2014 looks to be a positive but challenging year for the Indian health care sector; one in which many historic business models and operating processes will no longer suffice amid rising demand, continued cost pressures, lack of or inadequate care facilities, and rapidly evolving market conditions. India, likely will be dominated by the “Modi-care” –Health assurance for all.

1. Proprietary and Confidential
Evolution of the healthcare industry in India
and the potential impact of the new
government
Executive Briefing Teleconference
August 27, 2014

2. Dr. Harshit Jain (Doctor HJ)
Vice President – Engagement Planning
McCann Health
Harshit works on creating new commercial models that can potentially
address the challenges that the Healthcare & Life sciences Industry faces
around engagement with the key stakeholders. Also , working with various
partners to develop Innovative engaging platforms to reach stakeholders via
various channels and mediums that they seem to be leveraging in their daily
life. These have a potential of revolutionizing the Healthcare Communications
industry across the globe.
His experience and expertise extends across a wide range of areas including
brand management, establishment of SBUs, healthcare communications,
health insurance, disease management, direct clinical care, and health
program/benefits design. He is also the reviewer of Southern Medical
Journal, a medical publication. He has authored several scientific papers in
national and international Journals of Medicine, including a text book on
"Principles & Practice of Liposuction"
Dr. Jain completed his undergraduate medical training from University
College of Medical Sciences, Delhi and then moved to Northwestern
University, Chicago for a short stint in Internal Medicine, followed by Masters
in Business Administration from the Indian Institute of Management,
Lucknow.
Read his blog at www.doctorhj.com / Follow him at
www.facebook.com/hjdoctor
2

3. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

4. Healthcare Spending in India
4.9 5.6
6.4
8.4
1.8
2.1
2.8
3.3
2005-06 2006-07 2007-08 2008-09
6.7
7.7
9.2
11.7
Healthcare spending by the Indian government “will” be on a steady upward
trajectory
Total spending by the government (central and state) on healthcare in India
USD Billion
2014-15 2020
18%
State
Central
10%
~20%
ê
Announcement by the
government in Feb
2014 budget
New Stable
government

5. 1.Improve access
• Building Infrastructure
• Rural Health care delivery.
• Senior Citizens healthcare
• High priority to chronic
diseases
• Universalization of emergency
medical services-108.
2.Skill building
• Education and Training –
priority to be given to address
the shortfall of healthcare
professionals.
• Yoga and Ayurveda -
Integrated courses for Indian
System of Medicine (ISM) and
modern science and
Ayurgenomics.
Priorities for New Government – “Modi-care”
Health Assurance for All
3.Reduce costs and out of
pocket expenditure
• Better penetration of
reimbursement plans
• Occupational health programs
• School health program would be a
major focus area, and health and
hygiene will be made a part of the
school curriculum.
4.Increased Usage of
technology
• mHealth
• Digital India project

6. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

7. 2009 Pessimistic Case
(2020)
Base Case (2020) Aggressive Case
(2020)
12.6
35
55
70
Growth in Indian Pharmaceutical Market
7
■ Indian pharma market will grow to 55 billion USD by 2020
Projected size of Indian pharma market
USD billion
CAGR
~14.5%
CAGR
~10%
CAGR
~17%

8. 2009 Pessamistic Case
(2020)
Base Case (2020) Aggressive Case
(2020)
2.5
8.6
9.5
11
Growth in Medical Devices Market
8
■ Currently the 4th largest market in Asia with 700 medical device makers, and ranks among the top
20 in the world
■ Forms a very small part of the total manufacturing industry accounting for only 0.2% of all certified
facilities
Projected size of Indian medical device market
USD billion
CAGR
~15.5%
CAGR
~13%
CAGR
~17%

9. Regulatory situation in India
Medical Devices
• Major Equipment
• Medical Disposables – Low Technology, High Export
• Implants and minor equipment – High Technology, High Import
• Accessories and furniture
• Central Drugs Standard Control Organization (CDSCO) - list of medical devices
under regulation is not detailed and hence leaves out many of the devices.
• Drugs and Cosmetics Act - attempts to introduce a comprehensive regulation
involving both Ministry of Health and Family Welfare and Department of Science and
Technology (DST), has not taken off yet.

10. Chinese market has changed “Shape” with a large mid-range dominated by locals
10

11. “Come, Make in India”
PM Narendra Modi in maiden Independence day speech
Future Outlook in India

12. Current Roadblocks faced by the Industry – Pharmaceuticals + Medical Device
§ Patent Cliff
§ Rising research cost
§ Harsher price control & taxes

13. Patent Cliff
• Changes in Intellectual Property rights
• Cheaper Alternatives - Great news for consumers!
• Big financial boost for generic drug makers. With some 46 US drug
patents set to expire by 2015, Indian companies stand to benefit by
around $40 billion.
At present, India accounts for over 10% of global pharmaceuticals production,
demand for generic drugs is leading India to rise as a hub of global
generic drug manufacturing.

14. Weak pipeline
Para-IV submission allows it to challenge a patent and launch a generic version of the drug at the risk of being sued by the
innovator or sell a drug that has just gone off-patent with the patent holder being the only competition.
Revenue potential from 'patent cliff' is expected to taper off after 2018 with
the number of drugs going off patent petering out.

15. What are global drug markers doing ?
• Entering into newer therapeutic segments
• Diversifying into newer markets
• Mergers and acquisition
• Pfizer + Wyeth (2009)
• Merck & co + Schering Plough (2009)
• Ranbaxy + Sun Pharma (2014)
• Outsourcing and partnering with smaller companies
• Merck & Co and Cipla and earlier with Sun Pharma
• Pfizer and Aurobindo Pharma
• GSK and Dr Reddy’s
• Strides Arcolab and Claris Lifesciences
• Abbott Laboratories and Aurobindo Pharma

16. Rising Drug Discovery Cost
Withdrawal of Service taxes exemption in case of technical testing of newly developed
drugs on humans.
§ Need to relook at the tax structure and eliminate or substantially reduce service tax for
the CROs, especially for overseas clients paying in foreign currency
§ Moreover, the current tax incentives of 200 per cent weighted deduction should be increased to
300 per cent with a validity of 10 years.
§ Doing this would remove a significant disadvantage India has compared to some of their
neighbors and competitors.

17. Harsher Price Control & Taxes – Expected to Continue
■ Last year, the Health Ministry raised the number of drugs subject to price control to
348 from 74. This had resulted in a 50% to 80% slump in the prices of several anti-
cancer and anti infective drugs
■ The government is likely to hike the number of drugs that come under the category
of essential drugs, and place them under the ambit of price control.
Pharma firms find it hard to exit essential drugs market
NPPA doesn’t allow cos with more than 1% share in essential drugs market to move out

18. Other Expected Trends
Changing Marketing & Sales model
• Limitations in payouts to be provided to Doctors
• Ratio of sales representatives to physicians expected to grow
• Direct to patient marketing for chronic ailments
• Penetration in Tier II + cities
• Bigger isn’t always better

19. Limitations in Payouts to be Provided to Doctors
■ Physicians Sunshine Act, US (2013)
l GlaxoSmithKline, like many other multinationals has stop paying to doctors across the board.
■ The code, similar to the MCI guidelines announced in 2009, aimed to bring
transparency to sales promotion and prohibited doctors from accepting gifts from
drug manufacturers.
■ The code also laid down rules about advertising and promotional material, claims
and comparisons of medicinal products, activities and conduct of medical
representatives, samples, hospitality, sponsorship, and meetings with healthcare
providers.
■ In 2011, the Department of Pharmaceuticals (DoP), part of the Union Ministry of
Chemicals, introduced a draft, voluntary code of conduct for the drug industry, which
banned all gifts to doctors and clamped down on foreign junkets by banning continuing
medical education events sponsored by industry - – Medical Device companies
depend so heavily on trainings and meetings.
The current environment would further favor the strengthening of such laws, and force
pharmaceuticals to adopt newer marketing techniques

20. Ratio of Sales Representatives to Physicians Expected to Grow
Year Number of Doctors
Estimated Number
of Representatives
Ratio of
Representatives/
doctor
2005
2009
2020
670,000
760,000
940,000
60,000 –
70,000
90,000 –
100,000
300,000 –
350,000
Ratio of sales representatives to physicians to go up dramatically
~0.10
~0.13
0.31-0.37
20

21. Loss of Trust in HCPs
Hospitals make killing on stents, implants
Open secret: Doctors take
cuts for referrals
Ambani hospital admits
to offering docs ‘incentives
21

22. Direct to Patient Marketing for Chronic Ailments

23. New Growth Opportunities for Pharmaceuticals
Traditional
Opportunity
Non-Traditional
Opportunity
Newer opportunities will account for over 45% market share by 2020
§ Patented
products
§ Consumer
Healthcare
§ Biologics
§ Vaccines
Split of market by type of opportunity
23
60% 55% 50%
40% 45% 50%
2009 Estimate Base Case (2020) Aggressive Case
2020
100% = 13 billion USD 55 billion USD 70 billion USD

24. Smart healthcare devices could revolutionize
WHAT?
WHY?
SO
WHAT?
Smart healthcare devices
• Smart healthcare devices, such as wearable activity
trackers provide actionable healthcare data in real
time, so consumers can adjust medications, exercise
levels, sleep, and more for optimum health.
Bringing hospital-level technology into the home
• Health monitoring technology innovation has been
largely confined to hospitals, but increased penetration
for smartphones and breakthroughs in miniaturization
promise to bring these technologies into the home.
Smart healthcare devices can drive product sales
• A smart healthcare device that is constantly monitoring
the body may be able to suggest when certain foods
should be consumed, what dose of medication is
optimal, and what nutrients need to be replaced.
Wearable fitness trackers like the Jawbone Up24
track sleep, activity, and eating to help make
"healthier choices." Companion applications like
UpCoffee can help to monitor caffeine levels in real
time to avoid potential issues related to sleep.
Oral-B's SmartSeries toothbrush has Bluetooth 4.0
connectivity and the Oral-B app to record and help to
optimize brushing activity. It debuted in Germany in
spring 2014, and launches globally in June 2014.
24

25. The audience for fitness trackers is extending to pets
25
■ Whistle is a new fitness tracker for dogs that measures how much time dogs spend playing,
walking, and sleeping, using Wi-Fi and Bluetooth to synchronize data in the cloud and send
them to the owner's phone
The tendency of consumers to treat pets like
humans bodes well for pet trackers.
A fit dog makes a happy pet and pet owner
A new activity tracker
that can tell you how your
dog spends their time

26. Smart healthcare devices may bench intrusive tests
26
■ The need to know precise blood sugar levels is ongoing for diabetes sufferers; the usual
method is a finger prick and analysis of a blood sample, but a new breathalyzer-type device
could change everything
Is this what the future of blood-sugar
testing may look like someday?
Breathalyzers like the police model above that are
designed to measure blood alcohol levels may offer a
glimpse of the future for blood-sugar monitoring.
Scientists have created the first functional breathalyzer
for diabetes, and a hand-held device may not be far off.
Breathalyzer design can greatly improve
compliance for a medical condition that
currently affects 350 million people, globally2
"You hear that one of the common complaints among the diabetic
community is the needle prick, even though it's minimally invasive,
it's still an invasive technology."
Ronny Priefer, professor of medicinal chemistry, Western New England
University
The world's first functional breathalyzer for
diabetes is a needle-free way to test blood
glucose levels
Researchers at Western New England University (US) have created a
hand-held breathalyzer device to measure blood sugar levels by tracking
breath levels of acetone.

27. Penetration in Tier II + Cities
Driven by growing urbanization, metro and Tier-I towns will continue
to be significant drivers for growth
Growth in urban population
Million
Growth in urban real income levels
Per capita, USD
Share of India’s GDP
Percent; USD billion, real 2008
54% 58%
69%
46% 42%
31%
2001 2008 2030
Rural
Urban
100% = 647 1,090 5,290
27
+250%
+207%
Urbanization
rate
28% 30% 40%
290 340
590
2001 2008 2030
600 810
2480
2001 2008 2025

28. Rural Markets – Disposable Income Levels
Disposable income level set to rise significantly in rural markets
Changing income pyramid in rural India
53%
41%
33%
41%
50%
51%
2010 2015 2020
100% = 153 161 165
Globals
Strivers
Seekers
Aspirers
Deprived
+54%
28
Annual per capita disposable
income in rural regions
USD
411
516
631
2010 2015 2020

29. Bigger isn’t always better

30. Need to Challenge Myths to Drive Excellence
From Myth To Reality
90% of sales happen during
the last 3 days of the month
Performance transparency and problem solving can
enable up to 60% of sales in the first 3 weeks
Late launches can generate
only so much in the face of
entrenched competition
Thoughtful planning and passionate execution can
lead to a substantive late launch success
New sales representatives
will be fully productive in only 2-3
years time
New sales representatives can ramp up in 12-18
months… with the right expectations and right inputs
95% achievement implies an OK
performer in the field
105% achievement can become a habit for the
organization… 100% a marker for average (and
expected) performance
Players will need to challenge myths and well entrenched views to drive excellence
30

31. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

32. _______________________________
_______________________________
Independent Clinics Nursing Homes Hospitals
(Government + Few
Corporate)
2000
Independent
Clinics
Single Specialty
Hospitals
Corporate Hospitals2008-10 Family
Clinics
Independent
Clinics Single Specialty Hospitals Corporate Hospitals2012-14 Family
Clinics
Diagnostics
Pharmacy
Virtual
Clinics
mHealth
Evolving Healthcare = Evolving Models of Delivery

33. Projected size of hospital market (in billion USD)
Hospital market will grow to ~14 billion USD by 2020, with
growth more in the private hospital space
2009 Estimated
1.7
Share of market
Growth Rate
(2009-2020)
13.1%
7.5
12
18
3
Conservative
Case (2020)
Base Case
(2020)
Aggressive Case
(2020)
9
14
21
25% 26% 30%
17% 22% 26%
33
Public
Private

34. Tea/Coffee/Beverages Skin Care/ Salons
Foods/Restaurant Services ---à ProductsHealthcare/Hospital
Bangalore
(2008)
Bhopal,
Jaipur
(2009)
Mumbai,
Delhi
(2010)
125
Centers
(2002)
50
Academies
Over 107
Clinics
(2002)
Extension to Services business
34

35. Building Infrastructure
§ Set up four more AIIMS like institutions at Andhra Pradesh, West Bengal, Vidarbha
in Maharashtra and Poorvanchal in UP and a sum of Rs 500 crore has been set
aside.

36. Cabinet nod to more PG medical
seats
• The Cabinet Committee on Economic Affairs
has approved continuing the Centrally-
sponsored scheme for upgrading state
government medical colleges
• At a total cost of Rs. 1,350 crore, this proposal
will result in an increase of about 4,000 seats
• The funding pattern will be 75:25 by
Central and state governments.
• Rs. 686 crore has already been released
to 72 government medical colleges.
Ratio between generalists and specialist doctors in India is expected to change

37. Doctor Exchange Program
"Swasth India" is a portal that would make it possible for any US-based Indian doctor to
select the areas they wish to serve in India, seek and receive formal approval from
Medical Council of India (MCI) on their qualifications, and address all other government
issues within 15 days.
Skill based development

38. DOCTORS ARE ALSO ONLINE
Usage of Multi-Channel Marketing
With the new government being tech-friendly,
the adoption of newer technology tools is
expected to grow
38

39. Adoption of Newer Technology Mediums – Social Media
39

40. Adoption of Newer Technology Mediums – Mobile Applications
40

41. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

42. Rising Insurance Premiums
Employees’ parents lose health shield
With costs rising, only 36% cos now foot insurance cover for staff’s kin

43. Health Insurance Premiums & Out of Pocket Expenditure
3209
5125
6626
8305
11480
2006-07 2007-08 2008-09 2009-10 2010-11 2013 2015 2020
78% 76%
69% 66%
60%
2004 2005 2006 2007 2009 2013 2015 2020
43
Out of Pocket Expenditure as a % of Health Expenditure
Health Insurance Premiums Premium
Collected in Crore INR

44. Universal Health Insurance
■ Plans to introduce - World's largest universal health insurance (UHI)
programme, partially inspired by “Obamacare”.
– Karnataka became the first State in India to provide Universal Health Coverage to its
population, with the launch of Rajiv Arogya Yojana on 9 January 2014.
– The Scheme entails the beneficiary to pay only 10 percent of the cost of treatment or procedures.
It aims at providing subsidized healthcare to virtually every citizen in the State with Above Poverty
Line (APL) card.
■ Key components to the vision
§ Develop a segmented health care system – one for the poor and the other for the rich.
§ Government is not in favor of taxpayers’ money being used to push a one-size-fits-all health
policy.
§ Public services being outsourced to private providers through a combination of an
insurance based system and public-private partnerships.

45. Proposed Segmentation of Indian Population
Indian
Population
(120 crores)
Poor
(29.9%)
35.5 crores
Special
Groups
(9.46%)
11.4 crores
- Senior
Citizen
- Differently
Abled
Agriculture
Sector
(28.49%)
34.19 crores
Informal
Sector
(26.75%)
32.09 crores
Formal
Sector
(5.41%)
6.49 crores
Self
Employed
(11.08%)
13.29 crores
Informal
Workers
(15.67%)
18.80 crores
Government
Sector
(3.40%)
4.08 crores
Private
Sector
(2.01%)
2.41 crores
Central Govt.
(.56%)
0.67 crores
State Govt.
(1.34%)
1.61 crores
Other Govt.
(1.5%)
1.8 crores
45
Non-Poor
(60.64%)
72.8 crores

46. Current State After 2-3 Years After 5-6 Years After 8-10 Years Beyond 10 Years
- 25-26%
Coverage
- 38-40%
Coverage
- 60-62%
Coverage
- 75-77%
Coverage
Over 80%
Coverage
The current
coverage includes
the population
covered by health
insurance, RSBY,
government
employee insurance,
and ESIC
Increased penetration
through mandatory
health coverage in
informal sector,
poor category and
formal sector
including Government
and Private sector.
Special category
segment will also
start getting enrolled
in the health
coverage schemes
Increase in coverage
by getting poor
category under the
fold of mandatory
health cover;
increase in the
voluntary cover
adoption by self
employed people in
informal sector and
people in
agriculture sector
Improved adoption of
health cover by
informal sector,
such as self
employed people and
people in agriculture
sector. Reach will
further be improved
in special category
segment
With improved
database capturing
details of citizens and
mass awareness and
enrollment efforts, a
large segment of
India’s population
will be covered with
at least a basic
health cover
Expected Growth in Reimbursement market
46

47. Health Insurance Penetration
47
■ According to Dun & Bradstreet, health insurance was the fastest-growing general insurance business in
India between 2006 and 2013, growing at 30 percent a year. Local insurers, however, do not have the
risk appetite or the capital to expand this segment
FDI Increased to 49% from 26% in 2014 Budget,
and voting rights of foreigners will still be limited to 26 percent
Informal
Sector +
Special
category
segment
At least a
basic health
cover for all
– either
through
government
/private
plans
2022 Beyond 2025
13055
120
80
240
110
140
2010 2020
Penetration >80%75%45%26%
State insurance
RSBY
ESIC
Private insurance
Government employee insurance
Number of People Covered
Million

48. Other changes expected in recent future
§ Ensuring availability of products by making it mandatory for all companies to provide
standalone health insurance.
§ Encouraging people to go for health insurance by offering tax sops – greater awareness

49. Market Drivers
Increasing awareness of Health Insurance
Rising healthcare costs have increased
need for health insurance
Supporting Demographic Profiles (Prospering
Middle Class, Increasing Disease State, Population)
De tariffing of the general insurance industry
(which has increased emphasis and efforts by
insurance companies towards health
insurance and other personal lines of
business
Rationalization of premium rates (e.g. trend of
upward revision in respect of Group Health
policies)

50. Market Restraints
Inadequate healthcare infrastructure
Limited reach
Significant underwriting losses for Health
Insurance business in India
Lack of standardization and accreditation
norms in healthcare industry in India
Insufficient data on Indian consumers &
disease patterns resulting in difficulty in
product development and pricing

51. Market Share of Key Players
New India,
24%
ICIC
Lombard,
17%
United India,
14%
National,
13%
Oriental,
11%
Roliance,
5%
Bajaj Allianz,
5%
Star Health,
3%
Others,
8%
New India Insurance & ICICI Lombard have over 40% market share
51

52. Market Share of Private Health Insurance Players
ICIC
Lombard,
45%
Reliance,
13%
Bajaj
Alliance,
13%
Star
Health,
8%
Others,
21%
Present Scenario
Star Health
Apollo DKV
Max Bupa
ICICI Lombard
Royal Sundaram
IFFCO Tokio
TATA AIG
Reliance
Bajaj Alliance
Niche Market Leaders
Market Boomers Market Followers
Futuristic Scenario: Perfect Competition
Star Health
Apollo DKV
Max Bupa
Cigna
ICICI Lombard
Reliance
Bajaj Alliance
New Players
Others
Royal Sundaram
IFFCO Tokio
TATA AIG
Niche Market Leaders
Market FollowersMarket Boomers
52

53. Missing Pieces
Disease Management Models
( with Industry support)
Big Data
53

54. Recent regulatory changes
IRDA – Regulations and Guidelines
EXTRACTS FROM IRDA’S HEALTH REGULATIONS – Oct 2013
§ Request for hospitalization shall be forwarded by the provider immediately after
obtaining due details from the treating doctor in the preauthorization form prescribed
by the Authority i.e. “request for authorization letter” (RAL).
§ The RAL shall be sent electronically along with all the relevant details in the
electronic form to the 24-hour authorization /cashless department of the insurer or its
representative TPA along with contact details of treating physician and the insured.
The insurer’s or its representative TPA’s medical team may consult the treating
physician or the insured, if necessary.
§ All documents submitted to TPA shall be electronically collected and shall be
forwarded to the Insurers for taking a decision on the claim settlements or claim
rejections.

55. Current Stakeholder Ecosystem
Payers
Insurers
Intermediaries Providers
IRDA – regulator

56. Proposed new information flow

57. New system will potentially eliminate the need of 1 Stakeholder
TPAs seem to now bring a picture of a monster, in the eyes of the consumer and general
public, who is the root cause of all disputes and problems and who must be shut down.
Third
Party
Administrator
(TPA)
Future Generali scraps TPA. The company,
which is still using about 10 TPAs, will switch
over to the in-house team by the end of this
year.
ICICI Lombard sacked its long running TPA, to
start its own in-house claims management
department. In fact not having a TPA (read
having an in-house TPA) is the trending USP
seen in product brochures, nowadays

58. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

59. Develop new business
models, products,
services that can be
successful in this new
“value-based” market:
• Beyond the product
• Beyond the treatment
• Beyond the hospital
Build partnerships to:
• Extend access to new
technologies
• Improve access to Tier
2+ Cities
• Improve skill based
development.
Respond to payers need
for improving and
maintaining population
through both company’s
products and its brand.
Summary
59

60. AGENDA
SECTION I – Introduction & Background
SECTION II – Medical Devices & Pharmaceuticals
SECTION III – Healthcare Delivery
SECTION III – Health Insurance/Reimbursement
SECTION IV – Summary
Questions and Answers

61. Questions & Answers

62. Closing Remarks

63. BACK UP SLDIES

64. A CASE STUDY

66. Background

67. Background

68. The Big Issue
GE had become primarily associated with appliances. The company’s
diversity was not generally understood.

69. A new brand narrative was called for

70. Which needed to appeal to every stakeholder

74. New Business Model for Asia

75. Eventual Outcome