not targeted. This is more complex than polio that is orally administered. This logistical challenge cannot be tackled by private players or government alone and is a huge ecosystem play where all players have to work in close coordination. In the last few years, there has been a trust deficit that has built up in the ecosystem of private healthcare providers, Government, payors/ insurance players, patients etc. Vaccine administration is going to be an acid test for a coordinated ecosystem play. Just the learning from this exercise is going to be a significant determinant of how the healthcare system evolves from here on.”
In conclusion, this is the first time where the people themselves, companies, investment ecosystem, government and foreign companies are coming together to create an investment synchronization and the focus is on making this better. This creates a very lucrative investment opportunity in the healthcare sector. As we can see, the BSE healthcare index has already risen from 13,544 in January 2020 to 21,744 in December 2020. Nevertheless, this is not just about investments but also about having an impact socially. To achieve this, more and more innovation is required across different sub-segments of the industry.
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