Chronic disease prevalence is high in most of Asia which is compounded by immature healthcare infrastructure which creates significant barriers to treating these diseases. These barriers range from awareness of the disease to insufficient numbers of HCPs through to inability to afford (most Asian countries are self pay) the appropriate treatment. Sustainable success in these markets requires innovative thinking and relevant business models to overcome the numerous barriers.
Indonesia has a huge unmet medical need where the availability of most pharmaceutical products is not the major issue. The actual challenge facing all pharmaceutical companies is how to overcome the infrastructure and access challenges to reach the patients.
I/ Building an innovative business model at the bottom of the pyramid
Faced with this challenge, Julien de Salaberry spent a number of months in Indonesia developing an innovative new business model to create greater access to hepatitis treatments. The initiative centered on creating new partnerships with a financial institution, testing laboratories and leading hepatologists, to name a few, to significantly improve the affordability of and access to hepatitis products for a major pharmaceutical company. In the process, Julien has had the pleasure of working and discovering Indonesia – a country with much promise, many challenges and some fascinating quirks.
To give you a sense of how dynamic this country is; it is the world’s 16th largest economy, an archipelago, made up of ~14,500 islands, and has the potential to be the 7th largest by 2030, according to McKinsey. It is a much more stable and diversified economy than many outside observers may assume. Within Asia, Indonesia is the fifth most important economy behind China, Japan, India and South Korea. By 2030, Indonesia will have ~90 million additional consumers with considerable spending power. There are now more Blackberry subscribers in Indonesia than in Canada and almost as many Starbucks as there are in China! This growth in Indonesia’s consuming class is stronger than any economy of the world apart from China and India, a signal to international businesses and investors of considerable new opportunities.
Jakarta, the Capital, is the major contributor to the economy (up to ~25%) but a swathe of mid-sized cities is now outstripping the capital’s GDP growth. However, as much as 50% of the population lives on less than $2 a day and many have limited access to health care and education.
This growth and opportunity landscape will need to overcome a number of challenges e.g. protectionism is preventing companies from adopting more efficient practices. Poor transportation infrastructure is also a hindrance. Julien’s weekly commute from Singapore to Jakarta involved spending more time driving from Jakarta airport to its city-centre than the flight time from Singapore to Jakarta.
With these opportunities but also challenges, there is substantial room for improving the quality of the healthcare infrastructure which is suffering from government spending ~3% of GDP on healthcare, resulting in a per capita spend of $77 per year compared to $221 in China and $3,503 in the UK.
Metabolic disorders (e.g. diabetes) and infectious diseases (e.g. hepatitis) are diseases with very high prevalence. Lifestyle related illnesses (e.g. cardiovascular disease and cancer) are also growing fast. Physician numbers are woefully inadequate – Indonesia has 96 hepatologists whereas the UK has 1000+ with much lower prevalence. Current compensation levels and working conditions make it difficult for many doctors to work outside the major cities. They also generally work long hours so Julien’s field trips to meet doctors meant visiting their surgeries between the hours of 10pm and 2am!
II/ Building an innovative business model means making healthcare affordable, not getting people to afford it
The commercial innovation initiative Julien helped build provided greater access to hepatitis treatment to the mid levels (lower B and C) of the income pyramid of the Indonesian population by improving the affordability of the treatment through the means of an affordable “loan” and establishing an integrated disease management environment for the patients. The required partnerships were established through the collaborative design of a new business model by all the parties involved e.g. banks, leading HCPs, apoteks, distributors, etc. It also involved extensive negotiations and legal work to establish a workable operating model. The greatest challenge, amongst many, for all parties involved is the perceived reputation risk.
Endemic corruption, infrastructure deficits, stringent labour regulations, practices by some local companies and policy uncertainties make it harder for MNCs to do business in their conventional manner. It is in this environment that Julien stepped in to lead the turnaround of a pharma affiliate, focusing on stabilizing the operations and establishing the foundations for the future.
Such initiatives disrupt this conservative market favorably for all stakeholders as well as contribute to the social purpose of a pharmaceutical company. It is the combination of great products AND great business models that is going to keep MNCs ahead of the competition in the coming decade.
Julien de Salaberry (http://www.linkedin.com/in/desalaberry) is an experienced regional head and GM with 15+ years in healthcare with leading brands including Eli Lilly, Boston Scientific, Baxter, GSK, Merck&Co. Julien has significant Asia Pacific experience.
Julien is now an advisor to startups and incubators in healthcare and technology in emerging high growth markets. He is also a private investor in early stage and promising SMEs.
Julien established The Propell Group (www.propellgroup.biz) in 2012, which is a virtual startup incubator, which helps founders where and how they need most. We provide pragmatic mentorship from early stage to startups pitching for funding. We seed and/or provide access to funding for the most promising startups. We support each incubatee with access to an extensive network of multinationals, investors and government agencies.
We also provide business strategy advisory to SMEs and larger organisations which seek to deliver innovative commercial solutions principally in Asia Pacific.
- For a description of how to make the delivery of healthcare at lower costs in mature economies and how this will impact the future of Medical Devices and Diagnostics, please refer to Clayton Christensen, Innovator’s Prescription, Chapter 9.
- For a description of frugal innovation, that is innovation done at the bottom of the pyramid, where purchasing power is lower than in mature economies, please refer to this website.
- For another description of how to distribute healthcare at the Bottom of the Pyramid, please refer to C.K. Prahalad, The Fortune of the Bottom of the Pyramid, Eradicating Poverty through Profits, Chapter 2
- For a discussion of how to innovation in situations of scarce resources, please refer to this blog, which is considered to be a reference in “frugal innovation”, or how to do more with less.