Monday, 15 December 2014

GE India Could Save U.S. PET/CT Scan Patients $7.5 Billion Per Year

Cancer is abnormal cell growth with the potential to spread to other parts of the body and disrupt normal functions, resulting in illness or death. Claiming over half a million lives per year, cancer is the second leading cause of death in the United States, second only to heart disease. There are over 100 known cancers effecting humans, some being more lethal than others. In all cases, early detection is crucial for improving the chances of successful treatment.

Cancer Cells, from WebMD

Cancer detection typically involves a range of methods and tests but is broken into two stages: Screening and diagnosis. Researchers have provided cancer screening guidelines to encourage regular screenings for potential symptoms of cancer, which differ for each type. Cancer symptoms might include heightened levels of proteins or other byproducts of cancer in the blood, abnormal growths, pain, bleeding, or discoloration of tissue. If potential symptoms appear, the doctor will move towards diagnosis, ordering additional tests to gather more data. These tests can be numerous and costly, and might include PET/CT scans, ultrasound, endoscopy, and MRI for imaging; lab testing on bodily fluids to detect tell-tale biomarkers; and biopsy to collect cell samples for microscopic evaluation by a Pathologist. Using data from these tests, doctors attempt to provide a definitive diagnosis and prognosis to the patient.

Many of the tests above are very expensive, but entrepreneurs in India are working on addressing an enormous and unmet domestic need for early cancer detection through innovative, low-cost product design. For example, GE Healthcare has developed the gorgeous Discovery IQ PET/CT, representing $15 million and 3 years of R&D at its center in Bangalore. Innovating within the constraints of India, they have succeeded in creating a scanner that's 40% more affordable than comparable alternatives, is modular and scalable to allow for price discrimination, offers a unified service of detection, planning, and assessment through state of the art hardware and software, and is a beautiful machine. The cost savings have come from conducting R&D in India, from redesigning a more cost-effective machine from the ground up, and from manufacturing the machine in India.

Discovery IQ PET/CT Scanner, from GE Healthcare

Currently, India only has about 120 PET/CTs operational in the country, whereas the required number of units to adequately address patient demand is over 1,000. Judging from the CEO & President of GE South Asia Terri Bresenham's remarks on Discovery IQ, GE hopes that the price elasticity of demand for PET/CT scanners in India is flexible enough that a 40% price reduction will help to fill this gap. I hope so, but it may be that more disruptive technologies like CellMax Life may ultimately be what brings early stage cancer detection to the masses of India.

Even if the Discovery IQ does not realize substantial financial returns or market share gains in India, GE and the world can still benefit tremendously because GE has created a superior, low-cost product. Producing 50-slice equivalent CT speed imaging, the highest PET axial view available on the market, the Q.SUITE platform for improved PET quantitation, and the Q.CLEAR platform for up to 2x image improvement (SNR) + 2x improvement in PET quantitation accuracy, Discovery IQ is a PET/CT that gets the job done. Certainly there are PET/CTs that may perform better on any one of these dimensions, but does it matter? For example, some PET/CTs are now capable of taking 512 slices, but since no meaningful diagnosis accuracy improvement was found from the jump between 64-slice and 128-slice scanners, 64-slice scanners generally make for the best value. In fact, according to Niharika Midha at GlobalData, the PET/CT "Hardware has reached this plateau . . . There is only so much that can be changed to the machine."

If GE India has tightly engineered Discovery IQ for maximum value (ROI), then this device may sit at the very rim of the performance plateau, including all of the right features, but not overloaded with cutting edge technology and experimental features that price it out value-conscious procurement networks.

GE Logo and Slogan from Inroads

Given that most PET/CTs cost between $2 and $3 million, the 40% price reduction for Discovery IQ puts it between $1.2 and $2.8 million for cost of acquisition. The median prices for CT scans charged by providers hover between $700 and $900, and the U.S. government estimates that 80 million scans are performed annually. The price for PET scans is about $5,000, but only 2 million are performed annually for Oncology diagnostics. Adding these up, approximately $75 billion is spent on PET/CT imaging per year in the U.S.

Of course, only a minor portion of this total spend could be chalked up to equipment cost, so if we instead look at the lowest PET/CT scan costs, and assume the imaging centers offering such low prices are highly efficient so that the overhead and profit margins per procedure are small, we might say that the 40% equipment cost savings generated by Discovery IQ could be passed on rather directly to the end payer. The lowest prices charged for CT scans seem to be around $200, and the lowest for PET scans around $1,200. Reducing these costs by 40% and multiplying by the yearly number of procedures shows a potential costs savings of nearly $7.5 billion per year.

This begs many questions. Could GE keep the cost this low in selling to PET/CT providers in the U.S.? If not, how much of the 40% cost saving be eaten up, and by what? Would GE even want to disrupt their home PET/CT market by importing Discovery IQ? Certainly short-term financial analysts held captive by Wall Streets valuation process would balk, as would the sales force taking lower per sale commissions. On the other hand, volume can make up for decreased unit margins, and such a move may gain GE significant additional market share. Also, the modularity of Discovery IQ might result in natural price discrimination, where the highest-end clients are able to pay for additional functionality, and could widen the base of the market by making a basic PET/CT available to clinics previously unable to afford one.

What Do You Think?
  • Should GE disrupt themselves by importing and commercializing Discovery IQ in the U.S.? If so, what main barriers would they face? 

Saturday, 6 December 2014

India's New Health Tablet Performs 30+ PoC Diagnostic Tests

The Swasthya Slate ('Health Tablet') is a portable diagnostic device that enables users to conduct 33 diagnostics tests with a simple box, power source, test sensors, and a smart device using the Android OS. The videos on this page give an excellent view into how the testing, analysis, and reporting process works. Of the 120m or so smart phone users in India, about 80% are using an Android OS, so the technological infrastructure is already in place for Slate to quickly scale up.
Photo Credit: Swasthya Slate
Launched in March, 2014, the Slate is the work of the Public Health Foundation of India, which also manufactures the device. The project is led by Dr. Kanav Kahol, formerly a bioinformatics professor at Arizona State University. With all sensors included, the device is being manufactured in India for only $800, a price expected to drop by 20% as it further scales. At this price, the primary target customers are health ministries, agencies, and clinics who will purchase the devices for public health management, putting them into the hands of community health workers (CHWs) who canvas the country as frontline care providers. The new diagnostic processes enabled by the device show the real value it's created, described in the following steps, and enabled by the components illustrated in the photo below:

  1. CHW visits village
  2. CHW conducts PoC diagnostic tests within minutes per individual
  3. Diagnostic box sends test results to smart device via Bluetooth
  4. Smart device uploads patient EMR to secure cloud
  5. Slate's data management software analyses data
  6. Slate's software communicates results to stakeholders via multiple channels

Photo Credit: Forbes India

The time and cost savings resulting from this process are substantial. Not only do the patients avoid costly travel for multiple tests when needed, but Slate only charged $1.25 for a panel of 10 standard biometric tests during their pilot. Referencing the table below, this is nearly 1/20th the cost of what the government was charging before at subsidized prices for the same 10 tests. Theranos, a highly disruptive lab diagnostics company featured in an earlier post, charges in the range of the government prices, but does not appear to offer Urine Glucose tests or the more manual tests like blood pressure, temperature, ECG and Malaria. And standard laboratory diagnostic test prices are sky high in comparison, as the prices from show. Slate's measurement accuracy performance is within 99.9% of the traditional path lab technologies, and they continue to publicly track their clinical evaluation data to improve the device's performance. 

How Transferable is the Slate Device to U.S. Healthcare? 

Theranos is valued at $9 billion because they are providing essentially the same laboratory diagnostics as traditional labs at a fraction of the cost (often 1/10th-1/20th), using less invasive methods, and at much faster speeds. Slate appears to provide PoC diagnostic test results even faster than Theranos using RDT strips, at another huge price discount (1/20th of Theranos's prices from the chart above), and in similarly non-invasive methods. They have also developed 18 apps so far to fulfill the true meaning of 'software as a service.' On the other hand, Slate only offers 33 tests, whereas Theranos is set to offer the full range of possible laboratory diagnostic tests, which number into the thousands. Convincing the medical establishment that the diagnostic results from Slate represent medical grade data would be difficult. EHRs have been slow to become truly personal due to hospital policies and HIPPA. Many of Slate's apps are culturally-bounded, and would need to be re-written.

Nevertheless, I am optimistic of Slate's potential to disrupt clinical laboratory diagnostic testing in the U.S. Here's why:

Firstly, there are encouraging signs that both the FDA and the medical establishment are beginning to approve diagnostic biometrics from wearables, and if from wearables, why not from Slate? At any rate, Theranos is operating as a CLIA-approved lab without FDA approval due to the unique classifications for laboratory diagnostics, and because Slate is already tracking their clinical evaluation data carefully and cheaply, this may not be such a large barrier even if their system does require approval. Secondly, apps are relatively easy to write. Thirdly, if Slate's battery of tests represent the most commonly ordered tests, then it could disrupt Theranos even as Theranos is disrupting Quest and LabCorp. After all, the device is affordable, portable, and modular enough for use by school nurses, the smallest retail clinics, and even by patients themselves. If a device like Slate becomes the go-to for routine diagnostic tests, how commonly will people need to level-up and go to a Walgreens to order a Theranos test that costs 10x the price, or to a hospital where the test will cost 200x the price? 

According to Dr. Kahol's Twitter feed, he has already received requests for the device from both emerging and developed health markets, such as Pakistan, South Africa, Malaysia, and the UK. Field workers from at least 8 different countries, representing both developed and emerging markets, are already using the device on a pilot basis, as this usage map shows.

Question for Comments: 

  • What barriers prevent Swasthya Slate from transferring to U.S. healthcare markets, and how might you recommend they reduce these?  

Monday, 1 December 2014

$100 Stents from India in the Offing

Since the USFDA approved cardiac stents in 1994, there has been tremendous growth in their use, to where 700,000 are implanted in patients annually in the U.S. alone.  Manufacturers' sales of stents reached $5.5 billion in 2012.

In the U.S. about 50% of stent implants are for acute conditions, such as unstable angina, or chest pain caused by the buildup of plaque in the arteries surrounding the heart. The other half are for elective-use patients in stable condition. This video from the Mayo Clinic illustrates Percutaneous Coronary Intervention (PCI), the procedure for which the large majority of stents are used:

The price of stents has followed the broad pattern of decline typical among innovation life cycles. Bare Metal Stents (BMSs) were first priced wholesale around $1,600 in the early 90s, but today the average cost is around $700 each. Drug-eluting Stents (DESs) were a new model introduced in the early 2000s that have helped marginally reduce potentially fatal angioplasty complications, such as blood clotting. These were originally priced around $3,000, and now cost about $1,500 each. According to Bloomberg, "Hospitals receive an average payment of about $25,000 per stent case from private insurers . . . [and] Doctors who implant stents earn a separate fee that averages about $1,000." The stent cost, then, only comprises ~5% of the total price of implantation, not to mention the ongoing costs for the patient, including blood-thinning medications, which are prescribed as a matter of course to mitigate the risk of restenosis.

Until 2001, India imported nearly 100% of stents used, although there were successful early innovation efforts at lowering the cost of stents through indigenous innovation. A network of doctors and engineers at Care Hospitals, Mediciti Hospitals, and the Society for Biomedical Technology pioneered a low-cost coil stent patented as the Kalam-Raju in 1995, crashing the prices of imported stents by several factors, and remained about 50% less expensive, costing around $250. One of their main reasons for creating a low cost stent was that the reason for the "very low number of cardiac procedures carried out in India is poor affordability arising from the high cost of imported consumables." Depending on the report, there were about 2,000 Kalam-Raju stents implanted before mesh designs replaced the coil stents.

Kalam-Raju Coil Stent, 1995
Indian innovators have generally trailed the major OEMs in stent innovations, so the design shift from mesh to scaffolding, and the biochemical shift to drug-eluting stents have not been kind to the market for indigenous stents in India. There remains a general mistrust of locally manufactured products among large, urban hospital systems, who remain the largest buyers of stents. These developments have maintained a high import price for foreign stents in India, and some reports show patients paying up to three times the import price for stents! Needless to say, the penetration of angioplasty in the Indian market remains tragically low. Of course, the high price of consumables is not the only reason for this. Another is the very low number of cardiologists in the country.

Nevertheless, it's clear that any solution to providing stents when and where they're needed in India will require low cost, high quality stents as part of the solution. Efforts to create affordable indigenous stents have continued in India, such as Relisys' Corel+C in 2007, a collaboration between Dr. Balram Bhargava, Relisys, and Germany's CINVENTION to create a non-polymer-based DES that was both safer and 50% the cost of imported DESs. Ultra efficient cardiac care centers like Narayana continue to ensure foothold markets for indigenous stents that are 'good enough.' While some may scoff at the use of 'good enough' applied to Class 3 implantable devices where quality is at a premium, we should all keep in mind that some device features are luxuries, and that having the basic version of a device that's almost as good, but that costs multiple factors less is far more valuable to a patient whose alternative is nothing at all. And the benefits of the 'best-performing' stents are quite marginal. A recent study found the rates of late stent Thrombosis to vary only marginally from one stent type to another as follows:
  • BMS stents: 1.5% 
  • Old generation DES: 1.1% 
  • New generation DES: .9%
Insured patients in the U.S. will pick the new generation DES every time for a .2% risk reduction, but the potential for disruptive innovation lives on in Indian healthcare, where only some 25% of the population even has access to some form of insurance, so that patients often haggle extensively with providers on costs for which they pay out of pocket. 

The implicit question of each post is always, 'could this device disruptively transfer into the U.S. healthcare market?' Let's compare the prices first: 
$200 is a already a low price for a stent, but the Indian OEMs give a further 25% discount to hospitals who buy directly from them, bringing the cost to $150. Furthermore, the Indian Council of Medical Research is currently conducting a study comparing the quality of imported vs. indigenous stents made by companies like Opto Circuits India, Sahajanand, Translumina Therapeutics, Vascular Concepts, and Vasmed Technologies. If they find similar levels of clinical outcomes, this would help drive domestic uptake, and further decrease the price through economies of scale, perhaps to around $100 each. 

Hospitals using fee-for-service reimbursement may desire to purchase lower cost stents, where 'cathlabs' have become valuable sources of profit at fixed reimbursement rates. Just switching to a $500 Indian DES from a $1,500 U.S. DES would save a hospital performing 2,000 implants per year $2,000,000. In time, payers will reduce reimbursement rates as low-cost stents contribute to low-cost implant procedures, further enabled through remote surgery trends and other efficiency gains. In the meantime, it may already be the case that ACOs and other specialized surgery centers in the U.S. who are incentivized to reduce costs at or above average outcomes would be interested in offering patients a choice between a $100 BMS with a 1.5% chance of Thrombosis, or a DES for $1,500 with a .9% chance of Thrombosis.

Starter Question for Comments: 
  • What's stopping low cost stents from being adopted in the U.S. today? 

Tuesday, 18 November 2014

Could Low Cost Cameras from India Disrupt $5B U.S. Ophthalmoscopy Market?

Ophthalmoscopy, or fundus photography, is the practice of taking high quality pictures of the eye for medical purposes. It is a standard part of an eye examination, and is used to screen for a wide array of conditions like macular degeneration, cancer, diabetic retinopathy, glaucoma, hypertension, or retinal detachment. In 2012, there were 105 million eye exams performed in the U.S., representing 43.8% of the adult population.

There is a range of testing quality to ophthalmoscopy. For the highest quality photos, a cutting edge deformable mirror-based adaptive optics device costing in excess of $500K might be used, but most clinics are using devices that cost anywhere from $1K to $20K for non-mydriatic (not requiring dilation of the eye) fundus cameras, as well as the slit lamp / mydriatic fundus camera configurations with prices in the $15K to $50K range. The slit lamp / mydriatic method produces higher quality photos, and is recommended for a comprehensive eye examination; however, the non-mydriatic cameras have been closing the performance gap in classic disruptive fashion, and they already comprise over half of the $220M fundus camera market. They may also be a safer device for patients.

PC: Aurolab's Slit Imager
At a price range of $1K to $500K, there's a fundus camera for every ophthalmologist in the U.S., but innovation has taken prices even lower in India. The push seems to have begun with the famous Aravind Eye Care System, which succeeded in mounting a Canon A800 camera into a slit frame in 2012 for routine eye exams. Aurolab's Slit Imager is a recent iteration of this model, and though they are careful to say the device is not a replacement for fundus cameras, their kit includes a camera + basic accessories, a professional quality eye piece for capturing photos of the anterior and posterior of the eye, and a sleeve for attachment to the slit lamp. The total cost is only $200, which seems great compared with the prices above, except for two fatal flaws. Firstly, the device requires a slit lamp, whose prices often run into the thousands of dollars. Secondly, the device is not officially approved or recommended to replace fundus camera images even in India, though I imagine it's often used to do just that. After all, something is better than nothing when a number of conditions are likely sufficiently diagnosed using a device like this. In fact, it seems likely one could use this device without a slit lamp. Even so, the U.S. ophthalmoscopy market does not seem amenable to disruption from devices like Slit Imager due to the following market characteristics:
  • Upmarket: The Incumbent View
    • Today's expensive slit lamp / mydriatic camera configurations still seem to be the backbone of thorough eye exams, and therefore a central piece of equipment in eye clinics. Dr. Cheung's May 1st post articulates the current incumbent view well, which has not even reached the point of accepting good-enough non-mydriatic cameras, not to mention a device like Slit Imager.
  • Midmarket: Disruption Today
    • The non-mydriatic cameras are closing the performance gap with the more expensive setups, and hybrid fundus cameras (allowing for both mydriatic and non-mydriatic modes) are predicted to have a faster CAGR than other segments in the coming decade. A particularly disruptive example of a non-mydriatic camera is Jedmed's portable fundus camera, which is modular enough to also function as a camera for general, dermatological, and ear, nose & throat exams. At an estimated price point of ~$2,500, this is comparably affordable to Aurolab's Slit Imager if including the cost of the slit lamp. But it is approved, more versatile, and probably provides higher quality images.
  • Downmarket: Disruption Tomorrow
    • The most exciting disruptive ophthalmoscopy innovations are occurring at price points far below even that of Slit Imager. Take EyeGo for example, a $15 ophthalmoscopic adapter for smart phones out of Stanford University. EyeGo's value proposition is very similar to Slit Imager's, which is "triaging when no other alternative is available," but this model enjoys serious advantages in terms of cost, ubiquity of devices, and seamless modularity with existing infrastructure through phones' photo management and email applications. 
Of course, current market conditions aren't everything: They are just a snapshot, and several nascent trends signal international opportunity for Indian ophthalmoscopic innovators in the coming years. Firstly--as evinced by the Aravind case above--, India is already working hard to decrease costs through substantial reengineering, but have only just begun as of 2012. Secondly, there is a large base of talented software engineers in Bangalore, and India's engineers recently put a satellite in orbit around Mars. These conditions are ripe in encouraging India to realize the true, large-scale disruptive potential within this market, namely by combining extremely low-cost, ubiquitous devices with software applications allowing for accurate diagnoses from photos patients take themselves. This technology is already emerging within certain academic settings, as in the case of eyeMITRA. An integrated product like this would profoundly change the retinal scanning market, drastically increasing the number of 'tests' performed on a routine basis, automating most of the basic spot-checking and triaging, and ensuring that the expensive and highly trained Ophthalmologists and Optometrists are utilized mostly to confirm complex diagnoses and manage complex treatment regimens.

Being in Silicon Valley, EyeGo is in a privileged geographical and cultural position to develop a SaaS platform that works well, or to form relationships with companies like eyeMITRA. On the other hand, market pressures in the U.S. may not be great enough to encourage and sustain an aggressive commercialization strategy. After all, an eye exam in the U.S. currently only costs an average of ~$50, and since nearly half of the adults in the U.S. are already getting eye exams each year, the unmet need may not be acutely painful. Therefore, my advice to innovators like EyeGo, eyeMITRA, and Aurolab is to build this disruptive product of tomorrow in markets like India first, where there is a vast need and a real market. Once the right product and business model arises from there, export the result around the world. 

Starter Question for Comments: 
  • What's stopping devices like EyeGo and Slit Imager from being widely adopted in the U.S. today? 

Wednesday, 5 November 2014

How Mitra Industries Could Save Kidney Disease Patients in the U.S. over $1.7 Billion per Year

Nearly $3 billion per year is spent by U.S. patients on a form of kidney failure dialysis treatment whose cost the Indian firm Mitra Industries has decreased, with the potential to realize savings of nearly $1.9 Billion in dialysate solution alone.
Peritoneal Dialysis
Peritoneal Dialysis

End Stage Renal Disease (ESRD) is a condition requiring either a kidney transplant or an artificial process (mostly dialysis) to clean the blood as a replacement for healthy kidneys. Transplant is the best option, but of the half-million patients with ESRD in the U.S., nearly 4/5 require dialysis treatment, and nearly all of these undergo hemodialysis (HD), an extracorporeal process of removing, cleaning, and replacing the blood using machines. The remaining patients, currently ~40,000, opt for peritoneal dialysis (PD)* therapy, a process whereby a permanent catheter embedded through the abdominal cavity is used to exchange medicated dialysate with waste from the blood via the peritoneal membrane at least 3x per day. This is a process the patient manages herself. The outcomes for PD and HD are comparable, but the main advantages of PD over HD are increased patient empowerment, and cost savings. Several studies in recent years have argued convincingly for the general superiority of PD over HD on a number of relevant dimensions

With per patient costs of ~$72,000 per year in the U.S., PD does cost less than HD, which runs ~$88,000 per year. The main cost drivers for PD are the dialysate solution, requiring 1 bag per session, as well as the general management of anaemia, the latter being common to any dialysis treatment. A quick look at the prices of PD supplies on Baxter's product listings confirms their high price as each bag of solution costs ~$45, summing to a yearly cost of nearly $50,000 in solution alone for just thrice daily treatment. 

While improvements in home hemodialysis technology could change this, PD is currently the most disruptive form of dialysis. But could costs be even lower for ESRD patients opting for the low cost dialysis route? 

Mitra Industries, a manufacturing company in Transfusion Medicine & Renal Services based in New Delhi, India, has developed a novel one-bag solution (NOB) for PD that has decreased the monthly per patient cost to a shockingly low $235. Even assuming that all of this cost is attributable to solution, with thrice per day therapy, that's a per bag cost of $2.6 compared with $45 from Baxter. Other product benefits are named in their release video below. 


In my correspondence with Atul Rishi, the Country Manager for Mitra, he prefaced his introduction of the NOB by listing the environmental constraints that shaped Mitra's innovation efforts. These are: 
  • India Is a Large Country: True both in terms of area & population
  • Education: The majority of the population is not educated
  • Limited Medical Resources: Main cities have excellent facilities but smaller towns are still lacking basics, and the majority of the population in India still resides in smaller towns. For example HD machines are only available in large cities
  • No Medical Reimbursement: Only limited government employees get medical reimbursement and all private patients are self-paid, so they know the costs
  • High Medical Costs: India still imports many medical devices and medications from abroad, and distribution costs are high to reach rural patients, e.g. consider the cost of transporting sufficient quantities of the standard 2 liter bags used in PD therapy
  • High Non-Consumption: 80% to 85% of kidney failure patients go without renal therapy in India as a result of the factors above
  • Emerging Manufacturing Capability: The first indigenous designer and manufacturer of PD products in India began work only in 2000, and started manufacturing supplies nearly identical to those India had been importing from Western countries. 
When Mitra began manufacturing PD products in 2006, they did so at the same price points as the competition, but as Atul says, "[We] were constantly thinking on how to reduce cost per bag so that it is not only more economical than existing PD company bags, but also equivalent to or lower than HD monthly cost" (HD, though generally more expensive than PD in developed countries, is sometimes cheaper in developing countries, likely due to much higher resource utilization).

Innovating to the market constraints above, Mitra reduced 2 bags to 1 by reusing the solution bag as the drain bag, and thereby also eliminated the Y connector & tube. This has decreased material cost and waste, and also reduced transportation cost of materials by 15%, leading to a price point not only 95% cheaper than PD bags in the USA, but also 33% cheaper than alternatives in India. 

Whether Mitra can make the leap into the U.S. healthcare market to disrupt existing offerings with its NOB depends on many factors outside the scope of this post's analysis; however, the need for innovations such as this is especially dire at this time. Baxter, which supplies about 90% of supplies for PD patients in the U.S., limited the number of PD referrals across their entire base of customers this year, as well as announced there will be an unexpected and large shortage in supplies of peritoneal dialysis solution for patients with kidney failure in the U.S. Other U.S. manufacturers have stated they cannot make up the shortfall. Given that PD has been rapidly growing as a viable form of low-cost, effective dialysis treatment in the U.S. in recent years, the FDA would do well to consider extending import and marketing approvals to companies such as Mitra, which not only have the capacity to serve patients at scale, but have also structurally innovated their products to decrease the cost of PD therapy. Baxter may well leave the game due to the loss of margins for provision of PD equipment, but they already seem to have lost interest in this market. Should we succeed in allowing entrance to laudable innovators such as Mitra, the real winners will be the patients and payers of America.

*All subsequent use of 'PD' in this post refers more specifically to continuous ambulatory PD, as opposed to automated PD

Photo Credit:

Monday, 13 October 2014

Theranos: The World's Best Healthcare Company

Introduction to Theranos

TheranosEver since their debut article in Fortune this June, in which Theranos unveiled its stature as a $9B-valued company poised to completely disrupt the $78B per year laboratory diagnostics industry, Theranos has been lavishly featured in the media as a herald of the new healthcare: Affordable, personal, transparent, and accessible. Theranos is built around a proprietary new high-complexity diagnostics lab that allows for a large range of tests (they currently list 229 on their website, but the Fortune article tells us they'll soon offer over 1,000) to be run on blood and other bodily fluids using much smaller sample sizes (70 separate tests can be run on a single sample of a few drops of blood: 1/1000th the amount of blood needed for traditional tests) for a very low cost (Theranos's prices are always 50-90% less than the Medicare reimbursement codes. For example, a standard metabolic panel would cost ~$46 at a standard lab, Medicare would reimburse $14.74, and Theranos charges only $7.27. The average price across their 229 tests is $12.92), and at exceptional speed (whereas traditional testing services would take days to return results, Theranos's labs take mere hours). The Theranos labs also require less footprint, allowing them to be housed in small corners of retail clinics, hospitals, and other existing healthcare outlets. They have signed a non-exclusive agreement with Walgreens (the pharmacy chain currently boasts over 8,200 brick-and-mortar pharmacy locations in the U.S.) to build Theranos Wellness Centers in each location as quickly as possible. They are already operating out of 39 Walgreens stores in Arizona, and 1 in Palo Alto, California. They have also inked agreements with several hospital systems, such as Intermountain Healthcare and Dignity.

Whence Theranos on 

Before explaining why Theranos is the best healthcare company in the world, it's worth explaining why is featuring Theranos in the first place; after all, the company maintains over 500 employees in a 111,000 square-ft. facility at Stanford University, and even manufacturers their labs at a 262,000 square-ft. factory in Newark, California. Their board is also unusually stacked with American civil heroes such as Henry Kissinger, William Perry, and James Mattis. Theranos is as American a company as they come, but there are good reasons to feature Theranos as the first innovation profile on a site dedicated to researching technologies originating from emerging markets. The first is that Holmes's (Elizabeth Holmes is the Founder and CEO of Theranos, a very focused and brilliant person who dropped out of Stanford's Chemistry program as a Sophomore to start this company) idea for Theranos seems to have originated from a 2003 summer internship (Holmes founded Theranos in the fall of 2003) at the Genome Institute of Singapore during their work with Roche Diagnostics to make highly affordable, accessible, and fast SARS testing kits available to the Asia-Pacific region using their nobel-prize-winning PCR technology. 

The second reason is that Theranos is such a complete example of a healthcare innovation, a standard by which all of the individual foreign technologies will feature must aspire to within the transplanted context of the U.S. healthcare market. The fact is that any technological innovation in isolation is naked, and really not worth much until it is clothed in the appropriate vestments of an integrated market application and comprehensive business model that delights each of its stakeholders. Like Edison, true disruptors must invent more than just a lightbulb: They must also design and execute a workable electrical grid into which the lightbulb can integrate.

Why Theranos is the World's Best Healthcare Company

Reason 1: Theranos's Market Position in Diagnostics
Successfully designing their 'electrical grid' is the second-most important reason why Theranos is the world's best healthcare company. The first is that they may credibly become the 'gatekeeper of healthcare' by owning the market for laboratory diagnostics, the data of which already form the basis of 70-80% of clinical decisions. This number will only increase as the speed, reliability, accuracy, breadth, price, and accessibility of diagnostic information increases--all of which Theranos is accomplishing. Additionally, diagnostics is the nexus of healthcare most amenable to expanding the scope of practice of lower-cost providers for well-understood medical conditions. As another of our posts explores, this is one of the surest ways to decrease healthcare costs in the U.S. 

Reason 2: Theranos's Business Model
Every component of a good business model flows from, and seeks to balance and reconcile, the foundational stakeholder value propositions (VPs) upon which the success of the business depends. These VPs are responses to stakeholder jobs-to-be-done (JTBD). Below are some examples of the primary stakeholders, their JTBD related to lab diagnostics, and the resultant VPs that Theranos has so expertly constructed its offerings around:

  • Patients
  • Providers
    • JTBD
      1. Fast, accurate test results
      2. Easily place orders and follow-up orders
      3. Easily consumable reporting
      4. Not take up much space (hospitals)
    • VPs
      1. Results w/in hours instead of days; high illustrative accuracy 
      2. Send samples using existing infrastructure OR send patient to Wellness Center
      3. Alerts and easily consumable graphs via software
      4. Theranos labs require 10x-100x less space than traditional labs 
  • Payers
  • Regulators

Challenges In Emerging Markets for Theranos

Theranos is a careful company. They were in stealth mode for 10 years making sure to nail each piece of their business model before starting to scale, and they are doing that very deliberately so far with Walgreens. Holmes has indicated that Theranos is systematically evaluating a global expansion strategy, which will probably not happen tomorrow. If it does happen, each new market will of course require an entirely new business model, or configuration among a separate set of stakeholders.

Research on the laboratory diagnostic market in India indicates that Theranos would today be a welcome innovation within this market since the vast majority of diagnostic labs in India are importing equipment from the same OEMs that supply the traditional diagnostic labs in the U.S., e.g. Siemens, Olympus, and Beckman Coulter. Because of this, even the Indian test prices are still higher than those of Theranos as the table below comparing the cost of a few Theranos and SRL Diagnostics tests shows:

But price is just one metric, and others may be just as important in emerging markets. For instance, Dr. Natarajan Sriram wrote a critical piece about existing IVDs in emerging markets, and while price was at the top of the list of criticisms, there are many additional reasons that make significant market penetration difficult for laboratory-based diagnostics. Dr. Sriram outlines important performance dimensions required for IVD products to succeed in emerging markets. While Theranos performs well on several cost and reliability metrics, there are a few that Theranos will find difficult to excel on in its current form:

  1. Simple and minimum end-to-end procedure
  2. Test results require no additional equipment or accessories from site of test
  3. Small pack size of IVD
  4. Minimal training required w/ no professional staff
Rapid Diagnostic Test
Typical Rapid Diagnostic Device
Dr. Sriram's own company, the Tulip Group, oversees the R&D and production of Rapid Diagnostic Tests (RDTs), which are typically single-use applications meant to test for the presence of an infectious disease, exactly like that of Roche's PCR system for SARS in 2003. While incremental cost advantages to RDTs have been shown at high levels of a particular disease prevalence, their true advantage in emerging markets is that they satisfy the above criteria for success that Dr. Sriram outlines. 

The penetration of Theranos into emerging markets in its current form might rely on how widely held and acute the JTBD of 'help me watch a movie of my micro-biological health indicators over time' is in these markets since the OEMs already supplying the equipment will likely soon provide lower-cost lab diagnostics to achieve cost parity with Theranos. 

I wonder, might Theranos carry their genius of miniaturization a bit further to create portable laboratories, patches, or more versatile RDTs in order to succeed in emerging markets as they will succeed in the U.S.? 

RDT photo credit:

Tuesday, 7 October 2014

Could India Lead the Way in Global Medical Diagnostic Solutions?

Molecular diagnostics, imaging technologies, and high-bandwidth telecommunications are important enablers for disruptive business models in healthcare because they greatly facilitate the movement of medical conditions from intuitive and empirical medicine to precision medicine, where the diagnosis and therapies for these conditions are perfectly or near-perfectly understood. 

Once a condition is within the realm of precision medicine, the scope of practice should be widened for less-credentialed providers to administer diagnoses and provide therapy since there is little possibility of error, the cost of care decreases, and specialists' time and attention can be refocused on true problems. Allowing for expanded practice scope results in more primary care doctors, nurses, PAs, NPs, and others solving the problem on the first visit, greatly mitigating one of the primary cost drivers of the ever-more-expensive U.S. healthcare system: Referrals. Once our understanding of a condition has graduated to the realm of precision medicine, passing the buck is no longer necessary. 

Of course, there are many rules and regulations in place that inhibit practice scope expansion, and thus the need for disruptive business models that prove out the value of administering precision medicine efficiently by gaining market footholds in alternative value networks. Once successful, such business models compel legislative reform on the basis of their fait accompli market victories. 

In the U.S., there are currently several auxiliary efforts to disrupt diagnostics underway; important and impactful to be sure, but not sterling examples of diagnostic technology's promise to disrupt healthcare. For example, American Well and Project Echo both leverage telecom and mobile technology to nip as many problems and as much of each problem in the bud as possible before recommending an expensive in-person visit to either a PCP or specialist. Retail clinics also continue to spend a great deal of money lobbying for practice scope expansion on a state by state basis, e.g. CVS Minute Clinic fighting for pharmacists' of NPs' ability to perform more precision medicine procedures.

Medical technology can greatly aid in establishing the most efficient, low-cost care processes for precision medicine possible, and improved diagnostics should be at the center of these new business models. But where to look for it? 

I believe India will be a source of truly disruptive diagnostic technology for several reasons. Firstly, it is a market forced to create alternative value networks as entrepreneurs attempt to radically expand access to care with radically affordable products and processes. Secondly, the diagnosis / therapy process in India is not necessarily constrained by rule and regulation to the degree it is in the U.S., allowing for expansion of practice scope as needed. For example, a large part of why Narayana Hrudayalaya is able to perform heart surgery at 1% the cost of the same surgery in the U.S. is that the specialist only does the grafting, which takes about an hour, while a support staff of junior doctors, trainees, nurses and paramedical staff complete the other 4 hours of work consisting of harvesting of veins/arteries, opening and closing of the chest, suturing and other procedures. 

Thirdly, there are several Indian medtech manufacturers that have been in operation for 1-3 decades, and have the technological and manufacturing know-how to start creating truly disruptive diagnostic products for the Indian market as a whole. For example, Trivitron--the largest medical device maker of Indian origin--claims that to "realize Dr. GSK Velu's dream of providing affordable healthcare solutions to all sections of the population, the Trivitron Group now also designs, innovates and manufactures medical equipment across the entire healthcare spectrum." 

Given Trivitron's Facebook post yesterday about bringing 4 new microbiology diagnostics products to market, along with Dr. Velu's closing comments at the recent FICCI Heal 2014 conference to give more focus and attention in India "due to very high import dependency," I would expect to find several promising diagnostic innovations being developed organically from within indigenous R&D centers, such as the Trivitron-IIT Madras Innovation Center. While it's true that companies like Trivitron will find breaking out of their traditional roles as manufacturers and distributors of imported products and technologies to the still-limited Indian healthcare infrastructure, developments like Trivitron's acquisition of Dubai-based ETA Star Healthcare enabling for an export strategy to other developing markets is an encouraging sign. 

Photo Credit: 

Thursday, 2 October 2014

Why Conducting Research with an "n of 1" is Best

I have pivoted the purpose and scope of in order to conduct research with an 'n of 1.' The idea is that truly valuable insight into causation comes from limiting research to one subject that reflects all potential factors that might explain the dependent phenomenon in question, and then carefully studying the provenance of the phenomenon with sole reference to this particular subject. In other words, just as a medical researcher might study the pathology of a disease within one patient to understand the disease (the patient being the subject; the disease being the phenomenon), so I might study global innovation transfer within one emerging market company (the company being the subject; the global innovation transfer being the phenomenon). I wish to acknowledge Clay Christensen for this insight, who shared it in a meeting with me on September 4th, 2014.

This was a significant paradigm shift as I had originally planned to uncover and analyze as many potentially transferable healthcare innovations as possible from around the world, and then hoped to extract some real insights into which ones might be 'winners' for effectively improving healthcare through global innovation transfer. According to the advice above, it will be much more productive to carefully choose one of the companies that has successfully developed a healthcare innovation within their own emerging market, and has also made some progress in transferring the innovation globally. By making an in-depth study of how this company has navigated the conditions and constraints confronted in its journey, real insight will emerge that may help guide more global innovation transfer in the future.

But how to choose the right company among such a large array of promising candidates? Firstly, I will initially limit the bulk of posts to companies that have developed healthcare innovations by, for, and of the extremely constrained markets of India. There are other great innovation 'laboratory' markets, but India is a good place to start as they are famously developing a sizable number of healthcare innovations.

Each week, will feature one or two snapshot posts of individual innovations from its Innovations Database page, each innovation of which fits the criteria above. I will also be attending the 8th Annual Indian Medtech Summit in Delhi on December 11th and 12th, 2014, and will finalize a single Indian partner company for close study during my stay in India in January and February of 2015. will feature the research coming out of this internship as a white paper on the website.

Photo Credit:

Sunday, 22 June 2014

A Brief Intellectual History of

The Inception

Excellent Ukrainian Bread
The idea for this project began to form during my time in Eastern Ukraine from 2003-2005. In many cases I discovered that Ukrainians' way of doing things was better than what I had known before. "Better" is always a word needing qualification, and the qualifier differs in each case. Take Ukrainian bread: It's better than the pre-sliced bread from grocery stores I was used to on dimensions of taste, nutrition, and texture; on the other hand, it was worse on dimensions of shelf life, tidiness (crumbs would fly upon slicing), and even PPP cost.

The insight for me was that societies have comparative strengths and weaknesses developed over time in response to conditions on the ground. This goes far beyond food, which after all is largely a matter of taste and habit, and into the ways in which societies organize themselves economically in general.

A Theory

The next piece of understanding was learning Clay Christensen's theories of innovation. I read all of his books and most of his articles as a consultant at Innosight from 2009-2011. Innosight, a firm co-founded by Christensen, helps mostly large corporate clients navigate the challenges and opportunities of disruption in their markets. Clay's theories deepened my interest in the mechanisms of successful innovations, which go far beyond isolated technological advances to encompass new systems and models for delivering value in more cost-effective, accessible, and targeted ways. Large scale disruptive innovations succeed over time and are often generated within tight resource constraints. For example, consider many of the disruptive innovations that Japan was exporting to the U.S. starting in the late 1950s:
  • The Honda Super Cub motorcycle
  • Sony's hand-held transistor radios
  • Toyota and Honda cars
Each of these innovations eventually created a robust market in the United States by targeting consumers that had been over-served by incumbent technologies. Relative to the 'jobs to be done' of these consumers, the product characteristics of physical smallness, efficiency, and low cost were all attractive. Importantly, however, these products were not created in the United States: They were originally of, by, and for the Japanese market, where conditions on the ground differed markedly from those in the United States. Products initially created for obvious markets in Japan would eventually create much larger, though initially less obvious, markets in the United States. This happened dramatically and repeatedly from the 1950s through the 1980s.

During my time at Harvard Business School I read Vijay Govindarajan's Reverse Innovation, which argues that innovations developed for consumers at the bottom of the global economic pyramid, i.e. the roughly 2.5 billion people living on less than $2 per day, share qualities similar to those that characterized Japanese disruptive products starting in the 1950s; namely, they are low-cost and low-performance relative to incumbent technologies, but they succeed because they're mostly targeting non-consumption and under-consumption. Here are just a few examples of these disruptive products from the Innovations Database page of this website:
Many commentators on the healthcare industry in the United States have called for various avenues of disruption to the industry, which would broaden access, lower costs, and improve outcomes. Though the barriers to disrupting healthcare in the U.S. are many, I believe adopting new, disruptive models of delivery inspired directly by successful innovations from the highly constrained markets of the world is one route that will greatly help., then, is a research project hoping to aid the transfer of these innovations, and thus aid the continuing betterment of the U.S. healthcare system.