toolkit -country snapshots

7/31/2019 Toolkit -Country Snapshots

1/15

Overview of Healthcare in Emerging Markets

India, Brazil


2/15

Emerging Markets Demographics


3/15

Increasing population and changing socio

economic mix:Indias population is expected

to reach 1.5 billion by 2040 with a large

proportion of wealthy population

India is the youngest country in the world and

will have one of the largest working population

in the near future

In the next two decades, the middle class

population of India from 5% of the population to

more than 40%

Rapid Urbanization:The proportion of the

population in urban areas is growing fast but

the social infrastructure is lagging

Only 29% of the population lived in an urban

setting in 2005; urbanization is expected to rise

to 37% by 2025

There is an increasing lag in the urban

services, followed by basic problems in the field

of housing, slum, water, infrastructure, quality

of life, etc.

India: The great boon and challenge India faces is the high

proportion of young adults in a traditionally under-literate

economy

Demographics: India

Slow liberalization of the economy:India is

ruled by a coalition of political parties which

prohibits the government to induce rapid

reforms or liberalization policies

The focus of the government is less on

corporate welfare but more on providing the

basic necessities to the common man

Government is likely to move forward with

modest reforms that increase competition,

although the pace of change will be slow

Universal education scheme:The new

government is aiming to implement universal

secondary education by 2013 to channel the

high number of young adults

Increasing private spending:With fast

urbanization, the Indian consumer is

expected to spend more and more, driving a

consumption based economy

Key demographic trends

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Children Elderly

Indias dependency ratio as % of population aged 15-64CAGR

0.5

0.50.6 0.6

0.70.8

0.70.8

0.91.0

1.1

0.60.6

0.70.8

1.01.1 1.0

1.2

1.3

1.5

1.7

$-

$0

$0

$1

$1

$1

$1

$1

$2

$2

$2

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Personal disposable per capita income Per capita GDP

12%

9%(000)

Key economic trends

Forecast

Forecast

Source: EIU, CII Report on Indian middle class,Medinsight Market reports, Cygnus market reports


4/15

Increasing dependency ratio:The Brazilian

population would age owing to a decline in

both birth and mortality rates

The overall population in Brazil will remain

younger than that of most industrialized

countries as the number of people of working

age is rising faster than the growth of the

population as a whole

The elderly population is skewed towards the

female population which stems from the high

incidence of male deaths under the age of 60,chiefly reflecting high levels of violent crime

High and increasing urbanization:An

estimated 84% of the Brazilian population

now lives in cities or urban areas which is

expected to peak at ~90%

The wealthiest region, the southeast, is densely

populated

Northern states and the interior of the dry

northeast are sparsely inhabited

Brazil: The country though liberal in its policies continues to

face a lot of political and economic turbulence

Demographics: Brazil

Instability in political and financial structure:

Due to sudden devaluation of the Brazilian

Real has led to a very debt/GDP ratio for Brazil

The Brazilian government has liberalized the

economy by relaxing taxes, thereby increasing

the debt burden which has put the country under

great financial stress

Numerous scandals have led to resignations at

the governments top brass coupled with

disharmony amongst the loosely collated parties

that form the government

Increasing public private partnerships to

improve Brazilian infrastructure :The

government has vowed to a Growth

Acceleration Program through private

partnerships to upgrade the physical

infrastructure

Key demographic trends

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Children Elderly

Brazils dependency ratio as % of population aged 15-64CAGR

1.61.8

2.22.5

3.0

3.3

3.0 2.9 3.0 3.0 3.13.1

3.7

4.8

5.8

7.0

8.2

7.17.5

8.1

8.5

9.0

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Personal disposable per capita income Per capita GDP

11%

7%(000)

Key economic trends

Forecast

Forecast

Source: EIU, Espicom world reports


5/15

Emerging Markets Healthcare System


6/15

India: Healthcare system is made up of a rudimentary network

of public hospitals and clinics and most healthcare services are

provided through independent practitioners

Source: Deloitte Consulting Analysis

Regulatoryagencies

Distributors

Patients

Physicians

Medicaldevice

manufacturer Fragmented with no large

players

Multi-layered distribution for

imports

Providers

Largely private

and very

fragmented

Payors

Mostly funded out-of

pocket

Commercial insurance

have low influence but

growing

Low physicians per capita

Traveling consultants

increase complexity

Rising incomes and

urbanization

Increasing focus onhealthcare

India: Healthcare Ecosystem

Minimal regulation

New regulatory authority

being set up


7/15

India: The government is trying to extend healthcare coverage to

rural India, while the onus of providing healthcare to urban India

mostly lies with private players

Increase in western diseases:Driven by rapid

lifestyle changes India has the worlds largest number of

diabetics; associated conditions like

cardiovascular disease and hypertension are

also on the rise

Incidence of oncologic disease is increasing by

about 25% annually

It is estimated that increasing lifestyle diseases

will cost India $237bn by 2015

High and increasing prevalence of developingworld diseases:India has a poor sanitation

infrastructure leading to a very high

prevalence of communicable diseases

The incidence of tuberculosis is holding

constant; many emerging markets experience a

decline in the disease

The nation has the 2nd largest HIV+ population,

behind only South Africa

Increasing stress on providing care to rural

India: The ministry of health has come upwith a 100-day plan to make primary health

accessible to the poor and needy in tribal,

rural and hilly areas

Health centers will be identified as 'difficult,

most difficult and inaccessible' and incentives

will be provided to doctors and paramedics who

are willing to work there

Increasing private participation:

The insurance market was opened up toprivate participants in 2000, and in 2007 the

government removed the limit on premiums

The new-found prosperity of many Indian

households is spurring demand for high-quality

medical care, which is being en-cashed by

large chain of corporate hospitals through large

expansion plans

Population disease trends

Major causes of deaths in india

Healthcare system trends

2005 2030 (E)

Communicable,maternal, perinatal,nutritional conditions

3,728,559 2,571,750

Cardiovasculardiseases

2,989,326 4,405,211

Other ChronicDiseases

1,645,366 2,344,199

Injuries 1,108,082 1,485,181

Cancer 826,189 1,462,494

Source: Deloitte analysis, WHO, EIU

$11B ,

20%

$44B ,80%

Breakdown of Healthcare Spendingin India , 2008 ($55B)

PublicPrivate

India: Healthcare Trends


8/15

Brazil: Though the healthcare system is supposedly universal,

but due to poor delivery of care, the public relies heavily on

private care delivery

Source: Analyst Reports, Deloitte Consulting analysis

Financing Delivery

Population

Enterprises

Centralgovernment

Privatehealth

Companies(30% pop.)

Local and

StateGovts.

Ministry ofHealth - SUS

Providers

Physicians

Compulsorycontribution/Generaltaxation

General

taxation

Voluntary pre-paid

Patients

DRG like fee for service

The quality of care is consideredpoor

Private organizations are theprincipal providers of service toSUS

Public hospitals are the oneswhich are equipped with thelatest technology and have thebest doctors working

In-patient is largely privately-run,whereas out-patient is largelypublicly-run

The three levels ofgovernment (federal, stateand municipalities) are bothpayers and providers

Difficulties with public services haveprompted people to contract withprivate companies that feature lowprices and few guarantees

The government has sought to

encourage greater use of privatehealthcare by wealthier citizens totake pressure off the public system

Brazil: Healthcare Ecosystem


9/15

Brazil: Due to fiscal constraints, the government is making

limited investments in healthcare but encouraging the private

sector to participate

Increase in lifestyle diseases:Diabetes is an

important and growing concern in Brazil

By 2030, Brazil is expected to have the 6thlargest diabetic population with 11.3 million

cases of diabetes

Lifestyle choices are a risk across all

population subgroups and include higher age,

BMI, alcohol intake, salt consumption, and oral

contraceptive use

Overall, death rates from communicable

diseases have been falling:

The budget for TB control more than doubled

between 2002 and 2006; incidence and

prevalence of TB declined from

20002006

Brazil has the 15th highest number of people

living with HIV; however, both the incidence

and mortality rates have declined since the

1990s with adult prevalence estimated at 0.7%

Limited government investments and

increasing private investments:Due to fiscal

constraints the federal system has onlyinvests in few regional healthcare initiatives

The government encourages greater use of

private healthcare by wealthier citizens, to take

pressure off the public system

Public investment are mostly aimed at

providing basic healthcare coverage to the

impoverished North-east region of Brazil

Foreign partners led modernization in

process:Foreign partners are participating assuppliers of equipment and providers of

services to modernize public healthcare

system

Population disease trends

Major causes of deaths in brazil

Healthcare system trends

2005 2030 (E)

Cardiovasculardiseases

424,621 648,139

Other ChronicDiseases

312,725 527,464

Communicable,maternal, perinatal,nutritional conditions

212,606 125,644

Cancer 190,154 307,047

Injuries 148,096 179,943

Source: EIU, WHO

Brazil: Healthcare Trends

29 30 31 31 32 33

41 4143 44 44

46

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010 2011 2012

Government Budgetary Expenditure Pr ivate Expenditure

Healthcare expenditure by sources of funds ($billion)


10/15

Emerging Markets Provider Landscape


11/15

India: Most large hospitals in India are in tier I cities, while small

cities have only basic infrastructure; relying heavily on travel to

tier I cities for advanced treatments

Commonly termed as nursing homes,

common in residential areas in large to

medium sized cities:

Serves to mostly medium class and

above

Highly constrained by infrastructure and

skilled staff

Mostly owned by individual or a group of

entrepreneurial Physicians

Serves low income population and has

Low infrastructure

Spe

cific

Characteristics

CommonCharacteristics

Definition Tier 3 Hospitals

Large sized facility, 100+ beds

Tier 2 HospitalsMedium sized facility, 50-100 beds

Total number of hospitals 790* Total number of hospitals 32000*

Larger corporate hospitals with good

infrastructure and technology

Serves high income patients, also

serves a % of middle class (mostly

Tier 1 cities)

Prefers MNC products where

available

Increasing insurance penetration

Serves primarily low incomepopulation

Serves complicated cases for high

income population

Consultant physicians serve patients across income segments and hospital tiers

Target and serve middle class populations

Affordability and price sensitivity is a large concerns: Patients pay out of pocket for

nice to have procedures or devices

Private

Government

* Top government and corporate hospitals included in Tier 3, nursing homes and remaining government/private in Tier 2

Source: Primary interviews, Deloitte Consulting analysis, n=76

India: Provider System


12/15

Brazil: While the rich use private provider facilities, the not so

rich get sub-standard care at government hospitals which often

lacks funding and infrastructure

Premium market hospitals

The premium segment is served by the

global manufacturers directly through key

account managers

These centers of excellence serve the

well-off minority

Mid-segment hospitals

Around 2000-3000 hospitals in this

segment

These hospitals are served through

distributors

Mass market hospitals

These hospitals serve the populationwhich cannot afford private insurance

Most are dependent on public financing

and deliver inefficient, poor-quality care

Look for low cost or re-furbished medical

equipment

Funding source andprovider and different

Funding source andprovider are the same

Funded by publicand run by private(~600)

Higher efficiencyand quality

Efficiency rivals that

of for-profit privatehospitals

Focus on high costcurative care

For-profit facilities(~2600)

Increasingly cater topatients covered byprivate health plans

Form a part of the

coverage network

Small non-profitfacilities (~1800)

Most of them areSUS-financedprivate hospitals

Lack of competitionhence no incentiveto perform

Funding andadministration isdone by government(~2500)

Most poorlyperforming hospitalsacross the board

There are also approximately 200 universityhospitals

Source: Industry publications, Deloitte analysis

Brazil: Provider System


13/15

Emerging Markets Distributor Landscape


14/15

India: Due to poor transportation infrastructure, an effective

distribution system required engaging multiple distributor

layers before delivering the product

OverseasManufacturer

LocalReceiving

Dock

Local IndiaManufacturer

Warehouse (Tier 1)

Warehouse

(Tier 2)

Distributor(Tier 1)

Distributor(Tier 2)

Retailer(Tier

1/Tier 2)

Poor electronics/PCBbased manufacturingscale/expertise; resultingin medical device imports

Strong processchbemistry skillsAPIsand formulations

Tax deferrals oninterstate warehousetransfers

Tax is imputed only

when title transfers to

the distributors

Mostly third partywarehousingcompanies offered on a

fee based service

Absence of economiesof scale - top 10 largedistributors account forless than 3% volume

Leveraging sub-distributors often forincreased market reach

Approx. 60K distributorsserve 500Kpharmaceutical retailers

Sub-distributor is similarto a micro-distributor; isin charge of an areawithin a city

Controlled by a stronglobby AIOCD (AllIndia Organization ofChemists andDruggists)

Controls payment

terms and margins

Logistics represents 45-55% of the total product cost

to the consumer and approximately 10-15% of

manufacturing, warehousing, transportation to

distributor costs

Most current investments are in creating cold chain

(fluid transportation) infrastructure across the

country

Largest infrastructure players are DHL and SafeExpress

Foreign distributors like Zuellig are entering the

distributor space

Consumer product companies (Unilever, Coca Cola

and ITC) have targeted the Tier 2 markets well and

are taking the lead

Some local pharmaceutical companies have

established subsidiaries which are entering into

device distribution, e.g. Elder Pharmaceuticals ownsa respiratory device distributor

Key Insights Challenges

Commonly used distribution process Less commonly used distribution process

Transportation

Poor transportation infrastructure - Bad roads

increases time and cost

Sub-distributor transportation often by bicycles,

motorcycles and auto-rickshaws

Warehousing: Absence of cold chain

infrastructure

Illegal Practices:

Issues in counterfeiting, pilferage, diversion

and parallel trade

Dealing with fragmented distribution base and

unfair trade practices by manufacturer sales

force (product dumping)

Regulations: very feeble medical device

regulations (introduced only in 2008)

Hospitals(Tier

1/Tier 2)

Sub-Distributor

(Tier1/Tier2)

India: Distributors


15/15

Brazil: Lack of large distributors, high urban violence and an

inadequate security system mars the Brazilian distribution

system

OverseasManufacturer

LocalReceiving

Dock

Local BrazilManufacturer

NationalDistributor

RegionalDistributor

4 national distributors accountfor 95% of the market

Approx. 3K regional and localdistributors

Approx.56Kpharmaceutical retailers

Key Insights Challenges

Limited scale andexpertise in APImanufacturing andmedical devices

Manufacturing:

90% of medical devices are imported

Imported devices attract ~70% in import tax andother duties increasing the price to consumer and

also leads to illegal imports

Transportation: Security is a big issue as there is

increasing cargo theft (trucks) and illegal trafficking is

common

Distribution: Medical device distribution is run by few

skilled specialists, but no dealer can effectively serve

the entire country

Regulation: Product registration is a difficult process: Registration: A local company must hold the

registration to sell a specific medical device

Cycle time: Registration process for products

already registered in Europe, N. America or Japan

takes at least nine months

Fee: Registration fees run from $500 - $5000

Significant safety concerns due to high levels of

urban violence

Distributor Trends:

Pharmacy chains and supermarkets with pharmacydepartments take advantage of economies of scaleby buying from manufacturers instead ofdistributors

More than 3K medical device distributors, only 3%qualify as large distributors who mostly focus onspecific regions

Regional distributors consolidated to form nationaldistributors which form 95% of the market

A few distributors are focusing on expansion intoTier 2 markets; others are beginning to consolidatein Tier 1 cities

Atlas and Bomi are the largest logistics and transport

suppliers serving manufacturers;

Most distributors outsource their trucks and logistics to

logistics providers except Panarello, which owns

trucks

Commonly used distribution process Less commonly used distribution process

Retailers(Tier

1/Tier 2)

Hospitals(Tier

1/Tier 2)

Brazil: Distributors

toolkit -country snapshots

Documents