Why digital health business models are on the cusp of disrupting the healthcare sector

In the wake of the devastating COVID-19 pandemic, we have all learned to live in an altered universe. Healthcare, in particular, has undergone irreversible changes. From drug discovery to patient care, new and strong business models powered by technology have started to emerge, leading to fundamental shifts in the entire healthcare delivery value chain. What would have happened in 10 years has telescoped into 12 months. Notably, patients have embraced digital healthcare.

At Endiya Partners, we were able to foresee as early as 2015 that inevitable shifts in consumer behaviour towards healthcare would catalyse the emergence of scalable business models that would, in turn, disrupt the healthcare landscape.

Clear business opportunities are emerging in areas such as telepathology, teleradiology, and chronic disease management. These are business models which address pain points at scale and have the potential to become reasonably large businesses globally.

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Non-communicable diseases – an untapped opportunity

Chronic disease management is a particularly compelling opportunity. The United Nations flagged non-communicable diseases or chronic diseases as a global health emergency as far back as 2011. Surprisingly, not much has been done since then. These conditions include diabetes, obesity, hypertension, cardiovascular disorders, cancers, and chronic obstructive lung disorders. All of these are amenable for digital therapies and are large opportunities globally.

Take cancer, for instance. Nearly 90 percent of cancers in India are diagnosed at stages three and four. Patients have to travel to advanced centres in Tier-I cities for treatment. But if we can identify these cancers at stages one or two, we can treat them at hospitals nearer to their homes. Obviously, the cost of treatment will be far less, the results of the treatment will be better, and patients would not have to travel to larger cities and face challenges such as finding accommodation in a new place. Many cancers can be identified at earlier stages through mass screening, including head and neck, thyroid, breast, stomach, and cervix cancers.

That is the problem Karkinos, our most recent investment in digital health, is trying to solve. It is a complete technology play, organising the journey from early screening and diagnosis to treatment and post-treatment, and all the way up to genomics and clinical trials.

Similarly, Sugarfit is addressing the diabetes market. There are roughly 100 million diabetic and prediabetic patients in this country alone. The traditional treatment plan is to go to a doctor once every three months and get the medication changed. Patients hardly consult a dietician or consult someone who guides them daily.

Bridging healthcare gap with technology

If you look at the current market, 90 percent of the specialist pathologists and radiologists are located in Tier I cities. But, 90 percent of the patients don't live in those cities. So how do you bridge the gap? It can only be done by using technology. Luckily, the cost of internet bandwidth is coming down and the reliability of bandwidth is better. That's the problem we are trying to solve.

In addition to building sophisticated telepathology and teleradiology solutions, these companies are building AI solutions as a top layer. Pathology and radiology, in particular, are specialities in healthcare that are very amenable to AI adoption because both of them deal with images.

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Good life sciences startups will emerge soon from India

As we move forward, betting on emerging business models such as chronic disease management, teleradiology and telepathology, we continue to track developments in medical devices and life sciences. We haven’t really done hardware or medical devices investments, but going forward we believe that hardware and software will merge.

Eyestem  is the only bet we have made in life sciences. It’s developing cell therapy to address a rare disorder – age-related macular degeneration. Around 150 million people in this world have this condition and there are only four or five startups globally trying to tackle this problem. There are a couple of them in Japan and a couple of them in the western world, and all of them are roughly at the same stage. Eyestem has completed its animal studies and the initial data looks very promising. Hopefully, we'll be in human clinical trials in nine to 12 months.

But, we believe that it is still a bit early for life sciences investments in India. The talent is available. But what is more important is the development of the entire ecosystem. In addition to the scientific talent, we need expertise in regulatory affairs, commercialisation capabilities of new technologies around the globe and investors with the right risk appetite. However, we believe that in five years, maybe ten, good life sciences startups will emerge from India.

Ayushman Bharat – a move in the right direction

While COVID-19 has accelerated the adoption of digital health, there are a few obstacles. Patients have embraced it. The bottleneck is the providers. Hospitals and doctors are resistant to accepting the change. But that’s also changing fast. In teleradiology and telepathology, for example, it’s a B2B business. While the end-user, like radiologists and pathologists, may be impressed with the solution, the decision-maker is not the end-user but a hospital administrator and their priorities may be different. That said, these are not insurmountable problems.

What’s encouraging is the impetus that digital health is receiving from the government. The Ayushman Bharat Digital Mission (ABDM) aims to develop the backbone necessary to support the integrated digital health infrastructure of the country. It is a move in the right direction.

Right now, the government is going with a softer approach and making it voluntary for providers and patients to register. At some point a carrot-and-stick approach is necessary. The real benefit will occur when every provider, whether it's an individual doctor or a laboratory, or a pharmacy, or a hospital, registers themselves and provides a digital record to the patient which is linked to the patients' unique ID.

What is not clear at this time, is how startups can make a compelling business proposition in this space. But once it picks up momentum, those opportunities will emerge as well.