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? 


  1. Looking at this from a Fortune 500 company point of view, low priced products are not what drive innovation in healthcare. Many healthcare companies in developed countries with complex healthcare systems need better solutions, not just cheaper products. Recognizing this themselves, medtech companies are turning more to services to fuel their growth so they can offer "one stop shop" models for their customers. For example, Medtronic recently acquired NGC Medical to expand it's influence into surgical suites to complement their portfolio of surgical devices.

    Further, low priced products aren't necessarily innovative. Big companies can easily lower their prices, but to the detriment of their profits, so they don't until the market demands it. Remember prices are generally set based on a willingness to pay, not COGS. In my opinion, real innovation in developed markets comes when something is created that does something better, for either the same overall value or more (or equal or less overall economic burden).

  2. Thanks, Ryan, great points. I agree cost is not the most important measure of the disruptiveness of a product, which is mostly measured in terms of how much it increases accessibility relative to incumbent products targeting similar stakeholder 'jobs to be done.' Saving cost often won't matter to insured patients, where it may matter a great deal to payers. But cost is also not the only factor of accessibility; other accessibility characteristics include size, simplicity, modularity, or ubiquity. Cost is only correlated with these characteristics.

    This blog explores the disruptive potential of emerging market devices within developed markets, referencing cost as a lens only. This is something we should be more explicit about.

    As you point out, the direct expenditures associated with medical devices are a small part of total healthcare spend, but when disruption occurs markets are fundamentally changed. Yes, they're made more efficient, but their shape often changes too as the number of end customers increases. Care becomes more patient-centric and distributed. A medical device is usually just a piece of hardware, but it's 'housed' within a business model that's an integral part of the delivery of the diagnosis or treatment for targeted condition(s). And business models can be hungry things, requiring a large number of personnel, processes, time, physical space, and other costs to operate. If you've read The Innovator's Prescription, you'll remember that housing too many conflicting business models is a fundamental cause of general hospitals' financial non-sustainability. The beauty of disruption is often that the cost and efficiency savings are not only reflected in the price decrease of a device itself, but mostly realized as the overhead of an incumbent business model associated with the incumbent device is gradually replaced. This is happening all over healthcare, such as American Well's telehealth solution, Theranos's diagnostics, and various medtech wearables.

    Since necessity is the mother of invention, our hypothesis is that many of tomorrow's medtech disruptors will originate within emerging markets. Whether any of the devices we feature will be global disruptors is an open question, but the Fortune 500s are already being quite active in sourcing innovation internally and through acquisition in India and China (see book Reverse Innovation).

  3. Here's another interesting possibility in this market: http://www.bbc.com/news/uk-scotland-30194602

  4. Eye Netra and Remidio are two companies already commercializing ophthalmoscopes as smartphone attachments. Their focus seems to be emerging markets, but Eye Netra is based in Cambridge, MA. Forthcoming post on these.

  5. Fundus cameras are here to stay and NOT just for eye diseases, either. Neurologists, who deal with the mass of tissue behind the eyes, called the brain, have forgotten the eye as a source of ready information gleaned by just looking at the brain (the optic nerve/retinal complex is not exactly hanging out there out of thin air but is an extension of the brain) itself. They are NOT taught about the retina in their residency programs (most of them anyway) since the teachers themselves are unsure of what to teach, if anything, since they do not know anything, unfortunately. So, most give it a nod and a wink. When was the last time neurologists used their ophthalmoscopes which is supposed to be 100% for all diseases concerning brain, but what is the actual number ? Perhaps 2 % or less ?