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 remotely monitor and transmit biometric data, but any instance of technology that assists in the delivery of health services. While these initiatives are under way around the world, there are significant differences in the speed and scale of medtech adoption across emerging markets.
UBS Investment Bank estimates that the collective value of health care in emerging markets will grow 6.3% annually over the next decade – double the rate of developed markets – as governments compensate for historic underinvestment. Although they are working to reduce the deficit, emerging markets currently spend just 5.5% of GDP on health care, compared to 14% in developed economies. Ageing populations are a catalyst, and the UN estimates that by 2030 the 65-andover demographic in emerging markets will rise to 15% of the population, up from 10%.
Concurrent with the rise in elderly patients needing care, the diagnosis of non-communicable diseases (NCDs) is expected to increase. This is due to urbanisation and sedentary lifestyles accelerating the incidence of cancer, cardiovascular and chronic respiratory disease, 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 simultaneously reducing the rate of readmissions.
Digital Revolution
Digitisation is a critical first step towards achieving medtech synergies, facilitating the adoption of standard health care industry practices in order to reduce waste and improve analysis. In many countries in Africa, however, obtaining a patient’s medical records can often be difficult. The process has inspired solutions such as the KEA Medicals digital health platform, under which 50,000 patients from six African countries currently maintain their medical information, having created Universal Medical Identity (UMI) accounts. Once signed on, each patient receives a printed QR code that embeds their UMI code, which allows doctors to scan their patients for information at the point of delivery. Some 1700 medical professionals are connected to the network.
Such innovations, while effective, are no substitute for government-led programmes to digitise medical records, otherwise known as electronic health record (EHR) systems. Mexico aims to implement EHR across its hospitals by 2020, and recently announced the activation of HarmoniMD, a cloud-based EHR system, at Fundación de Cáncer de Mama, a breast cancer foundation that provides specialist care services. This will put in place a digital system, which is expected to improve understanding of disease incidence, vaccination rates and other health occurrences.
Four Shifts
Once health systems have completed the transition to digital, Deloitte identifies four resulting shifts: 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 big data-driven algorithms; and from specialised silos of knowledge to centralised, widely available systems. US-based market research company BCC Research estimates that the global medical devices market will grow to $674.5bn by 2020, up from $521.2bn in 2017.
Emerging markets are earmarked to increase their share of these revenues from less than one-quarter to more than one-third. This has been driven by innovations in smart technologies enabling higher rates of home care for patients, and by a push towards multifunctional devices and holistic biomedical data, consequently lowering costs for industry and end-users. In practice, these devices enable projects like Khon Kaen Smart Health in Thailand, an integrated smart health initiative centred on Khon Kaen Provincial Hospital. The project incorporates a smart ambulance service that uses GPS to coordinate patient pick-up, coupled with real-time video and data transmission to prep the hospital ahead of patient delivery. It also includes a sensor platform that monitors the activity and condition, including the blood pressure and sugar levels, of elderly residents with chronic diseases, enabling them to remain at home. The data is then integrated with the patient’s EHR information.
Khon Kaen employs a multi-stakeholder approach to patient care, which is increasingly the norm amid an ongoing redefinition of the health care value chain. Traditional innovators like pharmaceuticals, hospitals and medtech giants – such as GE Healthcare and Medtronic – are increasingly partnering with bulk buyers, including health insurers and public entities, accelerating a shift towards centralised repositories of health data. These traditional stakeholders are also looking to partner with tech firms that make smart predicative analysis and monitoring tools. US venture capital (VC) firm Rock Health reports that digital health companies in the country alone raised almost $6bn in 2017, and had secured a further $6.8bn by end-September 2018. Diagnosis of diseases was the heaviest funded value proposition, followed by disease monitoring. Some governments, such as that of Dubai, are consequently directing state-backed start-up accelerators, such as Dubai 100, towards the development of health care.
This digital revolution encompasses a shift towards measuring patient outcomes rather than only drug sales. Japan provides a good example along these lines. A 2017 study by the Economist Intelligence Unit shows how the use of medtech devices for screening and treatment of various diseases provided significant net savings – in the case of diabetes treatments more than $1000 per patient per year – to the Japanese health care system through greater labour force productivity, reduced mortality and morbidity rates, and decreased downstream health care costs overall.
Risks & Challenges
The path to medtech adoption is often impeded by cultural, structural and regulatory factors. In the UAE the sector is undergoing a wave of consolidation and specialisation in reaction to over-investment in hospitals during the first half of the decade. Health care providers are focusing on their bottom line. “The health care sector in the UAE needs to develop their focus on providing value-added health care,” Majid Kaddoumi, vice-president and regional managing director for central eastern Europe, the Middle East and Africa at Medtronic, told OBG. “For the most part, providers think about reducing costs without putting any thought into the overall outcome for the patients.”
Additionally, the benefits resulting from adoption of artificial intelligence-enabled procedures are not always immediately apparent. According to David Hadley, CEO of Mediclinic Middle East in the UAE, productivity gains are currently outweighed by doctors having to maintain existing notes while also 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 justifiable caution regarding the notion of transferring medical data to centralised gatekeepers. It was revealed in August 2018 that Hova Health, a Mexican telemedicine company, left the data of 2.4m patients exposed online. Patient names, personal ID codes for Mexican citizens and residents, insurance policy numbers, dates of birth, and addresses were all available without password protection. However, the breach involved a simple misconfiguration of a MongoDB database, rather than a targeted cyberattack.
Another challenge is that information is not currently shared as effectively, 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, cautioning that this technology is still in the early stages of development.
Leadership
Asia is the fastest-growing region in the global medtech market, fuelled by the confluence of ongoing public health care reforms, a rapidly expanding private sector and revenues from a thriving medical tourism industry. UBS Investment Bank notes that China and India are key engines of emerging market health care growth. The former committed to a reform programme that, if successful, will develop a $1.3trn health care industry by 2020. This marks a seven-fold increase from 2011. Both countries experience a discrepancy between the standard of health care provided in urban and rural areas, and in a bid to bridge this divide, are committed to improving preventative programmes and growing the availability of mobile health care.
Regarding public health care, Thailand’s programme to transform itself into an innovation-driven digital economy – under its Thailand 4.0 vision – has resulted in a new e-health strategy. This strategy maps national development for the decade to 2027. Targets include EHR adoption, the provision of high-quality telemedicine systems, medtech innovation and smart health care provision in rural areas, which are driven by a focus on digital education for all health care stakeholders. Telemedicine and mHealth programmes are already deployed as pilots. However, the strategy identifies ICT hardware as an area of potential weakness, particularly when it comes to servers. It also notes the absence of legislation ensuring the privacy of personal data on EMR systems and several other deficiencies.
In Indonesia the government is making inroads into providing universal health insurance operated by an authorised body, the Health Care and Social Security Agency, with approximately three-quarters of the population now covered by the scheme. Yet there is still a wide education gap among much of the population. “It is important to note that most Indonesians are health care illiterate, do not believe in primary prevention and do not really understand how insurance works. It is only after they are sick and need high-cost health care, such as an operation, that they would pay the premium in hopes that they could get the benefit right away,” Ronny Adhipurna, president director of Medikaloka, a Jakarta-based health and wellness centre that provides care before and after hospitalisation to millions of Indonesians who travel to Singapore and Malaysia for medical reasons, told OBG. However, according to Ade Tarya Hidayat, president of AbadiNusa Group, an exporter of sphygmomanometers and other medical equipment, there are signs of improvement. “Technology increasingly plays a role in almost all processes, including 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.
This progress has been uneven, and Indonesian patients often need to travel to Singapore or Malaysia for treatment. “Foreign investment specifically aimed at developing specialty hospitals, the manufacturing of medical consumables and disposable products, and better training initiatives for local doctors will certainly make Indonesia a more reliable and appealing treatment destination,” Hidayat added.
Medical Tourism
Medical tourism is a key incentive for private hospitals to improve infrastructure and accelerate the trend of centralised purchasing, warehousing and decision-making that Deloitte identifies as a key shift in the transition to digital health care. Many patients in Asia are attracted by relatively low costs, shorter wait lists and gaps in national health care insurance coverage at home.
In 2016 medical tourism in Asia Pacific accounted for 10m patients and approximately €16bn in revenue. According to the medtech-focused consultancy TforG, the market is expected to grow by 16% annually for the next three years. Thailand vies with India for regional leadership, followed by Singapore and Malaysia, all of whom are actively engaged in establishing themselves as medical tourism destinations.
This demand, coupled with rising middle-class incomes and higher spending on health care, is fuelling strong appetite for medtech. Private providers are competing to lower costs and improve provision through technology. Combined, South-east Asia and India account for 10% of the global medtech market, and growth is forecast at a robust 7.5% going forward.
According to the “EY Private Equity Briefing: Southeast Asia” report for June 2018, products including consumables, diagnostic imaging and lab devices are expected to see growth of 8-10% in most markets. This presents an opportunity for private equity to step in and consolidate a fragmented device distribution industry, offering buyers several more cost-efficient solutions and wider medtech portfolios.
Middle East Reforms
The Middle East is set to experience the benefits of investment in digitisation as the introduction of mandatory insurance programmes and e-health systems set the stage for machine learning to improve patient outcomes. For example, the UAE’s Vision 2021 emphasises the importance of preventative medicine in reducing cancer and lifestyle-related diseases. The government has set aside more than $500m to fund a diverse assortment of innovations in priority sectors, including health care.
The country has already spent approximately $232m on funding advancement of digital health care between 2014 and 2016, and aims to become a regional leader in the delivery of smart medtech. “The National Unified Medical Record Project, now renamed MyCare, is an important initiative that aims to make available individual data to all health care providers,” Schelper told OBG. “Proper data management will lead to a decrease in the cost of health care by improving preventive medicine and well-being. This in turn will drive down the high cost of insurance premiums.”
In Qatar the public sector is responsible for delivering the vast majority of health care services, and the country is facing a typical set of emerging market health 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 non-profit health care provider, told OBG.
Consequently, Qatar’s National Health Strategy 2018-22 and Public Health Strategy 2017-22 each focus largely on preventative care. The former sets a series of 2022 targets, including building a national knowledge platform and data warehouse that will improve access to data, enabling intelligent analysis of population health, and establishing a system of clear legal frameworks to facilitate data access.
Elsewhere, Saudi Arabia’s Vision 2030 is poised to drive implementation of advanced medtech innovations at selected treatment facilities. King Faisal Specialist Hospital and Research Centre (KFSH&RC) is the first health system outside of North America to achieve Stage 7 on the ambulatory Electronic Medical Record Adoption Model by HIMSS Analytics, which is a system that scores outpatient facility environments. KFSH&RC has also implemented a patient portal that is able to deliver real-time medical advice to patients while integrating wearable devices that are designed to monitor their progress on an ongoing basis.
Overall, the trend of increasing specialisation in the region is considered to be driving higher quality that can potentially counter problems associated with high costs, particularly when supported by potential income from medical tourism. “Medical tourism has a huge growth potential in Dubai,” Omar Oumeish, executive director at Dubai Healthcare City Authority, told OBG, outlining a detailed plan to create a one-stop digital shop for medical tourists that will help fund ongoing high-value research and development.
It is also expected to incentivise the VC necessary to boost industry development. “Medical tourism is definitely a segment to be exploited, and increasing quality is the best way to do it,” Maha Aboughali, business development and marketing director of Moorfields Eye Hospital Dubai, told OBG. “However, costs are a signficant challenge because travel and accommodation in Dubai are very expensive in comparison to other medical tourism destinations.”
Latin American Progress
According to a recent study by the US-based Population Reference Bureau, by 2030, 81% of deaths in Latin America and the Caribbean will be caused by the four major NCDs: cardiovascular disease, cancer, diabetes and chronic respiratory diseases. Governments are racing to address this challenge, and have increased per capita health expenditures throughout the region, with Brazil’s increase of 31% between 2008 and 2014 sitting within the lower end of the spending spectrum.
These government expenditures are being supplemented by private equity and VC investments. In 2017 health care was classified as the second-fastest-expanding technology sector in Latin America, increasing by 250% in terms of the number of deals and by 731% in terms of value, according to the Latin American Private Equity and VC Association.
A burgeoning market for medtech start-ups is emerging in Brazil. Entrepreneurs are looking to capitalise on the void created by the market, which spends $42bn annually on private health care, but which loses more than one-third of that to inefficiencies. Their work is being assisted by a government initiative to digitise health records in more than 40,000 public health clinics by the end of 2018. This will generate savings of $6.8bn. The initiative will help address a shortfall of more than 150m out of 208m Brazilians who did not have electronic medical records as of the end of 2017. However, weak public finances and a lack of trained personnel are contributing to failures to meet the steadily increasing demand for health care services.
Mexico, for example, despite being a leading global destination for high-end medical tourism, has the fewest trained nurses per capita in the OECD, while a preponderance of public health care providers inhibits the sharing of data and resources. Fortunately, the country is on the cusp of a telecoms revolution enabled by the government’s Red Compartida telecoms network, which provides a wholesale mobile network upon which various operators can provide services, including mobile health solutions.
Politicians are also increasingly open to supporting struggling public health systems with private sector investments. A good example of this is Brazil’s decision to open its hospitals to private investors in 2016. Foreign suppliers of medtech devices are also in play due to gaps in local provision, with breathing aid technology, X-ray technology and vital sign medical equipment demanded in Mexico, Colombia and Brazil.
At the inaugural Digital Health Forum Mexico in March 2018, Julio Sánchez y Tepoz, general commissioner of Mexico’s Federal Office for Protection Against Sanitary Risks, the regulatory body for health technology, emphasised the government’s commitment to deregulating the space for medical devices.
African Potential
In Africa a lack of basic hygiene remains the leading cause of death, going some way to indicate the depth of the challenges facing the continent’s health care sector. Mass onset of NCDs threatens to overwhelm infrastructure that is already spread thin, and enhances the need to implement preventative health care models. Nonetheless, while there are opportunities for investment in local health care, led in most cases by private provisions made to expatriate populations, there continue to be substantial barriers to further development in the area.
As a result of sustained investment in health care, a commitment that was confirmed in its Finance Law for 2019, Algeria is well positioned to benefit from medtech. Legally mandated free universal health care was also implemented. This commitment allows the Ministry of Health to support a contract for the provision and maintenance of radiotherapy equipment with Varian Medical Systems, under its Plan Cancer 2014-19 programme, according to Mourad Belkheyar, director-general of the company.
Infrastructure is already well developed and provides national coverage, an element that is unique in Africa, Haissam Chraiteh, director-general of Sanofi Aventis Algeria, a pharmaceutical manufacturing company, told OBG. “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,” he said. Given its high regulatory standards, Algeria has the potential to become a regional hub for health care, but there remain a variety of obstacles. For example, there is a notable absence of consistently standardised data. “In the long term, as e-medicine and digital transformation reshape the sector worldwide, Algeria can count on a health sector that is ready to incorporate and take advantage of these new technologies,” Chraiteh said.
Elsewhere, Côte d’Ivoire hosts a health care sector ready for medtech invigoration, but suffers from a lack of skilled labour, supply shortages and accessibility issues. “To cater to the new needs of patients, health care facilities will have to develop multidisciplinary care services,” Eric Djibo, president and director-general of International Polyclinic Sainte Anne-Marie, told OBG. “Specifically, existing facilities are equipping themselves with technologies relevant to the new types of diseases the country is faced with, and facilities under construction must take this change into account.”
While Côte d’Ivoire enjoys universal health coverage, the system currently only benefits a selection of the population and its scope is limited to an identified set of essential health care. However, there are plans to progressively expand the system as the government continues to pursue health and public finance reforms. These reforms entail the construction of several new hospitals over the course of two years, all of which will incorporate centralised data systems and advanced medical equipment, according to Dr Meite Djoussoufou, general manager of CHU Cocody in Abidjan. However, there remain some doubts that the programme, which includes a rollout of a universal health care card, will receive sufficient funding, considering the obstacles that stand in the way of private sector involvement.
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