Health tech: Epharma penetration to move up 15-17%, see high growth in diagnostics, says Sanford Bernstein

With new-age companies being the flavour of the Dalal Street and IPO-bound PharmEasy filing draft red herring prospectus (DRHP), it is a good time to check what is happening with the health technology market in India.

The global health technology market as of 2019 was estimated at growing at nearly $96 billion and expected to grow to more than $140 billion, aided by COVID-19 and is expected to probably reach $400 billion in the next couple of years. While the COVID-19 has accelerated technology adoption, the size of the market is relatively small compared to peers in India. As per Bernstein, the health technology penetration is less than 2 percent.

To discuss this in detail, CNBC-TV18 spoke to Prashant Tandon, CEO & co-founder of Tata 1mg; Nithya Balasubramanian, Director, Sanford Bernstein; and Ashutosh Raghuvanshi, MD & CEO of Fortis Healthcare.

Throwing more light on the growth in this space, Balasubramaniam said, "In the epharma space, we do expect that the penetration should move up to 15 to 17 percent and that is where the growth is going to come from."

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"Similarly, in diagnostics, as well we are expecting very high growth rates. If anything, the growth in the diagnostic segment is likely to be higher than the epharma segments, though the segment size is likely to be larger in epharma."

“So, if you look at $7 billion as a lion's share then about $4 billion we are expecting to come from the epharma segment,” said Balasubramanian.

Talking about how Fortis is planning to capitalise on this opportunity, Raghuvanshi said there is no doubt in his mind that digital is going to be one of the major ways people will access healthcare.

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Players who have not focused on digital earlier will have no choice but to move in that direction either by collaborating with the new-age companies or they will have to have their own strategy, said Raghuvanshi.

“As far as Fortis are concerned, we understand that this is a component which we have to focus on and we are creating our digital strategy which would involve certain elements not all, for example, we are not looking at pharmacy, but we are looking at diagnostic and all other areas which we can do like homecare, remote monitoring, wellness programmes, etc.,” said Raghuvanshi.

When asked how these companies make money, Tandon said, "We are looking at a very large value pool, we are looking at a very large market opportunity. The early-stage is where a lot of investment is going to drive a behaviour change, COVID played a big role and going forward, we will see more of these businesses. But healthcare as a line of business or a segment definitely has very high-quality profitable value pools. It's about the business models figuring themselves out.

“There has been a very competitive initial rush into digital health but like same as the situation in beauty maybe 5-10 years back and once the behaviour changes happened, once the consumers are moving on, I think the businesses then come around to figure out the economic model to continue,” said Tandon.