Domain Study Healthcare


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2009 Study of Healthcare domain India

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Domain Study Healthcare

  1. 1. 1 Healthcare & Life Sciences 2009 S. P. Jain Institute of Management & Research, Mumbai
  2. 2. Healthcare & Life Sciences Team Abhishek Dwivedi (PGPM508_09): 7 years 6 months experience in End-To-End Product Management, Service Delivery, Business Development and Project Management across multiple Functional / Technical Domain. Nitin Goel (PGPM508_11): Nitin has rich experience in working with cross functional teams and adept to multi-cultural environments, serving Global 1000 clients across the US, UK, Switzerland, Malaysia and Ireland. He has 6 years 5 months experience in IT Services & IT Project management (Certified PMP (PMI, USA)), in a wide range of verticals: Life Sciences, Government, and Transportation & Logistics. Swapnil Saurav (PGPM508_41): Swapnil has more than 5 years experience in product implementation and delivering enterprise Information Technology programs in Healthcare domain. His has worked in medical devices domain. Arun VM (PGPM508_54): Arun has worked in the IT outsourcing industry for several years delivering technology solutions to major global clients. He is an expert in enterprise portal solutions and is passionate about IT strategy and technology consulting. Outside of work, Arun likes to spend time listening to music and closely follows the game of cricket, wherever it is played. Raghu VN (PGPM508_55): Raghu has been working in the IT outsourcing industry for several years. His interests are Enterprise Architecture, IT Strategy and Process Modeling. He is passionate about travelling and believes that investing in stock market will make him really wealthy. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 2
  3. 3. Healthcare & Life Sciences Index PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 3
  4. 4. Healthcare & Life Sciences I. Objectives The purpose of taking up study in healthcare and life sciences sector is to better understand the industry and the affiliate verticals which drive this sector. Our purpose is to get insight into various demand drivers of this sector and see how the overall sector is emerging in Indian context. The sectors and affiliate industries focus for this domain study are:  Biotech  Hospitals  Medical Devices  Pharmaceuticals  Healthcare Insurance Further the scope includes in-depth study of healthcare and life sciences sector. We have dissected following affiliate functions to unlock the opportunities available in this sector:  Breakdown structure of biotech industry in India  Primer study of the healthcare service providers in India  Government‘s initiatives in the Public health space  Healthcare Information systems with areas of application in billing, customer portals, usage of web for Data ware housing.  Emergence of medical system equipments.  Opportunities for consulting in healthcare domain.  Regulatory framework analysis PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 4
  5. 5. Healthcare & Life Sciences II. Methodology We have used secondary research as our method of conducting the domain study. This spans across gathering data from various sources like websites, reports, white papers and journals. In addition to this the whole study has been carried in phases described below: Phase I Understand the Healthcare business globally and in India and how they operate. We will choose one company from each sector and perform case study. Phase II Understand where Healthcare domain is moving and track latest developments in these sectors. Phase III Carry out the risk analysis of the sector to understand the various government regulations dynamics in conjunction with International regulations like FDA. Phase IV Look for opportunities for us and how to make career in these industries. Different kinds of job roles they offer. In addition to this explore new opportunities in the Healthcare business – convergence between business and healthcare and how Indian IT companies are supporting clinical trials etc We have further augmented our research by presenting case studies which cover various facets of the sector and highlight implementations in public sector as well as private domain. The following case studies have been presented: 1. E-Government Policy and Health Information Systems Implementation in Andhra Pradesh, India 2. Government of Maharashtra & HMIS 3. Managed Healthcare Provider Takes Internet Self-service Concept to New Heights 4. Apollo Hospitals Enterprise limited 5. Wipro GE Healthcare – In India for India initiative 6. Max New York life insurance PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 5
  6. 6. Healthcare & Life Sciences III. Executive Summary The India economic boom has been characterized by a few sectors which have been front-runners and a few which have benefited from it. One such sector is healthcare. The striking feature about the Indian Healthcare sector is that it has the potential to grow at a much faster rate in the foreseeable future and shall present new ―sectors of opportunity‖, which shall emerge as growth drivers. India's healthcare sector growth is expected to be driven by the expansion of hospital, pharmacy, bio technology and health insurance segments.  Hospitals - Private players account for almost 78% of the total healthcare delivery market. Major international players are expected to make a foray into the private hospitals segment in India, some of them include Parkway group (Singapore) and Columbia Asia (Malaysia). The growth in the hospitals sector is expected to be fueled by the demand for hospital beds with 2 million more beds required by 2027.  Pharmacy - In 2005, India's pharmacy market was about $ 6 million and this is expected to more than double to $ 14 million by 2015.  Bio technology - The bio technology industry is expected to surge to $ 5 billion by 2010 and $ 25 billion by 2015 from the 2006 level of $ 1.5 billion.  Health insurance - Huge potential for growth exists because of a low penetration rate, tariff elimination and FDI cap hike. A Mckinsey-CII report estimates the number of potential insurable lives at 315 million with the business expected to grow from $ 812 million in 2006 to $ 5.75 billion in 2010. Our research has identified many ―pockets of opportunity‖ within these sectors. The key areas of opportunity within the Indian Healthcare industry are:  Medical Infrastructure  Telemedicine  Medical Equipment  Health Insurance  Clinical Trials  Health services outsourcing  Medical value travel  Genome mapping  Data mining PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 6
  7. 7. Healthcare & Life Sciences Part I: Sectors at glance We have divided our study into 4 industries within Healthcare sector for ease of our study. The four industries which were part of our study are: 1. Biotechnology including Bioinformatics 2. Hospitals and medical care providers 3. Medical Devices industry, and 4. Healthcare Insurance providers 1.1 Biotechnology Market Overview India is witnessing increasing number availability of trained & skilled human resources with large number of India scientist seeking regulatory expertise and specializations in bio-technology industry. There has been a great deal of improvement in Indian standards with regards to bio-manufacturing and clinical development. The clinical data being produced by India now finds wide acceptance with USFDA / EMEA. Following facts and figures showcase the increasing potential in the bio technology industry. Indian biotech industry contributes to two per cent of the global biotech industry. As compared to previous years, the sector grew at 18% per cent in 2008-2009 which may be indicative of slowdown but still is healthy in terms of growth. The sector employs approximately 20,000 scientists, and over 325 companies drive it towards further growth. India is among top 12 biotech markets globally while India ranks third in the Asia-Pacific, after Japan and Korea. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 7
  8. 8. Healthcare & Life Sciences Indian Biotech Industry 2008-2009 Industry in 2008-09 registered 18 percent growth, record revenues of 12,137 crore. This industry is divided into 5 segments. BioPharma – vaccines , BioAgri – Bt cotton seeds , BioInformatics – tools for genomics therapeutics , diagnostics and bio-pesticides , bio- , proteomic databases , sequence animal health care products. fertilizers ( excludes hybrid analysis and database searches. Result 2008-09: 7883 Cr industry seeds ) Result 2008-09: grew by 15% to Result 2008-09: grew by Rs.220 crore 24% to Rs. 1,494 crore BioServices – clinical research, BioIndustrial – enzymes , organic amino acids , yeast and yeast contract research and contract based-products. manufacturing. Result 2008-09: grew by 16% to Rs. 478 crore Result 2008-09: grew at 31% In terms of dollar business, the industry was where it had been in the last fiscal, i.e., at $2.5 billion, with the price of a dollar hovering around Rs 47 during the year. The very nature of the biotech industry, that it is export-driven, is clearly reflected in these numbers. The recessionary effect in terms of venture capital and private equity funding did not have a dramatic effect on the companies, as the VC firms were anyways not taking the risk of investing in biotech ventures in the country. Looking at the future, India will go the innovation way. The government funding in terms of providing finance, getting into PPPs, their commitment in developing this sector is encouraging and it is prepared to be a financier and steer regulations. In the future, India will be a part of the global market and will be a part of the pie across the value chain. There will be a lot of marketing alliances where companies abroad can come and Indian companies will play the role of contract sales organizations (CSOs). Lastly on the globalization front, it will not just be about business opportunities but capability development that will expose India to actively learn the expertise of the partner. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 8
  9. 9. Healthcare & Life Sciences Biotech clusters in India There has been significant interest which has been generated by various Indian firms and multi-national corporations in making India as a Biotech hub with improved regulatory environment. The company footprint of industries present in this sector is as follows: India‘s main biotech clusters are located in Bangalore, Hyderabad, Pune-Mumbai and Ahemdabad-Vadodra. Western and southern region contribute heavily to the growth of this sector. Western sector accounted for 48 per cent growth with revenues of USD 998 million. The segments which contribute to this growth are mainly BioPharma & BioAgri. Karnataka and Hyderabad in the southern region PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 9
  10. 10. Healthcare & Life Sciences contributed to revenues of USD 488 million and Hyderabad has new members in its ―Genome Valley‖ , namely Shapoorji Pallonji Biotech Park and ICICI Knowledge Park. Top five players in bio-pharmaceuticals accounted for 45 per cent of the BioPharma market. Of the top 10 players, seven were vaccine players. Major investments Investments, along with outsourcing activities and exports are the key drivers for growth in the biotech sector. As per the survey carried out by ABLE, 56 per cent of the sector's total revenue of US$ 1.44 billion came from exports. Around 70 per cent of exports were from bio-pharma, and 26 per cent from bio- services segments. Private equity (PE) investments in the life sciences sector clocked US$ 183 million during the 10-month period between January and October, 2008 compared with around US$ 173 million for the same period in 2007. Some of the major investments in the sector are as follows:  Biocon Ltd has announced an exclusive collaboration with the US-based generic drugs major Mylan Inc to develop, manufacture, supply and commercialise many high-value generic biologic compounds for the global markets. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 10
  11. 11. Healthcare & Life Sciences  Two US-based biotech companies, Imac and Indus Expression floated by non-resident Indians have planned an investment of US$ 104 million to set up their units in India at the SEZ proposed by the Andhra Pradesh Industrial Infrastructure Corporation (APIIC).  CRYO-SAVE Group, the Netherlands-based stem cell company with a large Indian presence, plans to increase the number of stem cell donors in the country by opening more representative offices. The company plans to invest US$ 2.66 million in its Bangalore-based subsidiary for over three years.  Bangalore-based Cellworks Group Inc., which also has an office in California, has raised about US$ 8 million-US$ 10 million from a California PE investor.  Mahindra Shubhlaabh Services, an agri-business firm of Mahindra & Mahindra Ltd group, has entered into an alliance with HZPC Holland BV to produce, market and export high-quality seed potatoes from India.  Biocon acquired 70 per cent stake in German pharmaceutical company, AxiCorp for approximately US$ 43.5 million.  Albany Molecular Research Inc. (AMRI) bought FineKem Laboratories, a manufacturing facility located in Aurangabad.  Ocimum Biosolutions announced an equity investment of up to US$ 17 million for the acquisition of the genomics division of Gene Logic. Government Initiatives The Government of India and the UNESCO took a joint decision to establish the Regional Centre for research, training and education in biotechnology. The UNESCO Regional Centre for Biotechnology will come up in Faridabad, Haryana by next year. Further, the Department of Biotechnology (DBT), Govt of India, has also decided to set up a unique Health Biotech Science Cluster (HBSC) at Faridabad. The DBT is exploring avenues to fund research, focus on the opportunity of bio-similar products and create infrastructure to scale-up human resources to support a shift to high-end research in the long term. The Centre is also looking to support innovation from universities and a Bill to empower scientists and help them commercialize their innovations is expected to be passed by the end of the year. Moreover, the central government is planning to create a separate National Biotechnology Regulatory Authority.  The Karnataka government is proposing to establish biotech parks in prominent cities to promote the biotechnology sector in the state.  The Andhra Pradesh Industrial Infrastructure Corporation (APIIC) has allotted land to 19 companies so far in the Biotech Park Phase III at Karakpatla, Medak district. Over the next five years, over US$ 2.69 billion is likely to be invested by these companies. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 11
  12. 12. Healthcare & Life Sciences Union budget 2008-2009  Reduction of cenvat to 8.24 per cent  12.5 per cent weighted deduction to outsourced research  Reduction in customs duty on raw materials for ELISA kits to 18.72 per cent, select vaccines and select biotherapeutics to 9.36 per cent  Allocation of US$ 242 million for the National AIDS programme Key Growth Drivers & Trends Some of the key growth drivers and trends for the industry have been as follows  Pharmacos focus on biotechnology Major Pharmacos are diversifying into biotech, e.g. Ranbaxy, Cadila Healthcare, Lupin, Dr. Reddy‘s (DRL) and Intas. As part of its expansion plan, DRL is trying to create a recombinant proteins technology platform. Cadila Healthcare plans to enter the market by building a string pipeline of biopharmaceuticals in oncology and blood disorders.  Indian players expand their capacities to global standards Companies are putting efforts into upgrading facilities and capabilities to global standards for better access to partnerships. As part of this expansion plan , Biocon plans to set up a new plant worth US$ 116 million in Visakhapatnam, Andhra Pradesh , one of the most profitable bio- clusters in India. Reliance Life Sciences (RLS) also plans to invest US$ 219 million into four new facilities for home-grown clinical and generic products. They are going to setup a world-class Clinical data Management Center (CDM) in Bangalore  Direct investments from international biotech firms Avesthagen managed to raise around US$ 36 million from Europe‘s Groupe Danone, Groupe Limagrain and two other strategic investors. Shantha Bioetchnics Ltd. will receive close to US$ 10 million from its majority French partner Merieux Alliance. In another example of direct investment by a foreign firm, Amgen has opened a wholly-owned subsidiary, Amgen Technology, in Mumbai  Collaborations and alliances There is an unprecedented surge in partnering activity as a means to enter new markets and expand competencies and capacities. One of the recent examples is of RLS acquiring a 74 per cent stake in UK-based biotech company GeneMedix for about US$ 31 million in 2007. Panacea Biotec acquired a 10 per cent stake in UK-based Cambridge Biostability Limited (CBL) for over US$ 3.8 million. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 12
  13. 13. Healthcare & Life Sciences  Increasing government support for biotechnology Government has been proactive in initiating various proactive reforms for the industry. It has decided to provide biotechnology, all benefits and advantages that IT industry currently has. In addition to this it also proposes to implement a National Biotechnology Development Strategy (NBDS) and establishing a National Biotechnology Regulatory Authority (NBRA). Planned outlay for investment from DBT is USD 52.5 million in R&D in 2007-08  Strengthening confidentiality and IP protection Roche India has become the first life sciences company in India to be granted a product patent for its drug Pegasys. An effort by the government has been to step up presence of judicial courts that deal with IP issues. Patent applications can be submitted in four locations in India. This move has attracted many international players to invest in the domestic market  Increased biotech funding for the Indian market Various global and domestic financial institutions have shown interest in investing in biotech. Expected investments of USD 730 million to USD 850 million are expected over the next two years. International Finance Corporation committed equity of up to USD 4 million to the APIDC Biotechnology Fund  Emerging areas: stem cells and nanotechnology Significant investments have been made in stem cell research. DBT is setting up a Center for Stem Cell which has been approved by the Indian Council to conduct India‘s first ever multi- centric clinical trials with stem cells. Dabur Pharma has been successful indigenous development country‘s first nanotech-based chemotherapy agent outside of USA India’s top biotech players Top five companies contributed 35 per cent of the total industry revenues and all were home grown. MNCs such as Novo Nordisk, Mahyco Monsanto and GSK are among the top 10 biotech companies. Top three companies are involved in bio-pharma; fourth and fifth ranked companies are into bio-agri. 16 of the top 20 companies had revenues over USD 24 million. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 13
  14. 14. Healthcare & Life Sciences 1.2 Hospitals The scorching pace of growth that India has witnessed over the last few years has made it clear to leaders in India that to emerge as a real global economic super power, the country must invest in and strengthen its social fabric – specifically education and healthcare. The country is Figure 1.2.1 Projected rate of population growth projected to become the most populous country in 2035 and is already one of the youngest, being home to around 20% of the population under 24 years of age. The population of India is expected to reach 1.6 billion by 2050. Hence it is eminently clear that investment in healthcare is a priority and must be addressed through wide ranging policy and infrastructural mechanisms. The Mckinsey report ―A healthier future for India‖ lists down 2 reasons why India is well positioned to tackle its healthcare challenges – first, it has the opportunity to learn from the experiences of the Figure 1.2.2 Indian healthcare industry projections (Sources: IBEF and E&Y’s growth report”) more advanced countries and second, it has the opportunity to create new models that draw open the strengths of every sector in the country. These two factors should provide the much needed impetus to getting rid of the country‘s chronic healthcare issues –high infant mortality, malnutrition, high incidence of HIV/AIDS and low overall life expectancy. Currently, India has only 1.5 beds, 0.6 doctors and 0.08 nurses per 1000 people which are much lower than that of regional neighbors like China which has around 4 to 8 beds per 1000 people and the world average of around 1.2 doctors and 2.6 nurses per 1000 people. Historically, India spent less than 1% of its GDP on healthcare so more than 80% of healthcare expenses are funded out of pocket by individuals with less than 2% funded by private insurance which is primarily employer funded. However, in recent years, investment in healthcare has risen to 5.2% of GDP in 2004 and is expected to touch 8% of GDP by 2012. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 14
  15. 15. Healthcare & Life Sciences Hence, it is clear that action must be taken on a war footing on multiple fronts – policy reforms, innovation in products and a much deeper penetration of healthcare insurance amongst the masses. This three pronged strategy will need the cooperation and support of all sectors of the economy with adequate guidance from the Government. Private players account for almost 78% of the total healthcare delivery market. Major international players are expected to make a foray into the private hospitals segment in India, some of them include Parkway group (Singapore) and Columbia Asia (Malaysia). Fig 1.2.3 Investment in hospital infrastructure (Source: Mckinsey) Fig 1.2.4 Key drivers for hospital infrastructure ( Mckinsey ) The growth in the hospitals sector is also expected to be fueled by the aggressive growth of the medical tourism industry which is expected to grow from $ 350 million in 2007 to $ 2 billion a year in 2012. Fig 1.2.5 Medical tourism data PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 15
  16. 16. Healthcare & Life Sciences 1.3 Medical Devices The medical device industry consists of firms that produce a wide range of medical, surgical and dental products used for diagnosis and treatment of ailments. A medical device is defined, as any healthcare product that does not achieve its primary intended purpose by chemical action or by being metabolized. Medical devices include electro- medical equipment and related software, furniture, supplies and consumables, orthopedic appliances, prosthetics and diagnostic kits, reagents, and equipment. Medical devices are classified based on the level of risk to users/patients, corresponding to logical risk evaluations conducted by the FDA. Classifications of devices are: 1. Class I devices are the lowest risk classification and include general controls such as crutches and band aids. 2. Class II controls are more specialized, such as wheelchairs. 3. Class III devices require pre-market approval, as they are known to present hazards requiring clinical demonstration of safety and effectiveness. Devices in this category include heart valves, catheters, cardiopulmonary resuscitation (CPR) devices and various implants. Our remaining study is on class III devices such as: 1. Diagnostic Imaging: It includes X-ray, digital mammography, Computed Tomography (CT), Magnetic Resonance (MR) and Molecular Imaging technologies. 2. Clinical Systems: It includes ultrasound, ECG, patient monitoring devices, incubators and infant warmers, respiratory care and anesthesia management. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 16
  17. 17. Healthcare & Life Sciences 3. Healthcare IT: It provides clinical & financial information technology solutions such as departmental IT products, RIS/PACS (Radiology Information Systems/Picture Archiving and Communication Systems) and CVIS (Cardiovascular Information Systems), as well as revenue cycle management and practice applications. 4. Surgery: It includes tools (goes inside the body) for cardiac, surgical and interventional care, diagnostic monitoring systems, data management systems to mobile fluoroscopic imaging systems, navigation and 3D visualization instrumentation. Clinical investigations of medical devices must comply with each country’s designated authority: India- Central Drugs Standard Control Organization USA- Food & Drugs Administration (FDA) (CDSCO) Europe- European Medicines Agency UK- Medical Devices Agency (MDA) China- China‘s State Food and Drug Administration Australia- Therapeutic Goods Administration (TGA) (SFDA) Australia Canada- Health Canada Japan- Ministry of Health The Indian Market Over the last decade, Asia has accounted for an increasing percentage of medical device sales and manufacturers are pursuing opportunities in Asian markets to remain competitive. With steady growth in GNP, population numbers and standard of living, India represents one of the most promising markets. The Indian market for medical equipment and supplies ranks in the world‘s top 20 but, despite strong growth rates, the market remains disproportionately small with per capita spending of less than US$2. High quality, high tech products are sought after, particularly in the private sector. Future increased demand for medical equipment and supplies will come mainly from private sector hospitals and medical centers. Key Findings PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 17
  18. 18. Healthcare & Life Sciences The Indian government acknowledges that increased foreign involvement is necessary, especially in high- technology and highly specialized areas such as equipment for plastic surgery, cancer diagnosis and medical imaging. Several favorable factors, such as economic growth, free market environment, a developed industry and investment in health infrastructure, are driving increased demand for high quality medical devices in India. There are four types of Indian healthcare facilities that use foreign medical equipment namely, rural hospitals (or primary health centers), government hospitals, private hospitals and teaching institutions. Private hospitals outnumber the state facilities and generally invest in sophisticated foreign medical devices (that account for approximately 40-50 per cent of market sales), as they perform more complex procedures such as open heart surgery. Public hospitals lack funds to upgrade their equipment and expand their services, while domestic medical device manufacturers cannot produce high technology equipment essential for such procedures. Consequently, the demand for high technology devices is met predominantly by imports. Although imports constitute over half of the total Indian market, medical device suppliers seeking to enter India‘s market typically arrange joint ventures/ licensing agreements to manufacturer their products locally or employ local agents to distribute them. Prominent joint ventures include Wipro-GE, Hewlett-Packard, Toshniwal Brothers, Medi Systems Ltd., among others. Most imported products have high gross margins, however, the market is becoming increasingly competitive due to low entry barriers (for MNCs), an increasing number of players and an expanding consumer base. The USD 3 million Industry (Medical Equipments, Diagnostics and Supplies Market) is being hit by unfair unfriendly trade practices and anti industry regulations. To wake up the sleeping Govt and initiate a movement against these anti industry regulations and repressive environment the entire medical devices industry of India has gathered on a one single platform to form ―Association of Indian Medical Device Industry (AIMED )‖ which will be the single point contact for Govt of India. This represents the interest of over 150 Manufacturers of Medical Devices. The industry is currently growing at a pace of 12% pa and likely to touch USD 5 billion by the end of 2010. AIMED will ensure convergence at a one common platform, when needed, for ensuring over all growth of Indian Medical Devices Industry and further address the needs of all members of the Medical Device Industry irrespective of their affiliation or their company size. AIMED has initiated the formation of the IMDRRG – Indian Medical Device Regulatory Review Group for enabling Regulatory Reforms and provided a forum for the regulated/unregulated industry, the regulator the conformity assessment bodies, the testing institutions and consumer groups for bring around these overdue reforms. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 18
  19. 19. Healthcare & Life Sciences 1.4 Pharmaceuticals Pharmaceutical Industry worldwide has two primary activities - R&D for new drug development and manufacturing & marketing of the drug.  During drug development phase, which may last for 10 to 12 years, the main objective for paper work is to maintain all the records for the approvals from regulatory bodies, for example FDA in US. There are patent and IPR issues in maintaining all the records during the lifetime of drug development. The phases of drug development are pre-clinical testing, toxicology, chemical development, metabolism, product development, and clinical trials. Fig 1.4.1 Drug Development Cycle  In the drug-manufacturing phase, after the drug gets the approval for commercial production, the documents are needed as Standard Operating Procedures (SOPs), Testing procedures and records, and quality control procedures and records as part of umbrella Good Practices – GxP. GxP has three components - Good Manufacturing Practices (GMP), Good Laboratory Practices (GLP) and Good Clinical Practices (GCP). All have their share of document control requirements. Industry Overview Fig 1.4.2: Formulations- broad category From being almost non-existent before 1970 to a prominent provider of healthcare products, meeting 95% of the country‘s pharmaceuticals needs, the Indian pharmaceutical industry has come a long way. The industry has increased from Rs 4bn in 1970-71 to Rs 370bn in 2008 and has grown at an average rate of PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 19
  20. 20. Healthcare & Life Sciences 10% over last five years. The total Indian production constitutes about 1.3% of the world market in value terms and 8% in volume terms. There is a worldwide structural trend evolving in pharmaceuticals and Indian companies play a key role in this framework, driven by their superior biotech and drug synthesis skills, high quality and vertically integrated manufacturing assets, differentiated business models and significant cost advantages. Indian pharmaceutical companies reign supreme compared to their multinational counterparts in India. The market is predominantly a branded generic market with more than 24,000 players (around 330 in the organized sector), making the industry highly fragmented. The top ten companies make up for more than a third of the market. As per the Organization of Pharmaceutical Producers of India (OPPI) estimates, currently there are around 10,000 pharmaceutical units in India that produce around 400 bulk drugs and more than 60,000 formulations (falling under 60 therapeutic categories). Fig 1.4.3 Concentration of Industry tirnover The pharmaceutical products can be broadly classified into bulk drugs and formulations. The formulations can be categorized under various therapeutic groups. In India, the chronic segment, which constitutes only 28 per cent of the market, is considered a high value segment and market growth is mostly related to value growth; whereas the acute segment which constitutes as much as 72 per cent of the market is low value segment in which growth is driven by volumes. Fig1.4.4 Market share of top players Due to high level of fragmentation none of the players had a market share of more than 6 % (even the top players Cipla & Ranbaxy commands only 5.24 & 5.09 per cent market share on the basis of retail sales respectively). PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 20
  21. 21. Healthcare & Life Sciences Investment in the sector Most of the capital investment plans announced by the domestic players relate to expansion or setting up of formulations projects, followed by new bulk drug manufacturing projects. Moreover, a considerable amount of investments are expected to be utilised for setting up R&D centers, SEZs and pharma parks. In June 2008, project under implementation were 272 with the project cost of Rs 165.2 bn. Fig 1.4.5 CAPEX in the sector During April 07- Feb 08, FDI worth Rs 93 bn infused in the domestic industry. In December 2007 alone, FDI infused was Rs 5.3 bn. Demand drivers India‘s per capita drug expenditure has been growing at a CAGR of 12.1 per cent during 1981 - 2006.The key drivers in demand in pharma sector are:  Rise in population accompanied with favorable change in age structure  Emerging middle class and growing urbanization will create strong demand  Improving healthcare infrastructure  Growing healthcare insurance market  Growing health awareness Exports Exports of pharmaceutical products from India have grown at a CAGR of 17.62 per cent during the last 5 years ended FY08 at Rs 291 billion. Sharp rise in exports can be attributed to changes in the industry market dynamics both at the domestic as Fig 1.4.6 Export in Rs Bn well as the international level. Indian pharmaceutical exports are increasingly being directed to developed and highly regulated markets, which is growing at 7-8 per cent during past few years. The proportion of exports to developed and highly- regulated markets (USA, Germany, and UK) to India‘s total pharmaceutical exports has risen from 24.5 per cent in FY04 to 27.4 per cent during FY08. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 21
  22. 22. Healthcare & Life Sciences In addition, Indian pharmaceutical companies are also catering to developing markets, which are recording high growth during the past few years. In comparison to 7-8 per cent growth in regulated markets, developing countries in the Latin American region recorded a growth rate of 11 per cent during 2007 in terms of domestic sales value. Fig 1.4.7: Export to regulated market Strategic Assessment – Porter’s 5 Forces Supply: Higher for traditional therapeutic Demand: Very high for certain therapeutic segments, which is typical of a developing segments. Will change as life expectancy, literacy market. Relatively lower for lifestyle segment. increases. Barriers to entry : Licensing, distribution Bargaining power of suppliers: Distributors are network, patents, plant approval by regulatory increasingly pushing generic products in a bid to authority. earn higher margins. Bargaining power of customers: High, a Competition: High. Very fragmented industry fragmented industry has ensured that there is with the top 300 (of 24,000 manufacturing units) widespread competition in almost all product players accounting for 85% of sales value. segments. (Currently also protected by the Consolidation is likely to intensify. DPCO). SUMMARY With innovator pharmaceutical players reeling under R&D productivity and cost pressures, combined with a beckoning generic opportunity (arising out of large number of drugs going off-patient), India is likely to witness a gamut of opportunities in terms of exports of formulations and bulk drugs for manufacturing both on-patent and off-patent drugs. Exports, which are expected to drive the growth of the Indian pharmaceutical market, are set to nearly treble over the next 5 years. Exports will largely be driven by the rising confidence of innovators and the upcoming generic opportunity. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 22
  23. 23. Healthcare & Life Sciences 1.5 Healthcare Insurance Indian health insurance industry stands at INR 5,125 crores with only a small Section of the total population (around 2%) being covered so far. This provides a huge untapped market and the CAGR has been around 35% in the last few years. Health insurance industry is one of the fastest growing segments in India now. Some of the challenges facing Indian healthcare industry are:  Rising healthcare costs Private Companies  Need for long term and nursing care for the poor  Inability of the social schemes to cover wider population  Increasing burden of new diseases Government Employer Insurance and health risks Schems (ESIS -based and CGHS) Industry  Culture which doesn‘t see insurance schemes as a necessity Fig 1.5.1 classification of insurance schemes in India NGO/Co mmunity Healthcare Landscape in India based Schemes 1. Government Based Schemes (Social Insurance) Social insurance is an earmarked fund set up by government with explicit benefits in return for payment. Government run schemes mostly fall under CGHS (Central Government Health Scheme) and ESIS (Employee State Insurance Scheme) although there is some small scale schemes offered by state governments as well. CGHS (Central Government Health Scheme) This scheme is applicable for all central government employees except a few groups like railways, armed forces pensioners, etc. This scheme was designed to replace the cumbersome and expensive system of reimbursements (GOI, 1994). It aims at providing comprehensive medical care to the Central Government employees and the benefits offered include all outpatient facilities, and preventive care in dispensaries. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 23
  24. 24. Healthcare & Life Sciences ESIS (Employee State Insurance Scheme) ESI scheme provides protection to factory employees against loss of wages due to inability to work due to sickness, maternity, disability and death due to employment injury. Employees contribute 1.75% of their wages, employer contributes 4.75% of the wages and the state governments contribute 12.75% of the total expenses. Under the ESIS, there were 125 hospitals, 42 annexes and 1 450 dispensaries with over 23 000 beds facilities. 2. Employer Based Schemes Employers in both the public and private sector offers employer-based insurance schemes through their own employer-managed facilities by way of lump sum payments, reimbursement of employee‘s health expenditure for outpatient care and hospitalization, fixed medical allowance, monthly or annual irrespective of actual expenses, or covering them under the group health insurance policy. The railways, defence and security forces, plantations sector and mining sector provide medical services and / or benefits to its own employees. The population coverage under these schemes is minimal, about 30-50 million people. 3. NGO/Community based schemes These schemes are usually run by trust hospitals or Non-Governmental Organizations (NGOs) and are non-profit schemes. Premium is usually flat rate and does not vary with the income or the individual risk status. The benefits offered are mainly in terms of preventive care, though ambulatory and in-patient care is also covered. Examples of organizations offering such insurance schemes are Self Employed Women‘s Association (SEWA), Tribhuvandas Foundation (TF) and Mallur Milk Cooperative. 4. Private Companies In private insurance, buyers are willing to pay premium to an insurance company that pools people with similar risks and insures them for health expenses. Premiums are decided based on the risk status and the level of benefits rather than on the income. In the public sector, the General Insurance Corporation (GIC) and its four subsidiary companies (National Insurance Corporation, New India Assurance Company, Oriental Insurance Company and United Insurance Company) and the Life Insurance Corporation (LIC) of India provide voluntary insurance schemes. In year 1999, with the passing of the Insurance Regulatory Development Authority Bill (IRDA) the insurance sector was opened to private and foreign participation, thereby paving the way for the entry of private health insurance companies. Some of the major private companies offering health insurance in India are ICICI, Tata AIG, Royal Sundaram, Cholamandalam and Bajaj Allianz. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 24
  25. 25. Healthcare & Life Sciences Part II: Emerging & Future Trends 2.1 Indian Biotech industry India is already being globally recognized as a manufacturer of economical, high quality bulk drugs and formulations. With a huge base of talented, skilled and cost competitive manpower, and a well-developed scientific infrastructure, India has great potential to become a leading global player in biotechnology. Biotechnology industry in India has notched up a growth of 20 per cent during 2007-08 and the revenues earned were worth US$ 2.56 billion as against US$ 2.1 billion during the previous fiscal. Research services touched US$ 500 million and bio-IT (bioinformatics) was US$ 250 million. Growth of Indian Bioinformatics companies Many Indian entrepreneurs and intellectuals have set up companies to take advantage of the emerging opportunities in bioinformatics. Even major IT companies like Wipro, Tata Consultancy Services, Infosys, Kshema Technologies, Mascon, Satyam and Infosys have diversified their activities and went ahead to set up a separate section/division within their organizations. The pure-play bioinformatics companies in India include Strand Genomics, Ocimum Biosolutions, SysArris, SciNova India, CytoGenomics, Mascon and Molecular Connections. These companies have come out with products to cater mainly to the needs of the pharmaceutical and biotechnology companies. This sector is the quickest growing field in the country. The vertical growth is because of the linkages between IT and biotechnology, spurred by the human genome project. IT majors such as Intel, IBM, Wipro are getting into this segment spurred by the promises in technological developments. Companies like Ocimum Biosolutions and GVK Biosciences are also highly active in this field, with captive training centers. As the focus of the pharmaceutical and biotech companies has been on developing new molecules to capture the market share, major pharma companies are also investing heavily in this sector. Bioinformatics offers these companies a chance to participate in the front-end drug discovery process. This has led to many institutions/organizations to offer courses in bioinformatics at various levels. The major concern in this sector is that the companies are focusing on global market like Europe and the US. The Indian pharma industry is still in infancy as far as data driven drug discovery is concerned. The people in the sector say that about 80 percent of the action in biopharma is taking place in the US. In addition to these areas, techniques of data mining, scientific visualization, information storage, retrieval of special structure data and simulation of very long DNA sequences are gaining importance. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 25
  26. 26. Healthcare & Life Sciences 2.2 Hospitals The growth in the healthcare services sector in India is driven by the 350 million strong middle class people aspiring for quality healthcare services, thus increasing international confidence on the country as a potential, high quality and low cost medical tourism destination. According to the WHO report, India needs to add 80,000 hospital beds each year for the next five years to meet the demands of its growing population. Apollo hospitals started the trend of corporate hospitals and then other major players followed. An indicative list of some of the major hospitals and their spread is shown below: Annual Hospital Number of Number of Number Revenue Coverage Groups Locations Hospitals of Beds (2005-06 (In Rs. Crore) Apollo Hospital 11 11 3000 All Metros 779 Enterprise Ltd Bangalore, Wockhardt 8 10 1400 Mumbai and 210 Hospitals West India Fortis 5 13 1855 North India 100 Healthcare Max 1 6 765 Delhi & NCR 137 Healthcare South India Manipal (Mainly Health 9 11 3000 - Karnataka) and Systems Sikkim South and Care Hospital 11 14 2000 - West India PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 26
  27. 27. Healthcare & Life Sciences It is expected that with the arrival of more and more players, the number of beds available would go up along with the geographic spread of hospitals leading to better avenues for the availability of quality healthcare for citizens of the country. 2.3 Medical Devices The medical device industry has been rapid changes in the past five years driven by changes in both technology and treatment protocols for patients. Market leadership today depends on innovation, meeting high quality standards and getting the products to market faster than the competitors. This industry is a highly innovative industry where companies look to develop reliable, efficient and high quality models every time. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 27
  28. 28. Healthcare & Life Sciences Low cost Healthcare is a very expensive sector. All companies focus on developing low-cost products. GE healthcare has come up with six such products and 10 more are in the pipeline, the centrepiece of its achievements is the Mac 400, an electrocardiogram that weighs only 1.1 kg, costs around $800 (approximately Rs 38,400) and requires less than an hour's training to operate. It's sometimes referred as ―stethoscope of cardiologists". For example, the printer in the machine is what the Karnataka State Road Transport Corporation uses for printing tickets. A battery was provided, keeping in mind the frequent power cuts in the country. Just five buttons were kept to operate the electrocardiogram for simplicity of use. But the features have not been stripped. GE has already sold close to 6,000 such devices. It has even been readied for the retail market in the United States. GE's next target is to knock off another 200 gm from the machine and provide a USB port so that data can be transported. GE calls it- frugal innovation. Early Health Early Health is focused on enabling earlier diagnosis and more effective treatment of disease. It focuses more on early prevention rather than late diagnosis. Today, 70 to 80% of the resources in healthcare are devoted to managing symptom-based, advanced disease. Early health brings in the concept of predicting and diagnosing the problem even before it occurs. Companies are looking to use IT solution and the Life Sciences findings to predict the diseases even before its onset. Because the earlier the detection, the sooner we can bring disease to an end. Early health means more accurate diagnosis, earlier, more effective treatment and better outcomes for more patients. It is likely to improve cost efficiencies for the healthcare industry, revolutionizing the way healthcare is delivered. Shifting resources to "early" health and developing technologies that allow healthcare providers to diagnose disease at the earliest possible stage, when there can be many treatment options, is better medicine. It also makes simple economic sense. For example, currently, patients with cardiac disease have about a 45% chance of survival if treatment begins at onset of symptoms. An "early health" model made possible by advances in diagnostic tools such as cardiac biomarkers, non-invasive diagnostic imaging, targeted therapies, and IT-based disease management has the potential to nearly double the survival rates from cardiac disease. Applying these tools and identifying cardiovascular disease early can lower healthcare costs, while helping preserve the quality of life for patients. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 28
  29. 29. Healthcare & Life Sciences 2.4 Pharmaceuticals The healthcare sector in India has experienced a paradigm shift due to emerging trends in globalization, developing markets, industry dynamics and increasing regulatory and competitive pressures. To adapt to the changing trends, the Indian pharmaceutical and biotechnology companies have evolved distinctive business models to take advantage of their inherent strengths and the "Borderless" nature of this sector. These differentiated business models provide the pharmaceutical and biotechnology companies‘ the necessary competitive edge for consolidation and growth. Indian pharmaceutical Industry is moving up the value chain. From being a pure reverse engineering industry focused on the domestic market, the industry is moving towards basic research driven, export oriented industry with a global presence, providing wide range of value added quality products and services. In the recent past, Indian companies have targeted international. While some companies are exporting bulk drugs, others have moved up the value chain and are exporting formulations and generic products. India also offers excellent exports opportunities for clinical trials, R&D, custom synthesis and technical services like Bioinformatics. The drug price control order (DPCO) continues to be a menace for the industry. There are three tiers of regulations – on bulk drugs, on formulations and on overall profitability. This has made the profitability of the sector susceptible to the whims and fancies of the pricing authority. The new Pharmaceutical Policy 2006, which proposes to bring 354 essential drugs under price control has not been officially passed as yet and has been stiffly opposed by the pharmaceutical industry. The R&D spend of the top five companies is about 5% to 10% of revenues. Despite growing at a CAGR of over 50% over the last four years, the ratio is still way below the global average of 15% to 20% of sales. However, despite the relatively low R&D spending, Indian companies are stepping up their research activities to make themselves more self sufficient in terms of product development, now that the product patent regime has come into force. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 29
  30. 30. Healthcare & Life Sciences The industry is a net exporter and manufactures over 350 APIs (Active Pharmaceutical Ingredients). More than 60 Indian manufacturing facilities are approved by some of the toughest Regulatory Agencies such as US FDA, UK MCA, Australian TGA, WHO etc. Globally, pharmaceutical industry in India ranks 4th in volume term and 13th in value (largely because of very low prices). The industry is highly fragmented with about 15,000 plus registered units with only about 300 in the organized sector. The industry manufactures a wide range of drugs (over 100,000 - which includes vitamins, anti-biotics, anti-bacterials, cardio-vascular drugs etc.) Nearly 80% of the manufacturers have sales less than Rs1bn. Of the 300 manufacturing and formulation units in the organized sector; the market is concentrated at the top with the top 30 players controlling about 70% of the market share. As the growth opportunities in the domestic market are on a decline, the Indian companies are focusing on exports for higher growth and improved margins. Exports of pharmaceuticals consist of basic drugs (bulk), intermediaries & fine chemicals and finished formulations. The industry has been able to build a strong export market for Indian pharmaceuticals in the face of fierce competition from manufacturers in foreign countries with a long record of technology growth. Increasing generic penetration, intense competition, fragmentation of the industry has negatively impacted overall value growth of the domestic market. In this scenario, to grow in the domestic market, companies are looking at introducing value added new products, innovation, product life cycle management and increasing their market reach. Challenges  Government policies regarding range of price increase  Increase in prices of raw materials  Increasing competition Future Outlook  The product patents regime heralds an era of innovation and research resulting in the launch of new patented product launches. In the longer run, domestic companies would face fresh competition from MNCs, as they would make aggressive new launches. However, the latter would most likely be subject to price negotiation.  Drugs having estimated sales of over US$ 28 bn are expected to go off patent in the US between CY08 and CY10. With the governments in the developed markets looking to cut down healthcare costs by facilitating a speedy introduction of generic drugs into the market, domestic pharma PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 30
  31. 31. Healthcare & Life Sciences companies will stand to benefit. However, despite this huge promise, intense competition and consequent price erosion would continue to remain a cause for concern.  The life style segments such as cardiovascular, anti-diabetes and anti-depressants will continue to be lucrative and fast growing owing to increased urbanisation and change in lifestyles. Growth in domestic sales in the future will depend on the ability of companies to align their product portfolio towards the chronic segment.  Rising population, expanding economy, favourable economic policies, changing pattern of diseases, increased spending on healthcare and better health infrastructure are likely to provide the required impetus to the Indian pharmaceutical industry to sustain its growth at double digit rates over the next few years.  Contract manufacturing and research (CRAMS) is expected to gain momentum going forward. India‘s competitive strengths in research services include English-language competency, availability of low cost skilled doctors and scientists, large patient population with diverse disease characteristics and adherence to international quality standards. As for contract manufacturing, both global innovators and generic majors are finding it profitable to outsource production. Currently, India has the highest number of US FDA approved plants outside the US at 75. Mergers and acquisition Currently, as the generics business is weighed down by stiff competition and declining R&D productivity, alliances and partnerships is the need of the hour for the pharmaceutical industry rather than the preference. In recent times, most of the leading players have inked M&A deals across the globe. In 2006, the domestic pharma sector executed more than 40 deals with 32 cross border transaction worth PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 31
  32. 32. Healthcare & Life Sciences US$ 2000 mn and it includes deals like Dr Reddy‘s acquisition of Betapharm of Germany for Euro 480 mn (Rs 2550 cr) and Ranbaxy Terapia buy in Romania for US$ 324 mn (Rs 1250 cr approx). In 2007, Indian pharma sector witnessed 25 Mergers & acquisition deals, with 15 cross border transaction worth US$ 600-700 mn. There were a total of eight acquisitions in the Jan-March period of 2008 with a total announced valuation of $152 million; while in April 2008, Indian drug firms acquired six overseas companies, including the $255 million acquisition of US-based Draxis Health Inc by Jubilant Organosys. Hyderabad-based Dr Reddy's Laboratories was the most aggressive company during the four-month period, buying three companies in Europe and the US. Thus, mergers and acquisitions has proven tool to seize growth opportunities and is widely resorted to by players by either moving up the value chain or by integrating downstream production. More mergers & acquisitions and consolidation activity in near future is expected which is driven in the medium term by implementation of the new patent regime and generic companies looking to establish a low-cost base out of the country. Mergers and Acquisitions – Challenges While growth via acquisitions is a sound idea in principle, there are challenges as well, which relate mainly to the stretched valuations of acquisition targets and the ability to turn them around within a reasonable period of time. The acquisitions of RPG Aventis (by Ranbaxy) and Alpharma (by Cadila) in France are clear examples of acquisitions proving to be a drain on the company‘s profitability and return ratios for several years post acquisition. In several other cases acquisitions by Indian generic companies are small and have been primarily to expand geographical reach while at the same time, shifting production from the acquired units to their cost-effective Indian plants. A few have been to develop a bouquet of products. Other than Wockhardt‘s acquisition of CP Pharma and Esparma, it has taken at least three years for the other global acquisitions to see break-even. Most of the acquiring companies have to pay greater attention to post merger integration as this is a key for success of an acquisition and Indian companies have to wake up to this fact. Also, with the increasing spate of acquisitions, target valuations have substantially increased making it harder for Indian companies to fund the acquisition PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 32
  33. 33. Healthcare & Life Sciences 2.4 Healthcare Insurance Growth Trends • Health insurance is the fastest growing segment in the non-life insurance industry in last few years • Commercial health insurance (i.e. purchased from insurance companies) constituted only 0.7% of this expenditure in 2001-02 and barely covered 1% of the population. By the end of 2008-09, health Insurance premium would have grown about ten-fold from a level of Rs. 675 crores in 2001-02. • It grew 60% during 2007-08 (in non-life companies) of over Rs 5100 crores (Rs 3200 cr in 2006-07) • During April-September 2008 (latest provisional figures), it again shows 47% growth over the corresponding period in the previous year and business in Apr-Sep ‗08 is higher than entire FY 2006-07 • It is also emerging as an increasingly significant line of business for life insurance companies, and all the large life insurance companies now have products in the health insurance space. Challenges and Road Ahead Health System Issues: Consumer Awareness and Empowerment – Healthcare costs – Decrypting the jargon – Regulation of providers – Product innovation to match consumer needs – Accreditation/ Grading/ Quality issues – Simplification and standardization of key terms – Process efficiencies – Performance benchmarks for operations and service – Transparency and best practices – Leveraging technology Minimizing moral hazard in the system Increasing reach, access and affordability Crystal Ball Gazing • Growth trajectory likely to continue- health insurance will be an increasingly important mode of payment for hospital services • Product and delivery innovations, distribution innovations • Increasing specialization and professionalization in the system • Quality, Standards, Cost optimization • Providers contributing to sharing risk- – Provider payment mechanisms – New dimensions of Provider ‗Networks‘ • More comprehensive products- overcoming limitations due to health system issues • Savings linked, Differentiated and Multi-tiered products PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 33
  34. 34. Healthcare & Life Sciences Part III: IT as enabler in healthcare industry 3.1 Industry Offerings from TCS Pharmaceuticals Current Challenges: Increased pressure on pharmaceutical companies to speed up drug development coupled with rising clinical development costs and declining drug discovery success rates, resulting in a drug delivery process that is complex, time-consuming, and expensive What TCS provides: Strategies and technology to help pharmaceutical companies accelerate drug discovery, enhance understanding of the clinical development process, and make better decisions Scientific Instruments and Diagnostics Current Challenges: Keeping pace with rapid technological changes, frequent product introductions, rising manufacturing costs, increased competition, and stringent regulations What TCS provides: Comprehensive programs for managing software development and maintenance activities, executing strategies, and providing solutions to streamline manufacturing processes and jointly develop products in order to optimize manufacturing processes and collaborate with partners to co- develop products Healthcare Current Challenges: The need for minimized medical errors, improved tracking, increased reporting safety, and compliance with quality standards, as well as to consolidate back office systems that provide real-time patient information and automate billing and claims processing activities while adhering to compliance mandates such as HIPAA What TCS provides: TCS leverages its business and technology expertise to help healthcare companies succeed in their mission of improving the quality and accessibility of medical care. Life sciences Current Challenges: Reduced R&D productivity, increased drug discovery costs, decline in market growth, significant number of post-launch withdrawals, and patent expiries What TCS provides: Comprehensive strategies that integrate IT systems, and that deliver speed to market and scientific rigor for automated drug discovery and development processes that are more economical and accessible. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 34
  35. 35. Healthcare & Life Sciences 3.2 Industry Offering from Infosys Healthcare Claims Modernization Solution: It Patient Relationship Management: It addresses helps healthcare payors modernize claims rising patient expectations, enhances systems, optimize and rationalize claims customer service and ensures customer operations, reduce claims complexity and loyalty. maintenance requirements. Disease and Wellness Management Solution: It Modular Global Sourcing: It is an evolutionary is a Service-Oriented Architecture platform- healthcare outsourcing strategy that aligns based portal solution that can be customized sourcing activities with business strategy, delivers to support various types of disease innovation and achieves operational efficiency. management programs. Hospital Supply Chain and Revenue Cycle Hospital Information Systems Center of Collaboration: It provides visibility into cost Excellence: It focuses on Electronic Medical Records and IT-driven clinical transformations. data by integrating data across the purchasing and supply chain, clinical management and the revenue department. Related Services Consulting Application Systems Infrastructure BPO Services in Development Integration Services Healthcare Maintenance 3.3 Industry Offerings from Cognizant Cognizant's service offerings help clients transform their IT systems to adapt to changing market needs. Using accelerated implementation and measurable performance improvement with proven and tested frameworks and methodologies, we help our healthcare clients build their businesses. Industry-specific Services Solution Frameworks End-to-End Managed Care System futuraHealth - Consumerism Framework Regulatory Compliance Services ClaimSphere - Enterprise Reporting Consumer Directed Healthcare Solution Enterprise Reporting & Data Analytics Plan@net - Cognizant's Self-services Business Process Assessment Solution eHealth & Self Services Membership Pre-processing Utility Legacy Modernization Claims Fix Broker Quoting Engine PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 35
  36. 36. Healthcare & Life Sciences Part IV: Regulatory Environment 4.1 Indian Biotech industry The department of biotechnology (DBT) is planning to set up the National Biotechnology Regulatory Board to specify and regulate development of drugs and vaccines from natural sources such as humans, animals or micro-organism, a DBT official said. The board is being set up to distinguish between biologics and chemical based pharmaceutical products. Biologics are medicines and therapies developed from organic molecules derived from plants, proteins, tissues and cells. At present, both pharmaceutical products and biologics are regulated by the Drug Controller General of India (DCGI). The central drug quality regulator gives pre-clinical approvals for experimenting and developing both types of drugs. Domestic biotech companies such as Biocon, Wockhardt and Panacea Biotech manufacture biologics such as insulins, monoclonal antibody products and vaccines. Biotechnology is an emerging sector and should have a proper regulatory mechanism in place; The new guidelines will apply only up to the pre-clinical stage and not on the clinical trial. Pre-clinical trial is the stage of developing a new drug or a therapy before it is tested in humans. A clinical trial involves humans while testing effects of a new medicine. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 36
  37. 37. Healthcare & Life Sciences The proposed guidelines will be issued on aspects such as toxicology, feasibility and safety of the medicine during the pre-clinical stage and before forwarding the applications to the DCGI. Indian pharmaceutical companies are targeting to tap the $65-billion global biotech drug market. The department is also in discussion with the industry and other stakeholders regarding setting up a separate regulatory board and framing new guidelines for biologics. 4.2 Regulations for Hospitals In India, hospitals are accredited by the National Accreditation Board for Hospitals and Healthcare providers (NABH) which is a constituent board of Quality Council of India. This organization has been setup to cater to the needs of consumers and to set benchmarks for the progress of the health industry. The objectives of NABH accreditation are manifold: - hospital operations are based on sound principles of system based organization - NABH standards are implemented and institutionalized into hospital functioning - Patient safety and quality of care, as core values, are established and owned by management and staff in all functions at all levels - There is a structured quality improvement programme based on continuous monitoring of patient care services The accreditation process for hospitals has been summarized below: Step 1: Obtain a copy of NABH standards Step 2: Carry out self assessment on status of compliance with NABH standards Step 3: Identify gap areas and prepare action plan to bridge the gaps Step 4: Ensure that NABH standards are implemented and integrated with hospital functioning Step 5: Obtain copy and submit application form for assessment Step 6: Pay the accreditation fee Step 7: Receive from NABH the assessment programme including dates and names of assessors Step 8: Facilitate the assessment Step 9: Receive recommendation on accreditation Step 10: Maintain quality improvement programme based on continuous monitoring of patient care services Apart from the NABH standard, Indian hospitals can also opt for ―The Joint Commission International‖ accreditation. JCI is an international offshoot of ―The Joint Commission‖ which is a US based, non profit, private sector organization whose mission is ―to continuously improve the safety and quality of care provided to the public through the provision of health care accreditation and related services that support performance improvement in health care organizations‖ PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 37
  38. 38. Healthcare & Life Sciences 4.3 Regulations for Medical Devices India has does not currently has functioning medical devices agency. Very few medical devices are required to be registered in India. The pharmaceuticals regulatory body, the Central Drug Standards Control Organization, created in the 1940s, handles much of the device policy. Pharma products and medical devices are totally different. Double-blind clinical trials required for pharmaceutical products would be inappropriate for a medical device and that some medical devices require education and services that pharmaceuticals do not. The government of India is accepting input from manufacturers to help it develop a new medical device regulatory body. Experts suggest that India should regulate medical devices on its own rather than relying on established regulatory bodies like FDA. Copying model would lead to many challenges, including hiring enough qualified people to review medical devices. But there is no doubt that India should adopt regulations consistent with the global marketplace. This would help the device industry within India become more competitive. Consistent and harmonized regulations around the world would reduce costs and facilitate patient access to new technology. 4.4 Regulations for Pharmaceuticals industry Regulations are the requirements and rules imposed by regulatory bodies to ensure that drugs meet safety and quality standards. The Drugs and Cosmetics Act, 1940 (Drugs Act) and the Drugs and Cosmetic Rules, 1945 (Drug Rules) regulate the import, manufacture, distribution and sale of drugs in India. Under the provisions of this Act, the central government appoints the Drugs Technical Advisory Board to advise the central and state governments on technical matters. Under the Drugs and Cosmetics Act, the state authorities are responsible for the regulation of manufacture, sale and distribution of drugs while the central authorities are responsible for the approval of new drugs and clinical trials, laying down the standards for drugs, control over the quality of imported drugs and co-ordination of the activities of state drug control organizations. The Drugs Controller General of India (DCGI) co-ordinates the activities of the state drugs control organization, formulating policies and ensuring uniform implementation of the Drugs Act throughout India. It is also responsible for the approval of licenses of specified categories of drugs such as blood and blood products, I. V. fluids, vaccine and sera. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 38
  39. 39. Healthcare & Life Sciences Indian pharmaceuticals industry is mainly regulated on patents, price and quality Patents Till 2004, the regulatory system in India focused only on process patents. Indian pharmaceutical companies thrived during the process patents regime. Indian companies used to re-engineer the products of global pharmaceutical players and launch them in India, as India did not recognize the product patents. Indian companies gained process chemistry skills, but deemphasized research and development (R&D) for new drug discovery. In January 2005, India complied with the WTO to follow the product patent regime [the sale of re-engineered products (for drugs patented after 1995) is restricted]. However, enterprises which have made significant investment and were producing and marketing the concerned product prior to January 1, 2005 and which continue to manufacture the product covered by the patent on the date of the grant of the patent are protected, and the patentee cannot institute infringement suits against them but would be entitled to receive a reasonable royalty from them. Price The DPCO fixes the ceiling price of some of the APIs and formulations. The APIs and formulations falling under the purview of the legislation are called scheduled drugs and scheduled formulations. The National Pharmaceutical Pricing Authority (NPPA) is responsible for the collection of data and the study of the pricing structure of APIs and formulations, and provides recommendation to the Ministry of Chemicals and Fertilizers. Currently, 74 bulk drugs and formulations thereof are under the price control purview. The proposed pharmaceutical policy 2007 intends to bring 200 essential drugs under the purview of the DPCO. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 39
  40. 40. Healthcare & Life Sciences Pricing of scheduled bulk drugs Scheduled bulk drugs are allowed prices (excluding local taxes) that result in a post-tax return of 14 per cent on net worth (share capital plus free reserves less value of investments not related to the bulk drug business), or a 22 per cent return on capital employed (fixed assets plus working capital). In respect of a new plant, an internal rate of return based on long-term marginal costing is allowed. For a bulk drug produced from the basic stage, a post tax return of 18 per cent on net worth, or a return of 26 per cent on capital employed is allowed. The NPPA sanctions the prices after reviewing the detailed supporting calculations, and only after the approval is sanctioned can the players go ahead with the sales. The sanctioned prices cannot be revised without prior approval. When there is more than one manufacturer of the bulk drug, the maximum sale price is fixed at two-third of the cut off level or weighted average price, depending upon the situation. Pricing of scheduled formulations manufactured in India Scheduled formulations are priced based on the formula: RP = (MC + CC + PM + PC) x (1+ MAPE/100) + ED where, RP: retail price; MC: material cost; CC: conversion cost; PM: packing material; PC: packing charges; MAPE: maximum allowable post-manufacturing expenses; ED: excise duty. MAPE is intended to cover all costs incurred by a manufacturer after packing, i.e., transport, manufacturer’s profit, dealers/retailers profit, etc. As per the current order, MAPE should not exceed 100 per cent. Local taxes are added on at the wholesaler/retailer level and are not part of the retail price as above. Quality No drug can be imported, manufactured, stocked, sold or distributed in India unless it meets the quality standards laid down in the Drugs Act. All the companies have to comply with the Schedule M of the Act which outlines various requirements for the manufacturing of good quality drugs and pharmaceuticals by applying GMP (also referred to as cGMP or current good manufacturing practice). GMP has to be followed for the control and management of manufacturing and quality control testing of drugs. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 40
  41. 41. Healthcare & Life Sciences Part V: Career Options Part VI: Case Studies 6.1 e-Governance projects- Andhra Pradesh In recent years, many different types of e-government projects have been implemented across the developing world. One important application area, especially following the Millennium Development Goals, is the introduction of health information systems to improve the management of health care for development. Despite significant investments in these projects, experience reveals a disjuncture between macro-level policy priorities and micro-level implementation of these programmes. We use a broad conceptualization of evaluation to synthesize priorities at different levels during the implementation of an e-government project—the Health Information Systems Project (HISP) in Andhra Pradesh, India. This enables us to identify important enabling processes and conditions which serve to connect policy and PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 41
  42. 42. Healthcare & Life Sciences implementation priorities. Through this case study one can understand the disjuncture between macro and micro levels. This is what can lead to identification of key enablers. These also serve as opportunities for implementation and process consultants respectively. The overview of health information flow system is as follows: Key enablers are macro policy level: Provision of infrastructure Relevant infrastructure, in the context of this study, refers both to physical (buildings, power supply, electricity connection, roads), and to ICT-related infrastructure (computers and peripherals, vendor support, and people skills to operate the technology). In summary, the disjuncture with respect to infrastructure is summarized as related to: 1. The mismatch between the rhetoric of universal access and the sheer absence of it on the ground. 2. The poor electricity and power situation, which makes fulfilling the vision of universal access even more problematic. 3. The decision to have ―computers for all PHCs‖ without a serious examination of the capacity the clinics had to accept them. 4. Provision of computers without establishing adequate mechanisms for technical support, a problem compounded by the rural settings of the clinics. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 42
  43. 43. Healthcare & Life Sciences Targets, Indicators, and the Associated Mechanisms for Monitoring In the case study described, targets and indicators were formulated and pushed from the state, with almost no participation and inputs from officers at the sub-district level who were finally responsible for the meeting of the targets. Targets were based on a standardized and universal model without taking into account local variations existing among the entities responsible for the targets. These variations were with respect to the population served, the capacity, infrastructure, and location of clinics, and the different disease burdens in regions of the state. Indicators were not reported correctly because there were multiple hierarchies which existed in the system and people were not ready to carry out change in mindset to send in electronic reports but rather still fill in paper reports, so that it would be easy for them to manipulate the information. With respect to taking corrective action, it was found that the most common form of feedback was in the form of a reprimand, with limited focus on trying to understand why poor achievement had taken place. Given the primary focus on the outputs (the figures themselves) rather than on the process (of how the figures come to be), the value of the targets was limited to creating fear of reprimand among the lower levels, and to poor quality data arising due to manipulation. Key Enablers at the Micro Implementation Level Building Relations With Players at Different Levels Over Time An evaluation based on the formal objectives of the project, as set out in state government policy, would present a static analysis of good governance ideals in terms of improvement in the efficiency and management of HIS in AP. Through a study of the process of infrastructure provision and target setting, we understand how such an approach features economic costing of social welfare projects in terms of expenditure incurred and achievement of targets for the incidence of diseases. While structures were put in place for integration at the policy level, the ground-level implementation of these policies depended on trust-building among trainers and users, among users themselves, and among personnel working at the facility level. This was a total failure as people were not ready to co- operate, whether it is with respect to the local workers or the software providers. Capability-Building at the Local Level The evaluation of a development project such as HISP using a ―capabilities‖ approach provides us with another way of improving understanding of the linkages between macro and micro. Studies of ICT projects in developing countries often concentrate on capabilities in terms of whether users have sufficient IT skills to enable optimal utilization of technology. Consequently, insufficient attention is paid to PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 43
  44. 44. Healthcare & Life Sciences other capabilities of individuals—for example, the extent to which they are able to achieve their valued ends. For example, the capability of the DMHO to promote local health management was earlier hampered because of fragmented and vertical data flows between hierarchical levels, with limited feedback even to modify targets that were made irrelevant due to demographic changes or local contingencies. Similarly, the health workers had no freedom to change formats according to what they perceived was relevant or irrelevant data, or to suggest modifications in targets. An attempt was made to change this situation as health workers were asked to make suggestions on data relevancy even in the presence of doctors who were their administrative superiors. The workshops gave an opportunity to view errors in data as part of an experimental process of learning about the complexities of health management issues, rather than as something that needs to be hidden through the massaging of numbers. To conclude, the scope of our article has been to emphasize the disjuncture that often exists between policy directives launched at the macro level and the realities of micro-level implementation, and to propose a framework that addresses both these levels and encourages mutual interaction. Drawing from the literature, we suggested that a broad conceptualization of evaluation provides a useful way of connecting policy and implementation through the identification of crucial enablers at both levels. These enablers are always in a state of flux and need to be carefully studied over time in order to understand how e-government projects can deliver benefits to communities. Finally, on a more positive note, there is now an acknowledgment among some of the senior officials of the health department of the irrelevance of strongly technology-focused policy approaches at the expense of health management. Questions are being raised at various levels about the value of an expensive project like FHIMS for health management, and efforts are being made to evaluate the benefits. 6.2 e-Governance projects- Maharashtra Government-run hospitals in the state of Maharashtra will soon be electronically inter-connected and every patient visiting the hospital will be given a unique health identity number and will have access to his medical history at any hospital across the state. All the 14 government-run medical colleges and 19 affiliates will be linked though integrated software. The move is expected to bring with it transparency in accounts as well as an increase in administrative accountability. Termed as "Hospital Management and Information System (HMIS)", the project was flagged off by the state government's Medical Education and Drugs Department (MEDD) in 2007. PGPM508: Abhishek * Nitin * Arun * Raghu * Swapnil Page 44