Creating sustainable business models in the developing world

MassDevice.com is blogging on the topic of building innovative medical technology for the developing world, featuring some of the leading minds in the field.

This feature will continue through May 17th and the first annual World Health Medical Technology Conference at Boston University.

The conference is a one-day workshop dedicated to exploring the opportunities and challenges of designing, building and funding medical technologies for the developing world. It’s a way to bring together stakeholders from the medical technology industry with the leading minds in the Global Health movement. To find out more about the conference, visit the conference’s website for an agenda, registration information and a list of speakers.

This installment features a talk with Dr. Jeffrey Blander, co-founder of the Bienmoyo Foundation, a non-profit organization that provides advisory services on implementing technologies and services to improve management of non-communicable diseases in developing countries. In addition to a suite of services they provide to developing world countries, the Rockport, Mass.-based foundation also works with industry to facilitate the procurement and shipping of needed medical equipment, rapid diagnostic tests and pharmaceutical supplies and other much-needed services. This experience, plus his own work in the developing world, gives Blander a unique insight on creating successful partnerships with industry and the challenges businesses face when they work in the developing world.

Dr. Jeffrey Blander, Bienmoyo Foundation co-founder

“One of the initial experiences I had that shaped my idea that industry could play an effective and positive role in servicing under-served populations through access and delivery of life saving therapies was working as a volunteer country director with the Clinton Foundation in Jamaica back in 2004. In that role, you worked with a team of local Ministry of Health officials and an advisory team of business, clinical and logistics professionals to really develop a hands-on, practical, capacity-building roll-out plan for the treatment of people with HIV/AIDs.

“As a part of that activity in the early 2000s, the Clinton Global Aids Initiative was partnering with industry to gain access to life-saving therapies for children, both pharmaceutical and anti-retroviral medicines as well as laboratory equipment. By doing this type of work, I personally could see firsthand the positive influence of having industry partnerships, where through high-volume, discount models for global health you can impact positively the delivery of healthcare for many thousands of lives. The experience truly transformed the outlook on my career and belief in the power of public-private partnerships to help successfully tackle global health challenges.

“I think there are some classic barriers for industry participation. Most notable are the low return on investments in these markets (as compared to developed markets such as the U.S. or Europe) for devices and pharmaceuticals. There are also important barriers around IP. There are concerns by device manufacturers that IP won’t be respected and can’t be properly enforced. The other issue is risk over uncertainty, because over the years there’ve been some public-private partnerships that have gone awry. For a multinational corporation that perceives the developing market setting as a low-market return, yet high-risk for doing business, a natural question is, ‘Does the reward outweigh the risk? If not, why take that risk?’

“However, there are ways of effectively addressing those concerns to lower the threshold of risk and improve financial return on investment, to make strong market-based opportunities. For the return-on-investment question, you have some important examples with the Clinton Foundation that have taken the following question head-on: Can a higher-volume, lower-cost strategy help create the returns that your organization is looking for? Furthermore, can traditional barriers for industry be further minimized by reducing the high costs of conducting business, through a global distribution network and implementing assurances to reduce black-market or counterfeit products?

“What we have also seen in terms of business models from the U.S. perspective are those that take the “do good/do well” approach. This approach basically applies a two-tiered business model, where you make a technology platform that you can do well in a developed market, and then by doing well you might be able to subsidize global health markets. The challenge with these models is focus — it’s difficult to take on a global health market for a resource-poor environment while also under pressure from your investors to create a return in the U.S. or Europe.

“But industry is not the only effective partner in developing the global marketplace to reduce risk and improve return on investment: Advanced market commitments, or AMCs, in which government helps to create legislation that provides incentives to industry with either tax credits or demand-driven mechanisms that provide some confidence in future reimbursement for a successful product. So it’s not just putting all the focus on industry-led efforts, but creating a true public-private partnership model that reduces risk, stabilizes return on investment, and, very importantly for our own economy, stimulates job creation.

“For well-established companies looking at the next 10 to 15 years, there are data out there that support that emerging and developing markets will present significant business opportunities for working in developing markets, such as sub-Saharan Africa. For example, the IFC has estimated that the market for healthcare will more than double by 2016, going up to $35 billion in SSA alone. The challenge is, how do you sustain a business model that caters to those markets? R&D, development, regulatory approval, those are all significant cost barriers to doing business and require infrastructure and locally supported technical skills that need to be put in place for the longer term. This type of infrastructure and capacity-building requires both industry and public partnership.

“I think there are examples of good business models in places like Tanzania, where the Tanzanian Diabetes Assn. and an association of private health facilities have supported the roll-out of both prevention and care services to cater to sustainable models within the local communities. Scaling up and [scaling] out these sort of delivery programs requires an insightful understanding and intimate knowledge of the equipment available consistently through local procurement practices — either generics or branded medication and medical equipment and a working knowledge of your patient population coming into the clinic. Furthermore, what is the cash flow/income model and how is it determined? Is it out-of-pocket, part of the national health plan, private insurance? I believe there are important ways of developing sustainable programs at the grass-roots level that can help to drive new medical technologies for portable diagnostics, point-of-care systems and mobile health applications. But the key ingredient is creating a pipeline of innovation that caters to the environmental factors of these marketplaces, rather than simply trying to distribute products that were made for the West. In the latter case, cost structures and the products themselves will not meet the needs of the local market. Global health innovation partnerships that forge relationships with local groups to explore product requirements and payment models are essential in this process.

“If you look at these markets, such as SSA, where there are severe limitations on human resources, training and centralized laboratory services and logistics procurement, there’s no question of what the impact would be for providing technologies like point-of-care diagnostics and mobile health would have on improving quality of care. Organizations such as GE have developed some very exciting portable ultrasound technologies that could have a dramatic impact on transforming how diagnostics are being conducted in developed and developing markets. These technologies, coupled with advances in mobile phone connectivity and improved telecommunication infrastructures, can support transformative mobile health clinics and community workers to dramatically increase access to essential services. But want is critical to realize is that parachuting a technology will not simply improve a health system. Organizations need to work closely within the local markets to support delivery models that ensure local health workers are given proper incentives to adopt and use new technologies to improve access and quality of health services delivery. Pay-for-performance, quality-improvement indicators and reward recognition are key ingredients to making a technology a successful component of the arsenal to tackle the large burdens of infectious and non-communicable disease in the developing world.

“I wear two hats, a business hat and a public health hat. Using the business hat, you examine developing markets such as SSA in terms of traditional criteria of ROI, R&D cost, regulatory requirements and overall risk of doing business, to create a strong case for entering a market. But there’s also the public health hat, that sees the great need in providing existing technologies and developing new products that are focused in these markets that serve the billions of global citizens living in developing countries for under $10 a day. The two hats work synergistically in ways that focus on developing strong business cases and collecting the data required for advancing new technologies or creating new distribution opportunities for existing products for under-served populations. Emotion and passion are important tools for the public health advocate, but in order to move the needle forward with for-profit companies, building strong business cases around market data is an imperative. Much has been said in recent years, due to the economic crisis, about the negative effect of for-profit approaches. However, I believe not enough focus has been given to the transformative impact that leveraging traditional business analyst approaches and tools can have to improve global health and health systems, to weed out inefficiencies and create sustainable delivery systems.

“Personally and professionally, I believe there are not only opportunities, but an imperative to serve these markets. Helping to reduce the millions of childhood deaths annually or preventable complications experienced by expectant mothers due to poor access to healthcare can be achieved through public-private partnerships and innovative (as well as common-sense) financial and non-financial incentives to stimulate new business growth in these areas. To paraphrase the famous CK Prahalad, who passed away recently, we have only seen the tip of the iceberg.”