The pandemic has placed a huge strain on public health infrastructure globally, underscoring the need for private capital-driven interventions in health and insurance.
Going forward, the sector is likely to witness an increase in investments in earlier stage companies that address some of the industry’s issues, says Seemant Jauhari, managing partner at healthcare-dedicated VC fund HealthXCapital.
He said, “The early stage was and remains undercapitalised. The risk has made investors look towards the later stage.”
However, there are signs that a change is underway. He said, “Bigger investors have come in to conquer the whole stage. Sequoia with Surge, and Accel with its pre-seed fund Atoms, are getting in earlier and therefore, finding the good companies.”
Jauhari was the keynote speaker at DealStreetAsia’s most recent webinar ‘Reshaping Healthcare with Fintech for the Emerging Middle Class in Asia’ sponsored by Milvik Bima.
In conversation with DealStreetAsia’s Joji Philip, Jauhari pointed to the yawning gap that existed between the needs of the region and the resources being deployed to meet these requirements. One of the main reasons for the sluggish adoption had been the mindset in the region which has only recently been shaken by the pandemic, he added, “Telemedicine, online pharmacies and virtual consultations have all been around – in some cases for over a decade – but they’ve existed at the fringes.”
Emphasising that new startups which aim to disrupt the space should collaborate with the incumbents, he said, “Both have to coexist. Startups need hospitals for scale, complicated cases and to have a care continuum. Whereas, hospitals need startups to ensure that a patient actually gets end-to-end care which is more efficient and effective.”
Here is a video link to the session and a transcript edited for brevity and clarity
You had said that the pandemic added fuel to the fire in terms of investments in healthtech. But what has really changed across Southeast Asia and South Asia?
The greatest impact has been on mindset — the biggest challenge for digital health in this region. For instance, telemedicine has been there for about 15 to 20 years, but existed on the fringes, with adoption rates of maybe 5% to 7%. The pandemic left people with no choice but to go in for a safer and more efficient option. Even online pharmacies and virtual consults — all in different stages of maturity — were accelerated. There are differences across markets. In India, healthtech was a little ahead, because of the speedy adoption of other tech companies.
The other big change was with regulators. Normally, a regulator plays catch up to what an innovator brings in. But in this case, they had to move faster and be more progressive.
Finally, there was obviously caution in terms of investing. But it had more to do with the stage of funding than liquidity.
If you consider the funding boom, we have over 50 unicorns across Southeast Asia and India and even some decacorns. Why hasn’t healthtech scaled to the same extent?
As a healthcare supporter, I have always wondered why this is the case. The reality lies in the systemic inertia within healthcare, given its dependence on multiple variables — far greater when compared to other technology scale-outs.
For this to scale, you need clinicians to adopt, patients to change behaviour, hospitals and even insurance to fall in line. It takes time to line these ducks in a row, before a startup can actually benefit the consumer.
But now, the seeds have been sown. The next 3-5 years are very crucial for Southeast Asia and India, for such digital health startups to actually flower.
With telemedicine and online pharmacy, will startups play a big role or will they cede ground to incumbents who are trying to be digital first?
Startups have a bigger role to play in bringing to fore innovations that induce change and transformation. They demonstrate the feasibility of an idea, both commercially and even clinically.
That essentially puts the incumbent providers in a corner. They are pushed into changing themselves. Apollo Hospitals in India is coming out with Apollo 24/7: a completely integrated digital interface that’s almost like a virtual hospital. It’s now a mainstay of the group, which had not done something like this in 37 years of its existence.
Parkway Hospitals has a $100 million internal fund, investing in technology, including patient engagement, care navigation, AI chatbots and analytics for imaging — more productive systems with better accuracy.
This is happening since traditional hospitals have no option other than to compete with startups. Having said that, both have to coexist. Startups need hospitals for scale, complicated cases and to have a care continuum. Whereas, hospitals need startups to ensure that a patient actually gets end to end care which is more efficient and effective.
As an investor, what are the major trends that you’re seeing in the healthtech space?
The disproportionate gap when it comes to resource and infrastructure cannot be resolved organically. It has to be disrupted by technology. We need to make a doctor the equivalent of 10 doctors. We will see many scale-out aggregators or marketplace models, which will drive efficiencies, helping with access and in some cases, affordability. There are a number of these in the region: Halodoc in Indonesia, Doctor Anywhere in Singapore and PharmEasy in India. They are dependent on a new generation who have access to smartphones and the internet. Placing healthcare on these platforms will improve the number of scale-outs and result in a virtual reach out to several needy patients.
The second trend is around data. Barring developed Asia, a large part of data has traditionally been on paper in this region. Some of it has been captured, but the quality is compromised. With electronic medical record systems in place, Asia has a lot of data that you can work wonders with, if you capture it. However, the growth of data, AI and IP driven startups will be challenged in the immediate future. We will see these firms head to the US for a more immediate and larger market. There, they can work on predictive analytics or chronic disease management platforms. Maybe they will continue the Asian operation, but it will be secondary. Once they get credibility in the US and are stable — from a capital raise, revenue and performance point of view — they will return and start scaling.
The early stage was and remains undercapitalised. The risk has made investors look towards the later stage. That said, bigger investors have come in to conquer the whole stage. Sequoia with Surge, and Accel with its pre-seed fund Atoms, are getting in earlier and therefore find the good companies.
How are fintech and insurtech being integrated into healthtech?
In fintech, it is about creating innovative models to make healthcare more accessible. But these models are nascent.
The other aspect is customised insurance plans. From broking to third party administrators (TPAs) to managing general agents, the insurance industry is setting up for disruption. There are multiple players on the provider and consumer side. They are trying to move people on to a chronic disease management platform, or taking them to their insurance in a seamless fashion, reducing the claimed amounts or making central procurements from pharmacies.
Models are coming in that offer a digital health platform with doctors who probably do not prescribe at all, or may prescribe low and more relevant drugs. And if they do, they can access drugs which are centrally procured at 50% margin as compared to 300% margins which the clinics charge in Singapore.
There are companies going in for smarter, faster TPAs, reduction in claims, and more profitable products in insurance itself, which are either dynamically priced or incentivise behavioural change in consumers. It is to make the overall product profitable, but then it also pushes the consumer to be healthier, and therefore makes healthcare more affordable.
Speaking of making consumers healthier, while sticking to fintech and insurtech — when will Asia see embedded insurance and smart technologies being used to offer customers discounts according to their behaviour?
The basis of offering dynamic pricing to consumers lies in the ability to secure relevant data, analyse it and apply insights towards personalisation. Currently, the biggest challenge is to capture and mine relevant data. Several digital health companies are in the fray to address this challenge so as to enable a more efficient healthcare insurance ecosystem.
Smart technologies are emerging that enable the creation of more profitable products; automating and identifying fraud/abuse and smarter and faster TPA systems.
This not only reduces the cost to an insurer via reduced claims but also reduces the cost for the consumer eventually. Another part of the digital health ecosystem is directly going B2C. It involves enabling a more seamless journey for consumers whilst ensuring reduced cost, making healthcare more affordable. This space is nascent and will take another 3-5 years to witness maturity but the wave has begun and is one to watch out for.
There have been discussions about Walmart, Amazon and Google (Alphabet), among others, reshaping healthtech. For the region, can the SEA Group, Grab, GoTo or Flipkart play such a role?
Reshaping health needs data flowing across a real care continuum. Securing clean and curated data largely lies with the consumer or the provider whilst mining and monetising the data is something that technology majors are experienced in. Therefore, we need the providers, consumers and tech majors to join hands. Unfortunately, in the current situation, there is little meeting of minds.
In many cases, each one believes they can achieve a desired objective independently. This space requires large and long-term collaborations or even business partnerships between the above categories to create real value.
This mindset change has begun but in a very sporadic and fragmented way. A significant change where we see a data enabled service delivery and interoperability can probably be expected in the next 5-10 years, starting with developed Asia followed by the rest.
For healthtech to thrive, talent — especially in AI, ML, IoT — is crucial. But the best engineering and product talent are still attracted to software or SaaS. How can we get them to healthtech?
Great talent needs a strong demand. The career must be attractive to an individual and that is correlated to maturity of the industry, success stories of healthtech startups in the region, educational programmes, government support for the ecosystem and, of course, adequate capital to ensure growth.
Finally, an audience question on mental health startups. In terms of growth and fundraising, is it in line with what you expected or much lower?
Mental health has certain connotations that vary across geographies. It started far earlier in the US and so is treated with more maturity.
Arguably in Asia we are still going through the pains of accepting mental health issues. It is only after acceptance that we can go to the next stage of treatment and management.
However, the pandemic has pushed it in the right direction by triggering stress and mental health issues. Plus, there’s the silver economy to be considered. We have 60% of the world’s population here, and 1/4th of them are over 60. But a longer life doesn’t necessarily mean a healthy one. A lot of them will have mental health issues, and we need to be ready to cope. There is scope, but it will happen over the next 5 to 10 years, or by getting companies from the west to deploy and scale out here.