An ecosystem-mapping exercise can provide valuable insights into any innovation ecosystem’s current and future state. It can also assist policy-makers in strategizing and prioritizing areas that might require short-term or long-term interventions and improvements. However, this might not suffice, and one must look at identifying KPIs (key performance indicators) that can help measure the viability and performance of healthcare innovation ecosystems. So, while ecosystem mapping should be the first task in the process, the second should inevitably be of choosing the right set of qualitative and quantitative metrics. The KPIs should be carefully chosen to capture the performance of the ecosystem under consideration and should be measured from time to time. As discussed in the following section, a healthcare innovation ecosystem’s performance can be measured using four KPIs (three quantitative and one qualitative).
Fund available within the ecosystem (F)
In simple terms, funding refers to the capital required to start, run and flourish a business. Different organizations have come to use many different strategies to access this capital at different stages of their businesses. So, what does funds available within the ecosystem (F) mean? Suppose an ecosystem is viewed as a 3D box, where different interactions between stakeholders are taking place within its confined boundaries. F, in this case, represents the total amount of risk capital available within the ecosystem box at any given time. Two situations are unique to any healthcare ecosystem. First, healthcare innovations do not come cheap, and second, the total R&D investment might not accurately represent any healthcare ecosystem’s performance. The reason is that once healthcare companies develop a product or a service, it takes a mammoth effort and colossal capital to deliver it to the end consumer. Consider a startup that invests in R&D and develops a new drug that requires stringent storage, transportation, and distribution provisions. For a healthcare ecosystem to prosper on this innovation and deliver the benefits to the end-consumer, every other stakeholder within the ecosystem must be innovative. Be it the logistics providers, Carry Forward Agents (CFAs), or wholesalers or retailers, each of them has to meet the stipulated requirements of the drug to ensure seamless last-mile delivery. So for a healthcare ecosystem to match the modern-day health requirements, it is not only the healthcare company that has to invest capital but also every other stakeholder within the supply chain. So the right question here would be – how easily can each stakeholder access capital within the ecosystem boundary? A healthcare innovation ecosystem can collapse and fail to deliver on its true potential if the supply chain stakeholders do not have easy access to funds within the ecosystem. Therefore, F (mathematically represented below) can serve as an excellent quantitative metric to measure the performance of the Indian healthcare innovation ecosystem.
Total fund (F) within a Healthcare ecosystem at time (t) = Σ R&D capital required for individual drug/product development + Σ capital required by individual stakeholders within the ecosystem to deliver the drug/product to the end consumer
A proper due diligence process can help decide on the number F for any healthcare innovation ecosystem. Nevertheless, for any healthcare ecosystem to perform to its potential, the ecosystem box (as mentioned earlier) must have at least F amount of capital available for easy access by the stakeholders (irrespective of their position in the supply chain) at any given point in time.
Innovation and trade are intricately intertwined and mutually advantageous too. Trade enables novel technologies to move freely around the world, which warrants expansion in the size of the market for the innovator. Developed countries tend to export more high-technology goods compared to developing countries. Similarly, innovative companies export, invest overseas, and license their technologies to exploit the benefits of their innovations. Currently, India imports nearly 80 percent (US$5.6 billion) of its medical devices, whereas the exports stood at a mere US$2.1 billion in 2019. Of this 80%, 11% are imported from China. India remains highly dependent on imports for many medical devices ranging from elementary devices such as thermometers and ECGs to high-end devices such as ultrasonic scans, cancer diagnostics, and PCR technologies. If our Healthcare Innovation ecosystem is to grow, India needs to focus on producing high-tech products and exporting them. India needs to follow a two-pronged strategy of import substitution and export expansion. The GoI has released the “Production linked incentives” (PLI) scheme for medical devices and established four medical devices parks in Andhra Pradesh, Telangana, Tamil Nadu, and Kerala.
No. of Health-Tech/Digital health Patents
A patent is paramount in the healthcare sector as it assures safeguarding of the innovation. What appeals to investors is strong IP protection. The chronology is simple: tight IP regulations- investment inflow- more innovations. One needs to understand that it is often more cumbersome and exorbitant to bring medical innovations to the market compared to other industries. As the regulatory pathway for health tech can be protracted and extravagant, the innovators need to know that they have solid IP rights before they go down the rabbit hole. The patent system benefits the innovators and society by making patent information available to other researchers who want to improve their existing technologies. When we focus upon Digital Health, according to WHO, Digital Health is – “a broad umbrella term encompassing e-Health, as well as emerging areas, such as the use of advanced computing sciences in ‘big data, genomics, and artificial intelligence.” Some of the examples of Digital health are telemedicine, self-monitoring healthcare devices, m-Health, and e-pharmacies. The idea of Digital Health in India is in its infancy and has seen a lot of innovative products being developed. Hence, the need of the hour is to protect these innovations. Currently, China tops the global digital health patents list with 23,100 applications for 2018-2020, followed by the US (9,100 applications) and Japan (2,700 applications).
Regulations and Compliance
The most recent Economic Survey underlined the importance of having a regulatory framework in place to undertake regulation and monitoring of the healthcare sector, given the numerous market failures stemming from information asymmetry. There exist several regulatory bodies in the healthcare & pharmaceutical sector, such as the Central Drugs Standard Control Organization (CDSCO), Drug Regulatory Authority (DRA), Directorate General of Health Services (Dte. GHS), and Indian Council of Medical Research (ICMR). However, from a healthcare innovation ecosystem perspective, these regulatory bodies appear isolated and lack coherence in their operations. Given the complexity of healthcare ecosystems in terms of their size & shape and the products or services they deliver, a well-regulated ecosystem and stakeholder compliance can deliver tremendous value to the end-consumer. However, a one-size-fits-all approach might not work in the Indian context, and the impetus should be on regulating healthcare innovation ecosystems rather than the entire healthcare sector as a whole. Regulations help consolidate the market and infuse a degree of stability, thereby allowing new entrants into the market and developing competition between firms within the ecosystem in the long term. Competition helps achieve both economies of scale and scope in the long term. It can make healthcare products and services more accessible and affordable for the end consumers. Therefore, although qualitative, the extent of regulation and degree of compliance can serve as a good measure of an ecosystem’s performance.
Today, India is on the cusp of a healthcare revolution both in terms of value and volume. Healthcare ecosystems are an integral part of this revolution. Having the right set of metrics to measure ecosystem performance can help critical stakeholders such as policymakers, researchers, academic institutions, and public & private organizations decide on implementing frameworks that can help bridge the gap. Nevertheless, the focus should be on identifying the right set of KPIs, which can help measure both the performance & viability of the healthcare innovation ecosystem under consideration.
By Rohan Kar & Anurag Wasnik, Innovation Leads, Atal Innovation Mission (AIM), NITI Aayog
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