So, GenWorks is pivoting, taking a page out of an age-old playbook and selling not just a box but also the services to run it. It will sell packages to hospitals where it sets up the device; it will then train folks to operate the device; and finally, it’ll help send the results to specialists via the internet. Bengaluru-based Tricog Health Services is among the many startups trying to scale this business model.
Performing the operational model
“I’m sure every other company is going to do the same [operational business model],” said Charit Bhograj, founder of Tricog. “You need to solve the end customer’s problem, and selling him a box and walking away will not solve the problem.”
GenWorks plans to do this for everything, from newborn screening to cardiac care, Ganeshprasad said. The portfolio would focus on preventative care. To fund this venture, the company has executed a term sheet for $10 million from Somerset Investments. But it’s all too new to say whether it’ll be successful. To sell prevention, people need to show up at their doctor’s well before they fall sick.
“Especially in tier-two and three cities, people are not financially well-to-do, and so, their focus is on getting their jobs done or educating [the kids], for example,” said Ravi Menon of professional services group SKP Business Consulting.
When no response was been given
Philips did not respond to Ken’s request for comment by deadline. GE did not confirm most of the information in this story and denied some of it.
Hospital beds in metro cities are just not filling up. At major corporate chains like Apollo Hospital or Fortis, 25% to 40% of beds lie vacant. Ergo, they are not buying as much new equipment, which has led to lackluster medtech sales in India, said Menon of SKP. Most of the growth has come from service and replacement of existing purchases, he said.
Between 2013 and today, the sector has grown by only about $2 billion, he said. Medical devices are a $7-billion sector. Compare that to the US, where it was valued at $148 billion in 2016.
“That number is small in comparison to the size of our country,” Menon says. “We have 1 billion people and our medical device segment is only what, $7 billion now? How small is that?”
The dependence on metro hospitals has resulted in cycles of business for device makers, Ganeshprasad said. Companies see a peak in sales when new hospitals get built, followed by a trough.
“The healthcare system is not efficiently serving people, and we were being inefficient by only following them,” Ganeshprasad said.
Companies realized in the mid-2000s that they had to branch out to selling to facilities that serve people at the bottom of the pyramid. Unfortunately, GE, Philips, and Siemens Healthineers had high-end devices manufactured for developed nations. These facilities could not afford them and were buying refurbished or sub-standard machines.
Re-engineering the machines
Recognizing the mismatch, the device makers re-engineered their machines to create “value” portfolios comprising no-frills devices that still deliver excellent results. “Over the last three or four years, we [Siemens Healthineers] have balanced our products out with more of a value segment portfolio,” said Kailash Yagnik, head of the strategy at Siemens Healthineers. “This is coming from the global direction [Germany headquarters].”
GE began its own “Make in India” program in 2009 that would manufacture devices locally and sell it across rural India and the rest of the developing world.
But though the value portfolio sold well, much of the demand still came from Tier-1 cities, Yagnik of Siemens Healthineers said.
In GE, too, “affordable care” did not fly off the shelves, Ganeshprasad said. In 2014, GE Healthcare in India had a $350 million turnover. Of that, $30 million came from Tier-2 and beyond. The “Make in India” program constituted 20% of metro Tier-1 sales that year, Ganeshprasad said. GE denied these numbers.