Rising health care costs, ageing populations and changing lifestyles in emerging economies are stoking demand for medical technology (medtech) solutions. These entail not only smart devices that monitor and transmit biometric data, but any technologies that support care delivery. While these initiatives are happening globally, there are significant differences in the speed and scale of adoption across emerging markets.
UBS Investment Bank estimates that the emerging market health care sector will grow 6.3% annually between 2017 and 2027 – double the rate of developed markets – as governments make up for historic underinvestment. Emerging markets routinely spend less than 10% of GDP on health care, contrasted with close to 15% in developed countries, but are working to reduce the deficit. Ageing populations are a catalyst: the UN estimates that by 2030 the 65-and-over demographic in emerging markets will rise to 15% of the population.
Concurrent with the rise in elderly care, diagnosis of non-communicable diseases (NCDs) is expected to increase. This is due to urbanisation and sedentary lifestyles accelerating the incidence of cancers, cardiovascular and chronic respiratory diseases, and diabetes. NCDs demand longer and more expensive treatment programmes than many other illnesses. Therefore, emerging markets are investing in cost-effective medtech solutions to improve root cause analysis and patient care, while reducing the rate of readmissions.
Digital Revolution
Digitalisation is a critical first step towards achieving medtech synergies and facilitating the adoption of industry best practices to reduce waste and improve analysis. Challenges to obtaining patient records in some markets have inspired solutions such as the KEA Medicals digital health platform, which maintains Universal Medical Identity (UMI) accounts with the data of 50,000 patients from six African countries. Once signed on, each patient receives a printed QR code that embeds their UMI, allowing doctors to scan patients for medical information at the point of care.
Such innovations, while effective, are no substitute for government-led programmes to digitalise medical records, known as electronic health record (EHR) systems. Mexico aims to implement EHR across its hospitals by 2020, and recently announced the launch of HarmoniMD, a cloud-based EHR system, at Fundación de Cáncer de Mama (FUCAM), a breast cancer foundation that provides specialist care. This digital system is expected to improve understanding of disease incidence, vaccination rates and other health occurrences.
Four Shifts
Deloitte has identified four shifts resulting from the digital transition of health systems: from acute to preventative care and from hospitals to home care; from monitoring single biometric indicators to AI-enabled processing of multiple indicators; from intuitive approaches based on typical patients to personalised treatments optimised by data-driven algorithms; and from specialised silos of knowledge to centralised systems. US-based market researcher BCC Research estimates that the global medical devices market will grow from $521.2bn in 2017 to $674.5bn by 2020.
Emerging markets are projected to significantly increase their share of these revenues, driven by smart innovations that enable higher rates of home care, and by a push to use multifunctional devices and biomedical data, lowering costs for providers and end-users. In practice, these devices enable integrated, smart health initiatives like Khon Kaen Smart Health in Thailand. The project incorporates a smart ambulance service that uses GPS to couple patient pick-up with real-time video and data transmission to prep the Khon Kaen Provincial hospital ahead of patient delivery. It also provides a sensor platform that monitors the vital signs of elderly residents with chronic diseases in their homes and integrates this data into patients’ EHRs.
Khon Kaen employs a multi-stakeholder approach to care, which is increasingly the norm amid an ongoing redefinition of the sector value chain. Traditional innovators like pharmaceutical producers, hospitals and medtech giants are increasingly partnering with bulk buyers, including insurers and government entities, accelerating the creation of centralised databases.
These stakeholders are also vying for business with tech companies that make predictive analysis and monitoring tools. Savvy governments, such as that of Dubai, are consequently directing state-backed start-up accelerators, such as Dubai 100, to invest in health care.
This digital revolution encompasses a shift of focus from drug sales to patient outcomes. Japan provides a case in point: a 2017 study by the Economist Intelligence Unit shows how use of medtech devices for screening and treatment helped net significant savings – in the case of diabetes, more than $1000 per patient per year – through greater labour productivity, reduced mortality and morbidity, and decreased downstream costs.
Risks & Challenges
Medtech adoption is often impeded by cultural, structural and regulatory factors. The UAE’s health sector is consolidating and specialising in reaction to recent over-investment in hospitals, and care providers are focused on their bottom lines. “The health care sector in the UAE needs to develop a focus on providing value-added health care,” Majid Kaddoumi, vice-president and managing director, Central Eastern Europe, Middle East and Africa for Medtronic, told OBG. “For the most part, health care providers think about reducing costs, without putting any thought into the overall outcome for the patients.”
Additionally, the benefits of adopting AI-enabled procedures are not always immediately apparent. According to David Hadley, CEO of Mediclinic Middle East in the UAE, productivity gains are outweighed by the need for doctors to keep notes while entering data into hospital systems. “Little by little, though, the amount of stored data will serve more to help doctors rather than just giving them more work. The biggest potential is expected to be in diagnostics,” Hadley told OBG.
There is also reason for caution regarding the centralisation of medical data. It was revealed in August 2018 that Hova Health, a Mexican telemedicine company, left the data of 2.4m patients – including names, insurance policy numbers and addresses – exposed online. The breach involved a simple misconfiguration of a MongoDB database, rather than a targeted cyberattack.
Information is also not shared as seamlessly or securely as it could be, according to Michael Schelper, CEO of Cerner in the UAE. “However, this has a solution: blockchain. This technology will allow for decentralising the ownership of data and letting individuals own their own data, which in turn will allow for it to cross borders in an efficient way,” he told OBG.
Leadership
Asia is the fastest-growing region in medtech, fuelled by public health reforms, private expansion and medical tourism revenues. China and India are the primary engines of this growth. The former committed to reforms intended to raise the value of health care to $1.29trn by 2020, a sevenfold increase from 2011. Both countries see a discrepancy between urban and rural standards of care, and in a bid to bridge this divide, are committed to improving preventative programmes and the availability of mobile services.
Thailand’s goal to transform itself into an innovation-driven digital economy has produced a new e-health strategy in the lead up to 2027. Targets include the adoption of EHR, high-quality telemedicine, medtech innovations and smart health care in rural areas, driven by digital education. However, the strategy identifies several potential weak points, including ICT hardware and the lack of legislation ensuring EMR privacy.
In Indonesia government efforts to provide universal health insurance have managed to cover three-quarters of the population. Yet a wide education gap stands in the way of further gains. “Most Indonesians are health care illiterate, do not believe in primary prevention and do not understand how insurance works. It is only after they are sick and need high-cost care that they pay the premium, in the hope of getting the benefit right away,” Ronny Adhipurna, director of client relations at the Jakarta-based health centre Medikaloka, told OBG.
However, according to Ade Tarya Hidayat, president of AbadiNusa Group, an exporter of medical equipment, there are signs of improvement. “Technology increasingly plays a role in patient registration, data monitoring, lab tests and self-care tools. More hospitals are implementing e-health records, telemedicine and tele-consultation, where patients and physicians are able to interact online and share the same portal technology to access medical records,” Hidayat told OBG. Progress has been uneven, though, and Indonesians often travel to Singapore or Malaysia for treatment.
Medical Tourism
Medical tourism is a key incentive for private hospitals to improve infrastructure and accelerate digital transitions through the centralisation of purchasing, warehousing and decision-making. In 2016 the industry accounted for 10m patients and €16bn in revenue in Asia Pacific. According to the consultancy TforG, the market is expected to grow by 16% annually for the next three years. Thailand, India, Singapore and Malaysia all vie for regional leadership and are actively engaged in establishing themselves as treatment destinations. Demand for treatment abroad, coupled with rising incomes and higher health spending, is fuelling robust growth in medtech. South-east Asia and India currently account for 10% of the global market, and growth is forecast at 7.5%.
According to EY, products like consumables, diagnostic imaging and lab devices are expected to grow by 8-10% in most markets. This presents an opportunity for private equity to consolidate a fragmented device distribution industry and offer buyers several more cost-efficient solutions and wider medtech portfolios.
Middle East Reforms
The Middle East is set to benefit from investment in digitalisation as new insurance mandates and e-health systems set the stage for machine learning and improved patient outcomes.
For example, UAE Vision 2021 emphasises preventative medicine in reducing lifestyle-related diseases. The government has set aside more than $500m to fund an assortment of innovations in priority sectors, including health care. The UAE spent approximately $232m on advances in digital health between 2014 and 2016, and aims to become a regional leader in medtech.
In Qatar the public sector delivers the vast majority of health services, and the country is facing a typical set of emerging market challenges. “We are experiencing an increase in the prevalence of largely preventable lifestyle diseases, among them obesity, heart disease and Type 2 diabetes,” Hanan Mohamed Al Kuwari, managing director of Hamad Medical Corporation, a nonprofit health care provider, told OBG. Consequently, the National Health Strategy 2018-22 is focused on preventative care. Its targets include building a national knowledge platform and data warehouse, enabling intelligent analysis of population health and establishing clear legal frameworks to facilitate data access.
In Saudi Arabia Vision 2030 is poised to drive implementation of medtech innovations at select facilities. King Faisal Specialist Hospital and Research Centre (KFSH&RC) is the first health system outside of North America to achieve Stage 7 on HIMSS Analytics’ ambulatory Electronic Medical Record Adoption Model, which scores outpatient facilities. KFSH&RC has also implemented a patient portal to deliver real-time medical advice to patients while integrating wearable devices that are designed to monitor treatment progress.
Overall, specialisation in the region is driving higher quality that can potentially counter problems associated with high costs, particularly when supported by potential revenue from medical tourism. “Medical tourism has a huge growth potential in Dubai,” Omar Oumeish, executive director of Dubai Healthcare City Authority, told OBG, in detailing a plan to create a onestop digital shop for medical tourists that will help fund ongoing high-value research and development.
Medical tourism is also expected to attract the venture capital necessary to boost industry development. “Medical tourism is definitely a segment to be exploited, and quality is the best way to do it,” Maha Aboughali, business development and marketing director of Moorfields Eye Hospital Dubai, said in a statement to OBG. “However, cost is a very big challenge because travel and accommodation costs in Dubai are very high in comparison to other medical tourism destinations.”
Latin American Progress
According to the US-based Population Reference Bureau, by 2030, 81% of deaths in Latin America and the Caribbean will be caused by four NCDs: cardiovascular disease, cancer, diabetes and chronic respiratory diseases. Governments are racing to address this challenge, and have significantly increased per capita health expenditures.
State expenditures are being supplemented by private equity and venture capital investments. In 2017 health care was classified as the second-fastest expanding technology sector in Latin America, rising 250% by number of deals and 731% by value, per the Latin American Private Equity and VC Association.
There is a burgeoning market for medtech start-ups in Brazil. Annual domestic spending on private health care averages $42bn, but the market loses more than a third of that to inefficiencies. Entrepreneurs are looking to capitalise, and their work was assisted by a government initiative to digitalise health records in more than 40,000 public clinics by the end of 2018. This is expected to save $6.8bn, as more than 150m out of 208m Brazilians did not have EMRs at the end of 2017.
Shortages of public financing and personnel are contributing to failures to meet steadily rising demand for health services. Despite being a leading destination for medical tourism, Mexico has the fewest trained nurses per capita in the OECD, while a preponderance of public care providers inhibits data and resource sharing. However, the government’s Red Compartida telecoms network is set to provide a wholesale mobile platform that will enable the delivery of mobile health solutions.
Politicians are increasingly open to supporting struggling public systems with private investments, as Brazil did in opening its hospitals to private capital in 2016. Foreign suppliers of medtech devices are also entering the market due to gaps in local provision, with breathing aid technology, X-ray technology and vital sign equipment in demand in Mexico, Colombia and Brazil.
African Potential
In Africa a lack of basic hygiene remains the leading cause of death, indicating the depth of the challenges facing the continent’s health sectors. Mass onset of NCDs threatens to overwhelm infrastructure that is already spread thin, and increases the need to implement preventative health models.
As a result of sustained investments, Algeria – where health coverage is mandatory, universal and free – is well positioned to benefit from medtech. For instance, under its 2015-19 Cancer Plan, the Ministry of Health has contracted with Varian Medical Systems for the provision and maintenance of radiotherapy equipment.
“Local authorities are building an ecosystem that takes into account all the dimensions related to the health sector, including production of pharmaceuticals, prevention, training, research and clinical studies, [while] incentivising international partners to expand their footprint,” Haissam Chraiteh, director-general of the pharmaceuticals manufacturer Sanofi Aventis Algeria, told OBG. Given its well-developed and wide-ranging infrastructure and its high regulatory standards, Algeria could become a regional health care hub, though obstacles remains, such as an absence of standardised data.
Elsewhere, Côte d’Ivoire’s health sector is ready for medtech, though it suffers from shortages of skilled labour, supplies and accessibility. “To cater to the new needs of patients, health facilities will have to develop multidisciplinary services,” Eric Djibo, president and director-general of International Polyclinic Sainte Anne Marie, told OBG. “Specifically, existing facilities are equipping themselves with tools relevant to the new types of diseases the country faces and facilities under construction must take this change into account.”
While health coverage is nominally universal, the system only benefits a segment of the population, and its scope is limited to an identified set of essential care. Plans are under way to expand amid health and finance reforms, including the building of several hospitals that will incorporate centralised data systems and advanced medical equipment. However, there are some doubts that the programme, which includes a rollout of a universal health care card, will have sufficient funding, considering the obstacles inhibiting private investment.
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