This is Part 2 of Leapfrogging India’s Healthcare, titled - "The Future of India’s Healthcare." If you haven't read Part 1, you can find it [here].
Let’s begin with the last paragraph from Part 1:
“And in that case, you ask a counter-intuitive question: if so many aspects of healthcare will change, what are the things that will not change irrespective of massive technological and physical development? We will explore all these, and also understand why there can’t be a PhonePe of Healthcare based on the “Jobs to be done” framework.”
This essay is divided into two halves. In the first half, we will understand the “Jobs to be done” framework for Healthcare, and in the second half, we will explore the future of India’s Healthcare.
First Half: Why is the "PhonePe of Healthcare" impossible based on Healthcare’s “Jobs to be Done” framework?
In the past 15 months, we have been correcting ourselves thanks to rapid experiments and instant feedback loops. This practical approach was necessary to bring conviction about our strategy that could make healthcare affordable for 1.2 billion Indians. Considering this will be a decade-long journey, we aim to avoid getting trapped into “Sunk Cost fallacies.” Recently, we realized that thinking of building the “PhonePe of Healthcare” using UPI of Healthcare (ABHA) is not only wrong but impossible. The “Jobs to be done” for healthcare and payments are drastically different.
Indian society achieving cashless status is one of the biggest humanity (in terms of number and shorter duration) successes on the earth. I wrote about this in one of my essays. Of course, everything started with a Scalable Digital Public Infrastructure - UPI and many large businesses built on the different use cases of the UPI - PhonePe, GPay, Paytm etc.
India’s Healthcare is at a similar juncture with the creation of ABDM (Ayushman Bharat Digital Mission), and its UPI for Healthcare - ABHA (Ayushman Bharat Health Account). If I am being honest, initially I thought there would be companies getting built like PhonePe of Healthcare, but being on the ground and thinking from the first principles and the access of the instant feedback loop nudged us - Phonepe of Healthcare is impossible and will not solve the problem.
The biggest difference between fintech and healthcare is that the former is a super high-frequency usage (let’s say many times a day for both merchant and users) and the latter is super low-frequency usage especially from the user side (maybe a few times in a year) of course, for providers it has better usage frequency (due to supply constraint market).
The advantage of high-frequency usage is it eliminates the problem of user retention and the chances of cross-selling are super high. This creates the biggest difference between building a PhonePe and a PhonePe of Healthcare.
From the use case point of view, when you make a payment it is not related to any other components - your job to be done is completed. However, when we are talking about Healthcare the jobs to be done is not instantly. Things go on from the direct comparison POVs. Hence we realised thinking of building PhonePe of Healthcare would be a mistake considering almost all the stakeholders of Healthcare are interconnected and the expenses are distributed - the value for patients is only if all the components are combined. To understand that let’s take an example: let’s say you felt sick for some reason and now you have a fever, the purpose of your visit to the doctor is to improve your health outcome, of course, in this case, get rid of the fever and regain your strength. This means your “Jobs to be done” would not be completed till your body temperature is in the normal range and you feel stronger again. For that, you might consult a doctor (online or offline), go through a diagnosis, or consume drugs - and it would take a minimum of 2 to 10 days based on the type of fever.
In the case of a chronic disease, the process would be almost the same except for an additional treatment part and the duration would be for a few months/years including the recovery. Unlike making a payment in which “Jobs to be done” is completed as soon as you make the payment. You see, based on the “Jobs to be Done” framework PhonePe for Healthcare will not solve the problem.
Let’s shift to the 2nd half of this essay - the future of India’s Healthcare
In one of the famous talks Amazon’s founder Jeff Bezos highlighted one counterintuitive argument of e-commerce. He said each year people ask me what will change in the next 5 years, but I think the important question to ask is - what will not change? He gave the list that will not change in e-commerce: customers' expectation to get products at the fastest speed (Delivery), products at a lower price (costs), and high selection (Options). Unsurprisingly the above three are true, today, and will be true in future as well.
So, most probably India will leapfrog in Healthcare, and we might jump to Medicine 3.0 without covering biomarkers (Medical 2.0) [Read the part 1 to get the full context]. Many things will change fundamentally and many companies will have no value due to advancements in the LLMs, bioengineering, Genomics etc. Here is a list that I think will not change in the lifecycle of Healthcare due to advancement and progress in bioscience and technology.
The Preventive part of Healthcare will never go away even though I think the method by which preventive care is delivered will change entirely [It will move from Bio-markers to DNAs]. In fact, in the coming time, preventive healthcare will be the deciding factor that will control the cost of the rest of the Healthcare components. I also think most Indian (especially our Target Group) consumers, most probably, will not pay for preventive. And one of the best ways to fix that is to create an incentive with preventive for the rest of the healthcare activities. So, users will have no problem maintaining their health, ultimately lowering the cost of treatment.
The interoperability of the data - including DNA sequencing. As the “Jobs to be done” of Healthcare propagates to multiple stakeholders and takes longer - interoperability of Healthcare data is super important and will never change. [ABDM has solved this problem also ABDM will never be irrelevant]
The Health Insurance and the Value Chain of Health Insurance: Health Insurance is the only way to absorb the unaffordable shock of Health treatment. However, the purpose of Health Insurance should be to improve patient outcomes rather than financial risk prevention. I wrote about this in one of my essays.
Consumption of Drugs - In India, 90% of the drugs are sold at a premium on the name of branded-generic however with the same salt composition: unbranded-generic would cost a lower price of up to 90%, also the recent push from the government and regulators including the Production Linked Incentive (PLI) on generic manufacturing will redirect the consumption of generic drugs like USA where 2/3rd of the Prescriptions are generic - ultimately, lowering the Health Insurance premium. Also, as India doesn’t have the data points on the number of prescriptions written each year, hence the origination of Pharmacy Benefits Management (PBM) types of companies is inevitable - companies processing the medical bills of Health Insurance (IPD and OPD).
A Comprehensive Healthcare package at an affordable price [Medicare-based comprehensive healthcare delivery]. This is only possible if you have the above four available and the net value created would make the Healthcare affordable for billions of Indians and will fit perfectly with the Healthcare “Jobs to be done” framework.
I think these 5 will never change even with all the development and progress in technology - IT, BioEngineering, DNA Sequencing etc. We can validate all the above five from the five-decade evolution of the world’s two largest Healthcare companies - UnitedHealth Group and CVS Health.
Even though the origin of both of these companies has been drastically different considering UnitedHealth Group started their journey with Health Insurance and CVS Health started with Health and Wellness stores (Customer Value Stores), eventually, both companies control around 15% of the entire USA’s Healthcare revenue - $675 billion (WoW). Today, they are the perfect example of a “Managed Care based Health Insurance with care delivering” system which is usually termed SuperMed.
The only reason both companies survived 50 years and are on compound growth is because they have created value by focusing on the aspects of Healthcare that will never change. Today, it would be almost impossible to challenge these two companies by any means - including spending billions of dollars on technological development. Today, the amount of Cash flow that these two companies generate has the muscle to acquire any new technology company building on the advancement of AI, DNA sequencing etc. It has also built an ultimate moat for Healthcare that follows the “Jobs to be Done” framework and customers find the best value.
In fact, in the past 50 years, the two companies have swiftly navigated multiple paradigm shifts that technically disrupted multiple large market leaders. The biggest disruptions due to technological progress and developments - the Internet, Cloud Computing, Social Media, Desktop-to-Mobile, Artificial Intelligence (LLMs), DNA sequencing, Biotechnology etc.
If we look at the business dynamics shift due to the above technological progress, the method, revenue, and distribution of old businesses opted for new methods and channels. For example: due to the Internet e-commerce brought a market shift from offline to online, Search engines and Social Media snatched the revenue from traditional Media companies (I wrote about this), and the Internet brought new ways of finance, investing, medium of exchange, commerce etc and kept disrupting incumbents. However, technological development failed to disrupt or make a dent in USA’s Healthcare.
The reality is all the new technological development has worked in the favour of these two companies hence creating a stronger moat. Let me give you a few examples. CVS Health started with Health and Wellness stores however thanks to the backend integration with the manufacturing of drugs, the company built the first moat by offering drugs (Generic and Branded) at a lower cost. With a strong hold on Drug (one key component of healthcare that will never change) consumption and production, the company first entered into Pharmacy Beneficial Management (PBM) by acquiring Caremark when the Health Insurance Penetration in the USA was around 90%. PMBs are a special type of drug company that only process prescription-based Generic Medicine written under Health Insurance. The PBM are similar to any other Cashless Healthcare provider that processes generic drugs covered under Insurance. For example, 2/3rd of the USA’s Drug prescriptions are Generic. A PMB company called: OptumRx processes billions of claimed prescriptions each year, the company is currently valued at $91 billion.
CVS Health with complete control over the Drugs (Production, Consumption, and PBM), the company entered into Health Insurance by acquiring Aetna. At that stage the preventive part of the healthcare was missing from CVS Health and the company completed this by acquiring many primary healthcare-related companies - SignifyHealth (Hame-based Healthcare delivery a Healthtech company) and Oak Street Health (Primary Care providers for Older people - Healthtech company). With all these CSV Health offers Managed Care based Health Insurance at a price point that is unmatchable for the rest of the Healthcare companies in the USA. Here is a beautiful part of CVS Health, most of the acquired companies are multi-payer which means apart from creating a strong flywheel these companies are generating revenues from other competitors.
The world's biggest Healthcare company has created the same flywheel by connecting the four components of Healthcare and offering Managed Care Based Health Insurance at a price point that is unmatchable for their competitors. Considering all components of healthcare are a high gross margin business, building this flywheel means the net value for patients would be similar to what VISA created for customers and other stakeholders.
Frankly, even though their Net Promoter Score (NPS) is poor public investors have been rewarding these companies. For example, the stock price of UnitedHealth Group has increased by 387,064.29% in the past 40 years this is a more than 2X growth compared to the Apple stock in the same duration (40 years).
Comparison of UnitedHealth Group and Apple stock prices in 40 years
One of the root causes behind this stronghold on the market is the method of ManagedCare-based health Insurance with Care Delivery that covers all 5 unchanged aspects of Healthcare, that I listed above, which fits perfectly with the “Jobs to be done” framework of Healthcare.
This means the future of India’s healthcare must focus on these 5 aspects that will never change. And subsequently, use all technological progress and development in a way that could make the value propositions stronger and lower the final price - so it could be affordable for everyone in the country.
In conclusion, the future of India’s Healthcare for billions would be in the shape of managed care-based health insurance with Care Delivery and this shape will be affordable for billions of Indians. However, making quality healthcare affordable for 1.2 billion Indians is a decade-long journey, and it would be easier if the company found a wedge that could generate cash flow from day 0. Because the cash flow will take away all the mental stress of investor dependency and increase the chances of survival by 100X. The good news is the Indian shape of this Healthcare will take 1/5th of the time duration, in comparison with the global counterparts, to achieve a similar scale (based on GDP per capita) considering Indian companies will have the advantage of all the new technology at the fingertips, an active regulator paving the path, and informed customer base.
Thanks for reading. If you find this essay informative, please share this with your network.
I will see you all the next week :)