A few learnings in Indian healthcare

In every industry I’ve dipped my toes in, there have always been those first set of ‘aha’ moments that have fascinated and humbled me, reminding me of Plato’s famous quote – ‘I know that I know nothing’.

In education, for instance, despite near-universal school access, learning outcomes are so poor that most grade 5 children cannot read at grade 2 level. In financial services, despite increased digitization, only 5% of Indians own a credit card. Everyone who operates in the thick of these industries understands these stats well, but outsiders are almost always taken aback when they hear some of this.

So too in healthcare. Having spent the last two years in healthcare investing, I’ve been amazed at how little I knew about the space and, much like in financial services or education, that there’s so much more to reality than meets the eye.

1.???? Healthcare in India is small and fragmented

Indian healthcare’s total market size is only $350-400B dollars. Compare this to US healthcare which is 10x this size at $4T (or the size of India’s entire GDP!). Organized hospital chains (the likes of Apollo, Fortis, Manipal etc) are only 5% of the overall hospital market in India. Similarly, the top 5 players across services like diagnostic chains, pharmacies etc. account for only <10% of the market share resulting in highly fragmented supply chains and variable quality of care.

2.???? Despite being the last port of call, hospitals account for ~80% of private healthcare funding

While tertiary care infrastructure is important as India catches up to global standards in bed capacity (1.3 beds per 10K in India vs 3 globally), primary care (similar to early childhood education) can have a larger and outsized impact on long-term health outcomes. However, while speciality hospitals have scaled driven by a well-understood, high ROI business model, primary care has not.

3.???? 300M+ Indians have no health insurance coverage of any kind

Indians are both uninsured and underinsured. Private insurance (group + retail) covers 210M lives while government insurance and social schemes cumulatively cover ~800M lives leaving a gap of 300M+ lives uncovered. While some of the gap will undoubtedly be narrowed, 50% of healthcare spend is still out of pocket (vs. 20% in developed countries) with a large chunk of the population just one medical bill away from financial calamity.

4.???? Only 8-10M people have active gym memberships

Contrary to what we probably see in our social networks (read: bubbles), few Indians care for or have time for physical health - arguably the biggest and most evidence-based preventive hack for good health outcomes. It's not surprising then that 1 in 3 Indians run the risk of metabolic disease and 200M are diabetic/ pre-diabetic. Until the trend in physical activity increases dramatically, newer ‘downstream’ trends like wellness or mental health will remain niche.

5.???? Besides their role as healthcare professionals, doctors are also an important revenue ‘channel’ for the health ecosystem

Growing up, I saw doctors disproportionately revered for their role in ameliorating pain and disease. Doctors play an outsized role (prescribing medicine to referring to diagnostic centres or hospitals) in determining a patient’s course of action. Naturally (but surprisingly), they are also courted by an entire fleet of salesforce for their role as a ‘revenue channel’. In fact, freebies and benefits from pharma companies alone can add up to 10-12% of annual income for top doctors.

6.???? Most medicines are commodities but sold as brands

Branded medicines - those marketed and sold via doctors – are 70% of medicines sold in India. However, there is an entire class of trade generic medicines – sold directly via pharmacies that are 40-80% cheaper than branded ones but with the same chemical composition. Given that these are not marketed, their price excludes any promotion costs. Customers are wary of generics (anything not prescribed by their docs) and continue buying expensive, branded medicines, further increasing the cost of care.