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2016 REPORT

Emerging markets: transforming global surgical care by 2030

A workshop by Cambridge ConsultantsGlobal surgical care is at risk of diverging paths. In developed markets, rising healthcare costs, stringent regulations, and market saturation threaten product innovation and industry growth. Emerging markets, with more than two billion underserved patients, offer unprecedented growth opportunity. But currently, inadequate hospital infrastructure, a scarcity of qualified clinicians, and fragmented care pathways prevent delivery of affordable quality surgical care.

Against these dynamics, Cambridge Consultants recently hosted a thought leadership workshop for senior leaders in the surgical device industry, focused on emerging markets innovation. The workshop charter was to envision how the rise of emerging markets will impact the global landscape of surgical care by the year 2030.

Workshop delegates represented a wide spectrum of backgrounds in global leadership roles across research and development (R&D), strategic marketing, clinical affairs, and operations, hailing from multinational companies (MNCs), dynamic start-ups, and hospitals. Many delegates had deep experience operating out of China, India, Southeast Asia, Latin America, the Middle East, and Sub-Saharan Africa.

Our delegates envisioned a number of fascinating trends in surgical care to expect by the year 2030. This report summarizes the collective vision formulated during our workshop. It offers unique insight into the future of emerging markets surgical care, as seen through the eyes of industry leaders.

We are grateful to our delegates for investing significant time and effort to participate and share their insights. We are also grateful to our guest speaker Timothy Prestero, CEO of Design that Matters, a non-profit organization focused on newborn care in emerging markets, who gave an inspirational and thought-provoking presentation to launch our event.

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Emerging markets: transforming global surgical care by 2030 REPORT

Participants

Agustin Zabulanes Boston Scientific

Bethany Grant Johnson and Johnson

Bryce Klontz New View Surgical

Cliff Emmons Medtronic

Harsh Bakshi Smith & Nephew

Jocelyn Petersen Ansell Medical

Kristin King Ansell Medical

Lisa Faber Ginggen Sanofi Biosurgery

Michael Steer Partners in Health

Patrick McCullough Olympus Medical

Peter Hansen PNP Research Corporation

Peter Traianou Emerging Health Connections

Petro Arvanitis Independent

Ralf Dittmann Draegerwerk

Ravi Attri Becton Dickinson

Ravi Ramamurti Northeastern University

Robert Kenney Philips Healthcare

Subhrangshu Datta EMD Serono

Yongji Fu Hill-Rom

Hosts

Rahul Sathe

Ambuj Jain

Vaishali Kamat

Serge Roux

Ashley Whitney

Maureen Halligan

Karen Unterman

John Genova

Patrick Pordage

Darina Cotterill

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Emerging markets: transforming global surgical care by 2030REPORT

Transformational opportunity

The surgical device industry faces the duality of achieving sustainable emerging market growth while maintaining developed market success. Selling Western products into top-tier emerging markets will no longer be a winning strategy as hospital ecosystems across these territories evolve, patient consumerism rises, and there is increasing domestic competition. Mid-tier and rural markets are demanding tailored products, technologies, and services that address their unique unmet needs. Companies must rethink their global strategy and approach to innovation or risk stagnation in a changing landscape.

The term ‘emerging markets’ encompasses a broad range of geographies and economies, ranging from China and India to countries in the Middle East, Latin America, Southeast Asia, and Sub-Saharan Africa. Recognizing each emerging market is unique and complex, our workshop focused on common themes and trends across geographies as they

pertain to market dynamics, industry trends, and innovation and technology. The scope of the workshop examined the continuum of surgical care, from patient diagnosis to surgery in the operating theater to postoperative care and follow up. This made for interesting debate from delegates, whose organizations covered a wide spectrum of clinical and technology segments, ranging from general surgery, endoscopy, and orthopedics to field diagnostics, patient monitoring, and anesthesia.

This report presents the collective findings and insights from our workshop and offers a vision for the future of surgical care in emerging markets. Following the structure of our workshop, the first half of this report summarizes our delegates’ views on market transformation by envisioning patient expectations, clinical teams, hospital evolution, and healthcare value in 2030. The latter half focuses on how industry could address the future market of 2030, examining business models, innovation models, the role of technology, and the impact of emerging markets on global surgical care.

PRINCIPAL CONCLUSIONS

� By 2030, emerging market hospitals will achieve significant mid-tier and rural growth via new hospital construction, expansion, and partnerships. The ‘hub-and-spoke’ model – large hospitals networked with local clinics – will proliferate to treat mass patient populations. Patients’ expectations will radically change – they will expect minimally invasive and outpatient procedures, with a fast return to everyday life. They will also expect early diagnostics, patient education, and post-surgical appointments to be mobile.

� Conventional business models will not win in emerging markets. Successful global companies will evolve business strategy and product portfolios tailored specifically for emerging market healthcare ecosystems. New service offerings and pay-for-use models will allow companies to capitalize on large patient volume to drive revenue and profitability.

� Collaborative partnerships with hospitals, non-profits, and local domestic companies will allow global players to reach mass populations of customers in an unprecedented manner. Companies that go it alone risk weakening their global position.

� Technology will play a crucial role in unlocking access to patient care. New sensors, mobile technology,

connected ecosystems, and cloud-based software will enable advanced functionality to become affordable. Surgical teams will seek products and services that are easy to train on, use, and maintain, and increase throughput and efficiency of surgical procedures.

� The opportunity for digital health disruption is great in emerging markets – infrastructure and regulations are not long-standing legacy, offering a lower barrier to innovation. Digital health technology will enable earlier diagnosis and outcomes tracking where it was previously not possible.

� Emerging market healthcare policy, insurance, and regulations will wield greater influence over hospitals and clinical practice over the next 15 years. A consortium of leading multinational companies will be needed to collaborate with these stakeholders to ensure healthcare ecosystems mature sustainably.

� Reverse innovation will shape developed markets healthcare to improve affordability and efficiency. As industry succeeds in emerging markets, new business and innovation models, evolving design thinking, and new approaches to healthcare will extend beyond emerging markets to disrupt and transform how affordable quality surgical care is delivered globally.

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Patients of 2030

A new consumer

More than 85% of the world’s population lives in emerging markets, yet many of these people have no access to affordable quality healthcare, particularly complex treatment like surgery. Inadequate hospital infrastructure, a scarcity of qualified clinicians, and fragmented healthcare ecosystems prevent successful surgical care. The surgical device industry has unprecedented growth opportunity to address the unmet needs of very large patient populations.

But who exactly are the emerging markets patients of 2030?

Unlike developed markets, where the middle class dominates demographics, many emerging markets have mass populations with low income. Classically, most emerging

market demographics take the shape of a pyramid. Wealthy patients comprise the top of the pyramid, representing 10-15% of a country’s population, with middle class comprising 20-25%, and mass population consisting of 60-70%. The pyramid shape changes from country to country – China is quite different from India and from Nigeria. But many healthcare systems and hospitals exist in tiered ecosystems to address stratified demographics.

In 2030, our delegates predict the pyramid shape will undoubtedly get steeper. Mass populations are shifting toward middle class via urbanization, increased buying power, and improved education. In particular, patients at the bottom of the pyramid will greatly benefit from mobile information access, improved government policy and microfinance, and the rise of health insurance.

With demographic shifts by 2030, our delegates expect the landscape of disease incidence and prevalence to shift from acute surgical intervention to treating chronic disease and associated comorbidities. Acute diseases are not to be ignored as they will continue to grow across all demographic segments – stove burns, motorbike accidents, and trauma will continue. But chronic disease incidence and prevalence such as cardiovascular, diabetic, metabolic, oncological, and orthopedic procedures are growing rampantly. The healthcare cost burden will shift industry’s investment focus to chronic disease and the acute presentation of comorbidities.

Rising expectations

As a new demographic of patients arises, so will their expectations. In 2030, patients will expect to engage their hospitals for surgical care in vastly different ways than today. Patients will expect diagnostics, early assessments, and information to be mobile. Engaging physicians via telemedicine will be commonplace across all tiers of the pyramid – patients will opt to engage with ‘hospital.com’ rather than the front desk. While patients will continue to travel to hospitals for surgical procedures, they will expect follow-up to be mobile and data-rich. Many healthcare systems in emerging markets are recognizing this future trend and creating policy and investing in telemedicine technology. For example, the Ministry of Health in Mexico announced an initiative in 2015 to use telemedicine as an “indispensable tool for advancing the quality of health services”. Through collaborations with the Cleveland Clinic and Mayo Clinic, telemedicine technology is being tested in rural areas in Mexico.

Interestingly, delegates pointed out two contradictory trends with patient consumerism in emerging markets. On one hand, consumers in emerging markets rapidly adopt new services, technologies, and experiences – especially when interfacing with retail, telecoms, banking, and personal care.

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On the other hand, when it comes to medical care or surgery, strong cultural influences cause many patients to treat surgeons and doctors with great reverence, trusting their instructions without question. Our delegates agreed cultural attitudes are unlikely to change but that future patients will become increasingly empowered in influencing their own healthcare.

“Behavior and environment often overwhelm treatment decisions in emerging markets”

Surgery is generally the last line of therapy across the globe, but this is especially the case in emerging markets. In many emerging markets, patients’ decisions on treatment are largely driven by how quickly they can be mobile and

get back to normal life rather than necessarily a perfect outcome. Some patients are simply willing to live with some pain. Emerging market patients place even more focus on postoperative recovery – elective procedures like sports medicine are not common because patients cannot afford to be lying flat for six weeks. As minimally invasive technology becomes more affordable, and patient education increases, surgery may become an earlier intervention – especially when it might present greater value for chronic disease.

Most delegates said their organizations have good penetration at the top of the pyramid due to healthcare system capacity and capability, and patients’ ability to pay for care. But the near-term opportunity lies in the middle, and long-term in those patients at the bottom. As one delegate explained: “We need to empower patients to make decisions, currently only the top 10% have this luxury, but the middle and bottom of the pyramid are expecting this.”

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Disrupting clinical practice

Shifting roles of surgical teams

Emerging markets have some of the best surgeons in the world, combining training from Western medical schools with intimate knowledge of their patients’ lives and needs, and their local healthcare systems. It is no surprise that, in many cultures in emerging markets, surgeons are highly revered not just by patients, but also their support teams – often elevated to superhero status.

However, emerging market surgeons are a central bottleneck to treating large populations and struggle to keep up with growing demand. By 2030, surgeons will not be able to act as solo superheroes to treat mass populations, but will need to become army generals, delegating and deputizing more responsibility. Currently, surgeons are the primary users of surgical devices and technology, but nurses and technicians spend significant time setting up, maintaining, and supporting the surgeon. The disparity in knowledge between surgeons and support staff is much greater in emerging markets than in developed markets, which typically act as a more cohesive team with mutual respect. Nurses may have limited education, technicians receive little training or guidance from device manufacturers and, as a result, the brunt of responsibility falls to the surgeon, whose cognitive load and time are limited.

Dr. Devi Shetty, the visionary leader of Narayana Healthcare, is a great example of a superstar surgeon who has changed his role to enable an army of care providers. Narayana’s flagship hospital has more than 5,000 beds, sees between 10,000 and 12,000 patients a day, and performs over 60 cardiac surgeries a day. Such high patient volume provides ample training opportunity and the team culture ensures the hospital has great clinical outcomes. Its latest hospital in rural India focuses on quality cardiac surgery at dramatically lower cost (less than Rs 65,000 or $1,000) than developed markets. This center uses a highly standardized protocol for cardiac surgery and task-shifting is optimized – nurses train family members to perform routine postoperative care so they can focus on safety-critical tasks. In embracing an approach of shared responsibility, Dr. Shetty – one of the top cardiac surgeons in the world – democratized patient care through team-based surgery.

In 2030, emerging markets clinical teams will be much more distributed in roles, responsibilities, even geography. Surgeons will still remain the decision makers and will own ultimate responsibility for the patient. Delegates agreed that the culture of revering a surgeon is unlikely to change, but

they must instill a more team-based environment. Surgeons who focus on being a force multiplier for surgical care will provide greater benefit to larger patient populations.

Knowledge proliferation

Clinician training and education by both hospitals and industry is vital to fostering team-based surgical care, our delegates concluded. New models for surgeon training and team-based training are needed. Effective training will come from systematic investment by hospitals and clinical education, and engagement and support from industry. Medical school training in emerging markets will need to change, focused on team culture instead of hierarchy. Much like US medical schools have made patient bedside manners a teaching priority, emerging markets will need to educate surgeons to work in teams alongside nurses, technicians, and support staff.

Healthcare organizations like Orbis are leading the way in unique training models. Orbis is a global non-profit organization working on prevention and treatment of avoidable blindness by taking a systematic approach to training, advocacy, research, and telemedicine. It has a ‘flying eye hospital’ – a fully equipped mobile teaching hospital inside a DC-10 aircraft. Hence Orbis teams are able to travel to remote locations like Nepal to train local ophthalmologists in new ophthalmic techniques and technology. Orbis has served more than 90 countries in the past two decades and, in 2015, Orbis screened over two million patients across Latin America, Asia, and Africa.

Emerging market hospitals ultimately desire to enable their staff and technology to be more effective and better used. While a flying training center is unlikely to translate widely to the surgical device industry, the model speaks to the comprehensive approach to integrating training and education into products and service offerings.

In 2030, companies that deliver products and services that enable team-based care will provide compelling value propositions to hospitals. Delegates with deep experience in emerging market hospitals conveyed that hospitals really need better training support and physician education from companies. Several MNCs have already set up advanced training centers across emerging markets – a great first step. But even more so, hospitals want companies to consider how their staff will use the technology, from front desk admin to executive, from junior nurse to senior surgeon. They want to be engaged as stakeholders when defining new platforms to ensure new products can be highly used across their operating theaters.

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Hospital evolution

The business of patient care

Emerging market hospitals are changing their business models to focus on patient volume, access, and affordability. Most emerging markets have a tiered system of care: top-tier hospitals service large urban cities, mid-tier hospitals surrounding cities and towns, and rural clinics service villages and remote regions. Of course, this is not standard across all emerging markets. Some of China’s top-tier hospitals outpace Western hospitals in terms of technology. India’s tiers are not necessarily regionalized – all three tiers can exist within a 5km radius. But one common theme emerged – hospital groups historically focused on single-tier demographics will grow to span all three segments, and will configure their businesses to offer comprehensive value across the pyramid.

Recent hospital mergers, partnerships, and expansion has increasingly led to a ‘hub-and-spoke’ model, which our delegates felt will continue to dominate in the future to reach mass populations. The ‘hubs’ of the future will be large hospitals in urban areas or even mega ‘health cities’, providing both multi-specialty services and high capacity for high patient volume and throughput. Such centers will

provide neonatal care, integrative cancer treatment, cardiac surgery, and even serve as medical tourism destinations where outcomes exceed Western standards at a fraction of the cost. The ‘spokes’ will consist of hospitals and clinics that provide rural access to care, and offer special treatments and education for regional patients (for example, ob/gyn services for village women or diabetes clinics), and triaging them to hubs when appropriate.

As the hub-and-spoke model proliferates, future emerging market hospitals will value companies that offer a portfolio of solutions for both their hubs and spokes. This is not dissimilar to the comprehensive (albeit costly!) approach US hospitals have taken, where large urban hospitals have smaller regional hospitals. The biggest difference, however, will be the disparity between an emerging market’s hub and spoke, and the cost of care.

“Emerging market hospitals will want a balance of premium and value products, all networked on common platforms within a single ecosystem”

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Surgical device companies, particularly multinationals, will need to consider their value proposition to these future hospitals. The challenge is determining strategic priority between servicing the top-tier hubs and risking displacement at the spokes by domestic competitors, or investing in developing a continuum of products to access the whole hospital network.

Hospital investment and expansion

Our delegates predicted emerging market hospitals will grow and expand via both building capacity organically and also forming partnerships and alliances.

Building capacity seems straightforward but our delegates believed the future will see creative hospital business models tailored for the regions they serve. For example, Columbia Asia is a Malaysia-based hospital group funded by Seattle area investors, with a unique approach to the hospital business. Rather than building large hubs and small spokes, it builds hospitals with less than 100 beds in mid-tier and rural regions, focusing on providing efficient surgical care, and consistent patient service. Often called the ‘McDonald’s of hospitals’, Columbia Asia doesn’t seek superstar surgeons, but rather focuses on well-trained staff, digital health records, and technology value. Its model has paid

off – it continues to grow, with nearly 30 hospitals built to date.

Emerging market hospitals will race to form partnerships to support their growth, and partners may come from unconventional arenas. Apollo Hospitals is one of the world’s largest integrated hospital systems, based in India, and takes a comprehensive approach to partnerships across industry and academia. Sanofi is an investment partner in Apollo Sugar Clinics – integrated rural centers for diabetes treatment. Google helps Apollo track patient health data in hospitals, while Airtel provides network capacity for Apollo’s telemedicine initiative in Nigeria. Meanwhile, Apollo is collaborating with Medtronic to develop a portable affordable hemodialysis system, with Sapien Biosciences to explore personalized medicine, and with Rochester School of Medicine in the US on new physician training protocols.

In 15 years, some emerging market hospitals may even leapfrog developed market hospitals. The lack of legacy infractructure and focus on investment could enable hospitals to focus on technology investments that improve connectivity, workflow, and outcomes. This is already occurring in China to an extent – some top-tier hospitals being designed to be eco-friendly, sensor-rich, and cloud-connected.

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Redefining healthcare ecosystems

By 2030, emerging market countries and healthcare systems will have redefined healthcare value, learning from the achievements as well as failures of Western healthcare systems. Industry has the rare opportunity over the next 15 years to engage with payers, policymakers, and regulatory bodies to shape surgical care delivery.

While healthcare ecosystems can be created and structured to focus on outcomes, our delegates were split as to what will define a ‘good outcome’ in emerging markets. In regions with severe limitations of resources, staff, and technology, delegates suggested that ‘good enough’ care is far better than no care. As one delegate explained: “A surgeon must sometimes decide between treating 10 patients perfectly or 100 patients imperfectly.”

But some delegates countered that a trade-off between patient volume and outcome does not need to exist. Serving mass populations can actually yield better outcomes due to volume-based experience achieved under good clinical protocols, supported by technology, infrastructure, and staff

training. For example, Narayana Healthcare’s Bangalore hospital has a 30-day post-surgery mortality rate for coronary artery bypass graft procedures that is better than mortality rates of a sampling of US hospitals.

Our delegates were also split along how payment models would evolve. Some thought emerging markets would continue the path of ‘pay per treatment’, as this would cultivate the best surgeons for each procedure, particularly for mass populations, and encourage better outcomes with patient volume and experience. However, some delegates felt emerging markets would shift to ‘pay per outcome’ particularly for mid-tier markets, where outcomes tracking and data could play a role. And finally a case for a ‘pay-for-health’ model may exist for top-tier markets where insurance organizations have great influence, focused on preventative care to avoid chronic conditions such as obesity.

“We currently design solutions for reimbursement in the top of the pyramid. We need to design for outcomes to reach the bottom of the pyramid”

Regardless of payment model, our delegates all agreed payers will wield strong influence and drive clinical practice over the next 15 years. Most patients in emerging markets currently pay for surgical care ‘out of pocket’ but this will drastically change by 2030. Global insurance providers are looking to emerging markets to drive their growth, already working with many governments to enact legislation and sustainable policy initiatives. India’s insured population is 300 million, estimated to exceed 700 million in 10 years. China has nearly 800 million people with some form of insurance, while Southeast Asia has significant growth potential across Indonesia, Malaysia, Vietnam, and Thailand.

Strikingly, our delegates highlighted the lack of engagement of industry players with payers, policymakers, and regulatory bodies within emerging markets. Part of the challenge is such stakeholders do not exist or are immature in some emerging markets and in others they can be bureaucratic or corrupt. However, many delegates felt it was within both the capability and obligation of large MNCs to pioneer consortiums to engage governments, healthcare systems, and payers. The lack of strong legacy means many emerging markets have an opportunity to realize good outcomes and avoid high-cost healthcare systems, but this can only be achieved via strong stakeholder collaboration.


Emerging markets surgical care in 2030

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Patients

Patient consumerism is on the rise, with patients expecting high-quality yet affordable care and fast return to normal life. Disease burden will shift from acute intervention to treating chronic disease and associated comorbidities.

The ‘bottom of the pyramid’ will greatly benefit from mobile technology, improved government policy, microfinance, and the rise of health insurance.

Most MNCs have good penetration at the top of the pyramid, but the unprecedented growth opportunity lies in the middle and the bottom.

Hospitals

Emerging market hospitals are changing their business models to focus on patient volume, access, and affordability. The ‘hub-and-spoke’ model will proliferate to offer comprehensive value across the pyramid.

Hospitals will race to form partnerships to support their growth. They will value companies that engage them as stakeholders when developing new products and desire both premium and value products tailored for their hubs and spokes.

Some emerging market hospitals may even leapfrog developed market hospitals.

Clinical teams

Surgeons cannot act as solo superheroes to treat mass populations, but need to become army generals, delegating responsibility.

Clinical teams will be much more distributed, in roles, responsibilities, even geography. Team-based surgery will unleash capacity to provide greater benefit to mass patient populations.

Effective training will come from systematic investment by hospitals and clinical

education, and engagement and support from industry.

Healthcare ecosystems

The lack of strong regulatory and insurance

legacy offers an opportunity to realize good outcomes and avoid

high-cost healthcare systems, but this can only be achieved via strong stakeholder

collaboration.

Serving mass populations can actually yield better outcomes due to volume-based experience, if achieved under good clinical protocols and supported by technology, infrastructure, and staff training.

Payers will wield strong influence and drive clinical practice over the next 15 years.

CLINICAL TEAM

S

HOSPITALSHEALTHCARE ECOSYSTEMS

PATIENTS

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Future business models

By 2030, emerging markets will present an entirely new landscape of opportunity, requiring new business strategies, shifts in organizational thinking, and new approaches to innovation. Hospital growth will focus on mid-tier and rural regions, and successful global companies will evolve their offerings to be tailored specifically for emerging market healthcare ecosystems.

Disrupting business as usual

Our delegates concluded that conventional business models will no longer be competitive in future emerging markets surgical care. New revenue models, service offerings, and partnerships are needed to allow companies to capitalize on large volume and profitability. Companies that do not adapt their organization and business models risk loss of global market position.

Much of the surgical device industry relies on a capital equipment and disposable revenue model, selling or placing high-cost durable equipment in hospitals and relying on recurring revenue of disposables with high margins. But some emerging market hospitals are already seeking alternatives. They are unwilling to pay high upfront costs for equipment and service packages and are more interested in total cost of ownership. Hospitals prefer to avoid disposable products for both economic and ecological reasons. Several delegates explained that, while organizations strongly pursued disposable device revenue models and accounted for price erosion in their financial modeling, erosion is much steeper in emerging markets. Delegates admitted their organizations were quickly displaced by domestic competitors selling similar devices at much lower cost.

“A conventional capital equipment and disposable revenue model will not win in emerging markets”

Instead of focusing on reducing device cost, surgical device companies that focus on new products and solutions that create value will be more successful. Creating new service offerings can create value and expand the patient and hospital base. While this will be a challenge for companies that traditionally focus on products and technology, additive services can help increase market share. For example, Medtronic launched its ‘Healthy Heart for All’ initiative in India in 2010, focused on providing services and education directly to patients for treatment of cardiac disease. Medtronic offered free cardiac check-up camps in more than 30 cities, provided patient counseling, and even created

the first-ever financing loan for patient families to self-pay for treatment. As a result, more than 150,000 patients have been screened, and approximately 15,000 additional pacemakers were implanted to provide life-saving treatment.

Pay-per-use models will become more commonplace for expensive diagnostic equipment like MRI, PET, and CT scanners or advanced proton-beam cancer treatment. Companies like GE Healthcare, Philips, and Siemens are already offering pay-per-use models to Narayana hospitals in India. Patient volume is so large it creates a mutually beneficial model for both hospital and company.

Creating market access

Sales channels, distribution and supply chain are often significantly underestimated challenges in emerging markets. Most surgical device companies use distribution partners in local markets to gain initial market access and navigate local barriers. Corruption, government bureaucracy, and regulatory requirements are barriers that require complex stakeholder engagement. But our delegates strongly felt distributors have disproportionally bigger influence in emerging markets than developed markets. Better partnering approaches could address some of these challenges.

Market access is a fundamental challenge in improving care, and most delegates said owning the overall sales channel would provide more control and ultimate patient benefit. One delegate urged that, in parallel to developing tailored products: “Companies should determine how to actually distribute their current portfolio of products, technology, and services to emerging markets.” This will take significantly more investment from their organizations. Following the developed country model of building a large sales force and teams of field clinical engineers adds high overhead and takes time. Similar to hospitals tackling team-based surgery, industry will need a systematic approach to building a front-line presence.

Capturing the continuum of care

Surgical treatment, in the eyes of a patient, is ideally a single event, as the goal is to get them healthy quickly, without the need for revision. Our delegates agreed emerging market patients should be viewed as a partner, not a transaction, and that business models should be tailored to support the patient journey and deliver end-to-end services, not ‘just surgery’. The partnership approach to patient care will become more important with the rise in chronic disease and patient consumerism. Delegates pointed to the pharmaceutical industry as being ahead of surgical care in this regard. Many pharmaceutical companies have configured their business to allow patients to buy into a program over time, from

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prevention to diagnosis to treatment to recovery, and have applied this model successfully in emerging markets.

The continuum of care represents significant opportunity for conventional surgical device companies but poses fundamental questions regarding each company’s strategy. How far upstream or downstream should surgical device companies spread? Delegates agreed this would be dependent on each company’s core business and growth strategy, but the common sentiment was that emerging markets offer huge patient volumes, which may make entering new parts of the continuum of care attractive where perhaps it is not in developed markets.

Partnering for success

Companies that are able to manage unique partnerships will be best positioned for success in emerging markets. Our delegates envisioned some interesting partnering scenarios for the future. Hybrid public-private partnerships will be increasingly common. Large MNCs will partner with large foundations, local NGOs, and even government grant initiatives to help create valuable healthcare delivery.

Large MNCs may wholly buy out hospital groups in emerging markets or, at the very least, invest in hospitals seeking to rapidly grow to establish influence. More radically, vertical

backward integration – where hospitals buy companies to control the supply of technology and services – may be more commonplace in the future. In some ways this is happening already. Aravind Eye Institute has treated more than 32 million patients and implanted intraocular lenses in more than four million patients. To ensure a robust supply chain, Aravind created a company called Aurolab to create high-quality affordable lenses for implantation.

“Charity is not scalable. We need the heart of an NGO and the efficiency of a for-profit”

Many delegates felt their organizations faced a common set of challenges in emerging markets, particularly in navigating complex stakeholder relationships. Surprisingly, all delegates were in strong agreement about the need to collaborate, and identified opportunities for companies to transcend competitive advantage to work toward common goals. Several delegates suggested multinationals have a responsibility to help raise the global standard of care, calling for a consortium of leading multinational companies to influence and collaborate with emerging markets governments, healthcare systems, and payers.

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Rethinking innovation

Delivering affordable quality surgical care while achieving business success in emerging markets will require radical approaches to innovating new products, services, and solutions. Our delegates identified three key pillars for emerging markets innovation:

� shifting attitudes toward investing in risk

� disrupting the way companies innovate for emerging markets

� breaking barriers that often hinder developed markets

Investing in risk

Delegates highlighted that their organizations’ current approach to innovating for emerging markets is top-down – acquiring domestic targets or establishing joint ventures to create opportunity for innovation with new local resources. This is often a successful route to gain instant access to markets, new customers, and local insight, as demonstrated by Smith & Nephew’s recent acquisition success of the Sushrut-Adler Group for orthopedic trauma surgery in India, Medtronic’s acquisition and joint ventures in Brazil and China, and Johnson and Johnson’s partnership with the Joslin Diabetes Center to improve diabetes management in China.

“Top-down innovation is not sustainable in emerging markets – success will require bottom-up thinking”

But our delegates highlighted that top-down investment will require bolstering with bottom-up innovation to drive long-term growth. So what exactly does this mean? Delegates suggested that companies will benefit from stimulating local entrepreneurial activity in emerging markets. This is currently done by mergers and acquisitions activity but, in the future, MNCs will invest earlier and more frequently in domestic companies, research institutes, and even hospitals to create critical mass. MNCs will need to find new risk-sharing models to innovate faster and more freely. Some MNCs are experimenting with separating and insulating risk from quarterly earnings by incubating internal teams in emerging markets. This retains top entrepreneurial talent by offering a low-risk environment to innovate unfettered and with resources, and offers the MNC an opportunity to capitalize on their innovation.

Innovation models

Our delegates felt three common themes will emerge for enabling future emerging markets innovation. The first is to

innovate locally. This requires a paradigm shift as it means loss of control for larger companies. But, as one delegate pointed out, parachuting their own teams in for a few weeks has not been effective, and long-term commitment to local markets is required.

There is historic precedence for success. GE Healthcare was a pioneer in the medical device industry, investing significantly in a large R&D team in India focused on ‘in-country, for-country’ product development. Other large MNCs have followed suit, with Medtronic’s R&D center in Hyderabad, and Johnson and Johnson’s R&D center in Shanghai. Such locations often start as front-line sales and marketing functions with surgeon training centers or low-cost resource centers for developed markets. The future will see large R&D teams being hired, developed, and focused on emerging markets. Boston Scientific is leapfrogging this transition, envisioning its Gurgaon facility to be its largest R&D center outside the US over the coming years, focused on Asia Pacific, the Middle East, and Africa.

The second theme involves developing globally distributed teams, to leverage technology and medical development know-how from developed markets with local clinical, user, and business insight in emerging markets. Here the importance of virtual teams will rise. Companies will need to create strong global innovation cultures and streamline product development by using 3D printing and additive manufacturing techniques to create rapid prototypes for global evaluation.

The third theme for success is focusing on needs-driven innovation. Users of products in emerging markets have very different needs from users in development markets, and too many companies have failed by assuming they understand their emerging market customers – or choosing not to invest in finding out. An objective approach to understanding unmet needs is crucial to developing a successful product for emerging markets. Interviewing key surgical care stakeholders can uncover explicit needs, although companies that interview only top surgeons (representing a small percentage of target users) risk poor downstream adoption. Human factors engineering approaches offer scientific methodology to understand unmet needs via observation, interviews, and analysis early in development. Needs-driven innovation minimizes time to market, avoids cannibalization, and encourages faster adoption.

Breaking barriers

Emerging markets have unique barriers to innovation compared with developed markets, ranging from intellectual property (IP) to regulations to hiring talent. The subject of protecting IP in emerging markets is challenging to resolve.

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Our delegates debated this topic but admitted there was no easy answer. The value of IP in emerging markets was questioned, with one delegate considering: “If we innovate faster, and launch new products every 18 months, then we outpace the value of IP, so should we worry about it so much?”

Historically many emerging markets looked to the US Food and Drug Administration (FDA) as the model for medical device regulation, but that model may be too slow and cumbersome for most emerging markets. Interestingly, the World Health

Organization is becoming more active in emerging market device regulations, and may offer an alternative perspective.

Talent development will be a challenge – most emerging markets have very talented, well-educated workforces but lack the experience in medical device development. Some delegates proposed the surgical device industry could dramatically benefit from hiring local talent from other regulated industries in emerging markets such as the consumer, food or automobile industries.

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Enabling technology

The opportunity for technology disruption is great in emerging markets – infrastructure and regulations are still being formed, and industry legacy in emerging markets is not that strong, offering a lower barrier to innovation compared with developed markets. The primary role of technology will be twofold – it can extend the hospital ecosystem across the continuum of care from early diagnosis to surgical intervention to postoperative monitoring. Enabling technology can also ensure products and solutions are robust, usable, and affordable, and unlock access to care.

Unlocking access to care

Lack of early detection remains a key challenge in getting patients to the right treatment, and surgical device companies that offer early diagnosis solutions directly or via partners will ‘own the pipeline’ of patients and provide greater value. This is already occurring in some emerging markets, and will become commonplace in 2030. In Sub-Saharan Africa, often the greatest challenge is simply identifying when a person becomes a patient, and knowing when to bring them to the hospital. Djantoli is an organization in West Africa that helps mothers monitor the health of their children via patient monitoring technology, mobile networks, and education, so children see a doctor when needed.

“Trainability and usability remain the most challenging aspects of adopting new technology in emerging markets”

Our delegates predicted surgical care companies will increasingly use mobile technology to train and educate physicians, educate patients and their families, and use global networks and digital health to aid in diagnosis and surgical planning. Experienced sales and field representatives are scarce and add high overhead to a company’s cost structure. Technology that enables companies to educate and train clinical teams will ultimately enable companies to grow in new markets faster. Software-based training systems, virtual surgical simulators, and global knowledge-sharing networks enabled by mobile technology will be crucial to democratizing surgical care.

Advancing affordable treatment

Surgical procedures will benefit greatly from technology that offers advanced functionality and usability at affordable cost. High-fidelity sensors and optics technology are widespread and cost-effective thanks to the consumer electronics

industry. The cost of robotics technology is reducing rapidly, with great strides in automotive, consumer, and industrial applications infiltrating medical applications. Our delegates predicted emerging markets will benefit from the trend of large capital-intensive surgical robotics being replaced by small, portable systems. For example, Dobot, a start-up company in China (funded via Kickstarter), sells a desk-based robot that uses artificial intelligence and motion capture to control a tool to 0.2mm precision, all for less than $1,000.

Emerging market hospitals are looking to industry to provide products that not only have advanced functionality at reasonable cost but are robust for emerging markets use. One delegate shared a challenging situation in a Sub-Saharan African hospital – a surgeon used an energy-based laparoscopic device to resect tissue. This minimally invasive approach has inherently low rates of complications and infection risk. But because a functional laparoscopic stapler was simply not available, the surgeon opened the patient to manually stitch the tissue, negating the benefits of the laparoscopic approach. Similar challenges occur elsewhere – in India, surgeons are forced to perform invasive surgical procedures because when their minimally invasive equipment breaks it can takes several days for service support. Surgical staff do not receive adequate after-sales training or maintenance support. Hospitals seek modular products and technology that require little or no maintenance, and empower their teams to treat more patients, more efficiently, with high-quality, affordable care.

Digital disruption

Digital health technology will disrupt emerging markets, especially to help monitor outcomes, enhance recovery, and leverage the learning from a patient for future patient treatment. Low-cost sensors and mobile technology can help track and link diagnostic data to outcomes data. Connected ecosystems and user-friendly, cloud-based software will allow more patients and physicians to track clinical outcomes. Emerging markets patients will seek positive experiences from their treatment and recovery, and greater value will be placed on wearable devices that enhance recovery.

Predictive analytics will play a role in shaping future emerging markets surgical care. Already in developed markets, IBM’s Watson Health has made strides, helping oncologists at the Mayo Clinic in the US diagnose cancer more accurately using cognitive learning algorithms to analyze thousands of diagnostic scans. Shifting to global applications, IBM used similar technology in South African hospitals to help manage hospital staffing to alleviate acute staffing shortages. In April 2016, IBM announced the formation of IBM Health Corps, with the aim of applying Watson to emerging market healthcare challenges.

15


Evolution of industry & technology by 2030

Future innovation models

MNCs will develop new risk-sharing models to innovate faster and more freely. Top-down investment will require bolstering with bottom-up innovation to drive long-term growth.

Needs-driven innovation is crucial to developing a successful product for emerging markets, minimizing time to market, avoiding cannibalization, and stimulating faster adoption.

Future R&D teams will focus on emerging markets, but will be globally distributed, leveraging technology and medical development know-how from developed markets with local clinical, user, and business insight in emerging markets.

Future business models

Conventional business models will not win in emerging markets. Successful global companies will evolve business strategy to deliver quality, accessible, affordable solutions for emerging market healthcare ecosystems.

Competing on cost reduction is not sustainable. Creating value via tailored products and services will allow companies to capitalize on large patient volume to drive both revenue and profitability.

Companies that are able to manage unique partnerships will be best positioned for success. Partners in 2030 will include hospitals, non-profits, government agencies, and distributors.

A consortium of leading MNCs is needed to influence and collaborate with emerging markets governments,

healthcare systems, and payers.

Role of enabling

technology

Surgical teams will seek products and technology that are

easy to train on, use, and maintain, and increase throughput and efficiency

New sensors, mobile technology, connected ecosystems, and cloud-based software will extend the hospital ecosystem across the continuum of care from early diagnosis to surgical intervention to postoperative outcomes tracking

The opportunity for digital health disruption is great in emerging markets – infrastructure and regulations are not long-standing legacy, offering a lower barrier to innovation.

CLINICAL TEAMS

HOSPITALSHEALTHCARE ECOSYSTEMS

PAT IE N T S

16


Global impact

In the future global landscape of surgical care, emerging markets will play a significant role in transforming our industry. Our delegates envisioned knowledge-sharing and industry partnerships as crucial to shaping how surgical care is delivered in emerging markets. Clinical practice is already recognizing the importance of globalizing knowledge. Historically many surgeons in emerging markets trained at top medical schools in the US, the UK, and Germany. Today, US-based surgeons seek out fellowships, rotations, and specialist training in emerging markets. In Boston, Massachusetts General Hospital has a leading program focused on global surgery and social change, where visionary hospital directors and surgeons spend months training surgeons and staff in Africa. Conversely, top surgeons in India are mentoring US-based surgeons who seek a global perspective on surgical treatment.

Local emerging market companies may provide stiff competition to MNCs but they may also prove to be powerful partners in global surgical care. As one delegate quipped: “We look at emerging markets through an MNC lens, and lose sight of the partnership potential with domestic start-ups and major players.” For example, a number of start-ups in India are seeking to disrupt global markets with new technology ranging from cancer diagnosis and treatment to portable ventilation in critical care. Singapore’s government has created an entrepreneurial ecosystem, and invests billions of Singaporean dollars into medical technology for both

developed and emerging market applications. Mindray and Meril Life Sciences are large diversified medical technology companies based in China and India, respectively, with comprehensive portfolios of products and powerful brand presence.

Reverse innovation offers developed markets, particularly the US, the opportunity to benefit from emerging markets via learning new approaches to achieving healthcare affordability and efficiency. While emerging market products and technology may occasionally disrupt developed markets, our delegates believed lasting transformation will come from integrating new business models and innovation models. For example, Narayana Healthcare, mentioned earlier in this report as a leading hospital group transforming surgical care in India, recently built a new hospital in the Cayman Islands. Its mission is to bring affordable quality surgical care to the Western Hemisphere, leveraging years of knowledge and success in performing high-quality, affordable cardiac surgery in an emerging market.

By 2030, the rising influence of emerging markets will shift industry and clinical practice to focus on delivering affordable quality surgical care for mass populations. Success will require industry players to evolve the way they do business, organize for innovation, and use enabling technology. While complex, barriers and challenges are not insurmountable, and can be overcome by forming creative partnerships. As organizations evolve and succeed, innovating for emerging markets will enable industry to disrupt and transform how surgical care is delivered globally.

For further information or to discuss your comments, please contact:

Rahul Sathe, Head of Surgical Innovation for Emerging Markets [email protected]

About Cambridge ConsultantsCambridge Consultants is a world-class supplier of innovative product development engineering and technology consulting. We work with companies globally to help them manage the business impact of the changing technology landscape.

With a team of more than 700 staff in the UK, the USA, Singapore, Japan and India, we have all the in-house skills needed to help you – from creating innovative concepts right the way through to taking your product into manufacturing. Most of our projects deliver prototype hardware or software and trials production batches. Equally, our technology consultants can help you to maximise your product portfolio and technology roadmap.

We’re not content just to create ‘me-too’ products that make incremental change; we specialise in helping companies achieve the seemingly impossible. We work with some of the world’s largest blue-chip companies as well as with some of the smallest, innovative start-ups who want to change the status quo fast.

Medical technology is a core strength of our business, where we specialize in clinical diagnostics, drug delivery, surgical and interventional products, and digital health systems. Our work ranges from full-scale product development to technology consulting, and encompasses skills including product design, human factors, optics, low-cost electronic design, system engineering, and program management.

Our teams help clients transform global patient care via enabling technology, focusing on developing tailored medical products for the unique unmet needs of patients, surgical teams, and hospitals in emerging markets. As part of our ongoing commitment to global medical innovation, we would be pleased to hear your feedback on the content of this report, and to discuss your views on the future direction of the industry.

INDIA

Cambridge Consultants is part of the Altran group, a global leader in innovation. www.Altran.com

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