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Affordability Through Sustainability


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This presentation was given by Bala S Manian at the American Association of Clinical Chemistry Meeting 2008

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Affordability Through Sustainability

  1. 1. Changing the Design Paradigm. Affordability and Access through sustainability. Bala Manian, PhD. ReaMetrix Inc. San Carlos, CA
  2. 2. What is the context of my talk? <ul><li>“You can only be as objective as your subjectivity will permit you to be objective”. </li></ul><ul><li>We are all but a prisoner in our thought process and to our own perceptions of the world. </li></ul><ul><li>Why is this relevant here? Why is it necessary to “think” differently? </li></ul><ul><li>Defining local unmet need requires feet on the “local” ground. </li></ul><ul><li>Forget my successful experiences of 35 years in “silicon valley”. This talk covers my experiences over the last five years from Bangalore, India. </li></ul>
  3. 3. Why & how do we need to look at this differently? <ul><li>Past approaches have not succeeded in addressing unmet needs of the resource poor settings. </li></ul><ul><li>For every isolated local success story, there are many more unmitigated disasters. </li></ul><ul><ul><li>Too many false expectations. </li></ul></ul><ul><ul><li>Wasted valuable resources. </li></ul></ul><ul><li>Addressing Global public health in resource poor settings is also about tackling local economic activity. </li></ul><ul><li>Solution rendered has to be at economically sustainable. Or else it will remain forever a charitable endeavor. </li></ul>
  4. 4. Diagnostics – A case study <ul><li>Hypothesis - Manufacturing locally reagents used in diagnostics can help reduce the cost. </li></ul><ul><li>Focus on labor cost arbitrage or to use that advantage and create sustainable value. </li></ul><ul><li>In the US, the cost of labor is high. </li></ul><ul><ul><li>Less incentive to optimize material yield </li></ul></ul><ul><ul><li>No IRR for expenditure of labor resources . </li></ul></ul><ul><li>When labor cost arbitrage is used to increase material yield significantly, it can create sustainable value. </li></ul>
  5. 5. Example - CD4/CD8 Reagents <ul><li>For the measurement of immune system T-Cells </li></ul><ul><li>The assay is composed of detection antibodies whose specificities are workshop approved. </li></ul><ul><li>The assay runs any open flow cytometer </li></ul><ul><li>Reference beads provide absolute counts from single platform. </li></ul><ul><li>Versions of kits report Abs CD4, %CD4, Abs CD3, Abs CD8, CD4/CD8 ratio, Tot LYM and WBC </li></ul><ul><li>Results using these reagents are accurate and reproducible. </li></ul><ul><li>Test results have demonstrated equivalence to FDA cleared commercial assays. </li></ul><ul><li>Focus on process improvements has increased material yield by an average of 400%. </li></ul>
  6. 6. Measurement of Absolute CD4+ and CD8+ T cell counts using Tri T-STAT 1. Identification of CD3+ T-Cells 2. Enumeration of volume metering beads 3. CD4+ & CD8+ T-Cell counts derived from the CD3+ T-Cell population  CD8 + T-Cells  CD4+ T-Cells
  7. 7. Correlation of Tri T STAT with accepted standards
  8. 8. Tri T-STAT Proven Reproducibility Cell Type Level Mean SD CV (%) CD4+CD3+ T cells High 936 18 1.9 Medium 461 19 4.1 Low 168 7 4.3 CD8+CD3+ T cells High 721 14 2.0 Medium 486 14 2.8 Low 243 11 4.5
  9. 9. How do we define resource poor setting? <ul><li>Is it on the basis of economics or on the basis of the availability of infra-structure? </li></ul><ul><li>Or we designing for the lowest common denominator? </li></ul><ul><li>Are we designing assay measurement protocols on the availability of trained personnel or personnel who can be easily trained? </li></ul><ul><li>Can we really assume one solution fits all resource poor settings? </li></ul>
  10. 10. Does India represent Resource poor setting?
  11. 11. What is the existing paradigm? <ul><li>The most of the solutions conceived today are habitually western model centric. </li></ul><ul><li>Often the emphasis is on technology as the key driver. </li></ul><ul><li>The “modus operanda”: </li></ul><ul><ul><li>Engineer solution in resource rich settings. </li></ul></ul><ul><ul><li>Deliver to the resource poor settings. </li></ul></ul><ul><ul><li>Like giving the “fish to fisherman”. </li></ul></ul><ul><li>Local macroeconomics where design is done do influence design decisions. </li></ul><ul><li>These often lead to unpleasant surprises when and where the solutions are deployed. </li></ul>
  12. 12. What is wrong in this picture? <ul><li>There is no focus on local economic participation as a key component in design criteria. </li></ul><ul><li>This is difficult to internalize, in an environment of a “third party reimbursement” culture. </li></ul><ul><li>Seldom, there is an awareness of tailoring of technology development to favor local economic value addition. </li></ul><ul><li>There is also an absence of an understanding of the influence of local economic constraints during design or in deployment. </li></ul><ul><li>Incorporating a local economic stake is the only way to build “successful” and economically sustainable solutions. </li></ul>
  13. 13. How to frame the big picture? <ul><li>Diagnostics is an important component in disease management. </li></ul><ul><li>Diagnostics is not just about diagnosing “illness” but it has to be also about maintaining “wellness”. </li></ul><ul><li>It is all about “information” and diagnostics is an information business. </li></ul><ul><li>Information is generated to help the physician (and in some cases the patients) make better clinical decisions. </li></ul><ul><li>What matters is the cost per unit of information and the local macro-economic environment to support that cost sustainably. </li></ul>
  14. 14. Anatomy of the Cost of Goods Sold (COGS) <ul><li>Many components contribute to the costs per unit of information generated. </li></ul><ul><ul><li>Cost of patient transport to blood collection center. </li></ul></ul><ul><ul><li>Cost of the acquisition of the sample. </li></ul></ul><ul><ul><li>Cost of the transportation of the sample. </li></ul></ul><ul><ul><li>Cost of processing of the sample – Tech labor + assay reagent costs. </li></ul></ul><ul><ul><li>Amortization Cost of the capital equipment investment. </li></ul></ul><ul><ul><li>Laboratory infra-structure overhead cost. </li></ul></ul><ul><ul><li>Distribution, field service & support, etc, etc. </li></ul></ul>
  15. 15. How the costs are influenced? <ul><li>In most developed countries, because of the infra-structure advantages, there is a natural and organic aggregation of samples. </li></ul><ul><li>During development, macroeconomic factors prevailing in those countries such as labor costs, transportation costs etc do influence key design decisions. </li></ul><ul><li>Macroeconomic impact on product design decisions and process developments can be subtle and indirect. </li></ul><ul><li>Design criteria optimized for one environment may not be the right solution for another. </li></ul>
  16. 16. Different priorities in different environments <ul><li>In the developed countries: </li></ul><ul><ul><li>Labor costs dominate the COGS. </li></ul></ul><ul><ul><li>The emphasis is on reduction of labor both in manufacturing and in process. </li></ul></ul><ul><ul><li>Material conservation is not often a priority because it takes high labor cost for realization. </li></ul></ul><ul><li>In the resource-poor countries: </li></ul><ul><ul><li>Material costs dominate the COGS. </li></ul></ul><ul><ul><li>The Labor cost is low but how does use that cost arbitrage to impact high material costs? </li></ul></ul><ul><ul><li>The priority has to be on material cost reduction – more of the raw material has to end up in finished goods – this is sustainable in the long run. </li></ul></ul><ul><ul><li>Reliance on the utilization of labor demands innovation. </li></ul></ul><ul><ul><li>It is required to minimize human “error” which is by-passed in the developed countries by eliminating or minimizing labor. </li></ul></ul>
  17. 17. How to change the paradigm? <ul><li>Import the science but the implementation of that science locally has to be started from a clean slate. </li></ul><ul><li>Define “the affordability index” in the context of local macroeconomic environment. Affordability index does not necessarily mean always lowest cost solutions. </li></ul><ul><li>Affordability index drives the appropriate technology that can deliver the good and services within the affordability index. </li></ul><ul><li>The demand at the “bottom of the pyramid” then drives the cost economics. </li></ul><ul><li>However, local economic participation is what assures long term economic sustainability. </li></ul>
  18. 18. Dry Reagents <ul><li>In places like India, cold chain transportation costs can be higher than the cost of reagents. </li></ul><ul><li>Dried reagents stable at room temperature (up to 45deg C) can have huge impact. </li></ul><ul><li>Such a development can: </li></ul><ul><ul><li>Drive transportation and storage costs down. </li></ul></ul><ul><ul><li>Opportunities to explore new business models for local economic value add. </li></ul></ul>
  19. 19. Sample collection & centralized processing <ul><li>There is a huge problem in timely and temperate transportation of blood samples from remote areas to centralized testing centers. </li></ul><ul><li>Because of poor infra-structures and long distances, this results in “aged” blood samples (> 48 hrs) that are unusable. </li></ul><ul><li>To solve this problem, enormous effort & resources have been spent of ways to stabilize the blood sample. </li></ul><ul><li>However, with dry reagents, it became possible that blood can be collected, stained and fixed at the point of collection before being shipped to a central testing facility to add value at the local level. </li></ul><ul><li>Through serendipity, it was discovered that after processing and fixing the blood sample, it can be stored for up to 8 days without any significant difference in CD4/CD8 counts. </li></ul>
  20. 20. Post fixation stability of blood sample
  21. 21. Unintended benefits derived from dry reagents <ul><li>Unitized test – reduces human error. </li></ul><ul><li>Distributed value addition in sample processing – creating local economic activity. </li></ul><ul><li>With the sample coming into the central lab ready to be run, the throughput per machine increases dramatically. </li></ul><ul><li>Capital investment tied up on the expensive flow system amortizes much faster – lower cost to patient. </li></ul><ul><li>Longer shelf life of the reagent (>12 months at room temperature). </li></ul><ul><li>Thinking differently does offer its rewards </li></ul>
  22. 22. What lessons are to be learned? <ul><li>As stated before, ReaMetrix as a company, has been able to translate these concepts to diagnostic solution development in India. </li></ul><ul><li>Five fold cost reduction in COGS by focusing on improving material yield of Antibody used in assay KIT formulation. </li></ul><ul><li>Elimination of cold chain for transportation & storage – allowing the development new business models in distribution. </li></ul><ul><li>Development of multi-purpose hardware platforms designed for easy deployment and local service & support. </li></ul><ul><li>It is all about creating the ethos and the ecosystem to drive entrepreneurial solutions that are economically sustainable. </li></ul>
  23. 23. Thinking differently about Healthcare Delivery ( Work being carried out by HAP (
  24. 24. Saantwanam A health screening project Kerala (India) <ul><li>Fighting life style diseases – A novel project by HAP, Kumbashree & State Bank of India. </li></ul><ul><li>Objectives - Screening for Diabetes mellitus, obesity, hypertension and growth retardation. </li></ul><ul><li>Referral to physician & health education. </li></ul><ul><li>Strategy – rely on locally recruited and trained young women with high school education but from poor families and deploy them in an entrepreneurial business model to accomplish the objective. </li></ul>
  25. 25. A Training Session
  26. 26. The first batch
  27. 28. The Investment <ul><li>Measuring equipment 15000 </li></ul><ul><li>Motor Cycle 29000 </li></ul><ul><li>Mobile phone 2500 </li></ul><ul><li>Preliminary expenses 3500 </li></ul><ul><li>Total 50000 </li></ul><ul><li>Rs 7500/- is given as subsidy by the government </li></ul>Item Cost [Rs]
  28. 29. <ul><li>EMI against loan 1800 </li></ul><ul><li>Fuel charges 750 </li></ul><ul><li>Telephone charges 500 </li></ul><ul><li>Consumables 3000 </li></ul><ul><li>Total 6050 </li></ul>10 glucose estimations 250 15 blood pressure 150 10 BMI 50 Average income/day 450 Total per month 1250 Net income anticipated - over Rs 5000 per month Over 150 care givers servicing 200K screens/ year 20% earning over Rs. 10,000 per month. Expense Income
  29. 30. What questions that arise from this observation? <ul><li>What more can be done using this model of healthcare delivery? </li></ul><ul><li>How to empower these young women to move up the value chain? </li></ul><ul><li>How to bring other parts of healthy living as an economic part of this healthcare delivery? </li></ul><ul><li>If one believe that compelling self interest is the biggest factor in compliance enforcement, how to bring about financial incentives to shift the focus from illness to maintenance of wellness? </li></ul>
  30. 31. In summary… <ul><li>One has to look at “diagnostic information generation” holistically, not just as a set of assay reagents and hardware platforms. </li></ul><ul><li>Addressing “the economics” problem innovatively, will lead to sustainable solutions. </li></ul><ul><li>“ Import the science” but not the implementation of the science – great to think globally but sustainable innovation is all local. </li></ul><ul><li>Rather than just focusing on cost arbitrage, use cost arbitrage to generate sustainable value arbitrage. </li></ul><ul><li>Using this model, one can not only address the unmet needs in resource-poor settings but change the way diagnostic information is delivered globally. </li></ul>