“Pric­ing Trans­parency Is What We Want”

OMAR ISHRAK

Business Today - - THE HUB - Pho­to­graphs by Mid­hun Vi­jayan

Medtronic, the $ 29- bil­lion global med­i­cal tech­nol­ogy ma­jor, is a key mem­ber of US lobby group Ad­vanced Med­i­cal Tech­nol­ogy As­so­ci­a­tion ( Ad­vaMed) that wants the US to pun­ish In­dia for cap­ping prices of med­i­cal de­vices and medicines.

But Ad­vaMed’s stand does not stand in the way of Medtronic’s plans to strengthen its en­gage­ment with In­dia. Omar Ishrak, Chair­man and CEO, Medtronic, talks with BT’s Joe C. Mathew about ad­vance­ments in med­i­cal tech­nol­ogy, need for fair pric­ing of med­i­cal de­vices and the prom­ise In­dia’s flag­ship health as­sur­ance pro­gramme, Ayush­man Bharat, holds. Edited ex­cerpts:

Medtronic is an ac­tive mem­ber of Ad­vaMed, which is lob­by­ing with the US gov­ern­ment to take away tar­iff con­ces­sions given to In­dia. Will such a stand help your cause in In­dia? These are tac­ti­cal moves. You could ex­pect a set of tac­tics coun­tered by an­other set of tac­tics (at a gov­ern­ment to gov­ern­ment level). I see a big­ger op­por­tu­nity in In­dia and I think the (In­dian) gov­ern­ment is also look­ing at a big­ger part­ner­ship with med­i­cal tech­nol­ogy com­pa­nies to pro­vide qual­ity health­care for peo­ple in In­dia.

Ad­vaMed has ex­pressed con­cerns over In­dia’s pric­ing pol­icy. Will solv­ing such is­sues be a pre­req­ui­site to part­ner­ships?

These are two sep­a­rate things. The part­ner­ship is not go­ing to hap­pen in one month, while the tac­ti­cal moves re­lated to the In­dia-US trade col­lab­o­ra­tion are not re­stricted to health­care, and are short term. That will have some im­pact on us, but it will im­pact other in­dus­tries as well. What I am fo­cused more on is that we, as Medtronic, can do with the gov­ern­ment of In­dia to pro­vide bet­ter health­care. We want a long-term part­ner­ship with In­dia where we cre­ate value-based health­care in In­dia that ben­e­fits pa­tients. We will ben­e­fit from that; even­tu­ally, the en­tire in­dus­try will ben­e­fit from that, but that is not a one-month jour­ney. That’s a five years’ jour­ney and we want to be long-term fo­cused.

Medtronic has been present here since 1979, but In­dia still ac­counts for only about 1 per cent of your global rev­enues. What is the rea­son for this?

In­dia has qual­ity clin­i­cians and has a crit­i­cal mass of high qual­ity de­liv­ery cen­tres at least in the Tier-I cities. But I am not sure if that has been trans­lated into some­thing that will ben­e­fit the en­tire pop­u­la­tion. That is why the mar­ket is so small and our busi­ness is so small. A con­sis­tent gov­ern­ment pol­icy, which puts down some rules as to what kind of cov­er­age to ex­pect, what kind of fair pric­ing to ex­pect, is needed. That jour­ney is start­ing. The launch of Ayush­man Bharat, the health­care pay­ment scheme (in­sur­ance) and the com­mit­ment of cov­er­age are fun­da­men­tal long-term state­ments that have not been made with such con­vic­tion be­fore.

What is the growth one can ex­pect once you have a pre­dictable pol­icy in place?

It will con­stantly evolve. Get­ting to crit­i­cal mass will take a few years. Right now, the gov­ern­ment is fo­cused on set­ting up the in­fra­struc­ture. By their own state­ments it is go­ing to take three to four years. We can start the di­a­logue and see how pric­ing poli­cies and value poli­cies will be. But for real poli­cies to be rolled out, which are prac­ti­cal, it will take some years.

Any es­ti­mates of the mar­ket op­por­tu­nity?

It’s sim­ple math. Let’s stick to car­di­ol­ogy be­cause it is the big­gest (mar­ket). Our global car­di­ol­ogy busi­ness is well over $7 bil­lion. Of that, prob­a­bly 50 per cent is in the US. If you re­ally want to talk about full cov­er­age in In­dia, where the pop­u­la­tion is five times that of the US, then in prin­ci­ple, all things be­ing equal, even with a price dis­count (be­cause of vol­umes), I ex­pect the mar­ket for our prod­ucts alone, with our share, to be worth $10 bil­lion (in In­dia) in the long term. This is just in car­di­ol­ogy and we don’t do ev­ery­thing in car­di­ol­ogy. So you see the po­ten­tial. But to do that, you need to have the same type of in­fra­struc­ture the US has. You need to have the same type of tech­nol­ogy adop­tion. And there is no rea­son why In­dia should not have that. One day some­time in the fu­ture, In­dia will be a big­ger mar­ket than the US and it has to be.

Are you not look­ing at com­plete pric­ing free­dom?

Trans­parency is what we want. One should try to quan­tify the value and set the price ac­cord­ingly. That is fair price. That is not pric­ing free­dom. I am not say­ing we should get what­ever we say. What I am say­ing is that this is the value I am cre­at­ing and based on the value, this is the price that I de­serve. There is go­ing to be a dif­fer­ence be­tween the value that is derived from one set of tech­nol­ogy and the value derived from an­other set of tech­nol­ogy. I would like that to be quan­ti­fied in a way that pa­tients see the ben­e­fit. If there is

ad­di­tional ben­e­fit, one de­serves higher price.

Is there a move in that di­rec­tion?

There is in prin­ci­ple an un­der­stand­ing. I met gov­ern­ment rep­re­sen­ta­tives. There is an un­der­stand­ing that some­thing like that should be put in place. What the de­tails of that are, I think the gov­ern­ment will ac­knowl­edge that they will have to work out. They are quite open to work­ing with us, not just us, with oth­ers too in try­ing to for­mu­late that. We will work with the gov­ern­ment as part­ners to pro­vide bet­ter health­care.

The gov­ern­ment also wants to dis­cour­age im­ports.

From a busi­ness per­spec­tive, one should be mak­ing (in In­dia) if there is a mar­ket. Ev­ery coun­try that I go to, there is a case that is made by the gov­ern­ment as to why I should man­u­fac­ture there. If small coun­tries say they are the big­gest ex­porters, big coun­tries like In­dia say they are the big­gest mar­kets or po­ten­tially big mar­kets. They all have cheap labour, or ev­ery­one has good tech­nol­ogy. So ev­ery­one has a story. I do think that hav­ing a cap­tive mar­ket is an ad­van­tage for In­dia. Lo­cal man­u­fac­tur­ing is some­thing that we will nat­u­rally get to if the mar­ket evolves to that de­gree. The prob­lem will solve it­self once there is crit­i­cal mass in the coun­try. China (mar­ket) is much big­ger (than In­dia) but even there we don’t have the crit­i­cal mass to man­u­fac­ture. We im­port more than we make in China. So, this takes time.

Can fair pric­ing and af­ford­abil­ity go to­gether?

Of course they will. The whole point of health­care is that if peo­ple’s health be­comes bet­ter, their health­care costs will go down, not up. If this is played out cor­rectly, then fair pric­ing will ac­tu­ally re­duce the cost. If the pric­ing is not fair, then you pay the money but your health doesn’t get bet­ter. There­fore, un­der­stand­ing the true value of health­care is im­por­tant.

How close are you to hav­ing a prod­uct de­vel­oped in In­dia?

We are get­ting there, at least par­tially. Med-tech is more com­pli­cated than di­ag­nos­tic de­vices be­cause since it is some­times im­planted, it re­quires hos­pi­tal in­fra­struc­ture and other ca­pa­bil­i­ties. So, this does take a lit­tle longer. We are fairly early in that jour­ney; we have a few prod­ucts, par­tic­u­larly one in re­nal care that we are work­ing on and which will come to the mar­ket rel­a­tively quickly. In the next five years, we will cer­tainly see prod­ucts out of cen­tres out­side the US in emerg­ing mar­kets that will de­velop prod­ucts for lo­cal mar­kets and also ex­port.

Will it be less costly?

Not nec­es­sar­ily. It will de­pend on what the prod­uct does. It could well be, but our view of In­dia is not just the cost. It’s the pop­u­la­tion, it’s the ex­per­tise of the doc­tors, and the abil­ity to re­duce the over­all health­care costs. You need the best out­come that will lower the over­all costs. Just be­ing cheap does not mean the best out­come.

Medtronic re­cently flagged off a po­ten­tial cy­ber se­cu­rity vul­ner­a­bil­ity as­so­ci­ated with its car­diac im­plantable elec­tro­phys­i­ol­ogy de­vice. Are in­no­va­tions and in­ter­net of things reach­ing a stage that can threaten the health and safety of pa­tients?

We can man­age this par­tic­u­lar case be­cause we have newer mod­els with greater pro­tec­tion and they can just move to that. But, we, med-tech com­pa­nies, should be para­noid about such sit­u­a­tions. We should see that things like that can hap­pen and as a re­sult we have to de­velop sys­tems that pre­vent that. We are para­noid about safety as the cul­ture of the com­pany runs on safety.

‘‘ CHINA IS A MUCH BIG­GER MAR­KET THAN IN­DIA BUT EVEN THERE WE DON’T HAVE THE CRIT­I­CAL MASS TO MAN­U­FAC­TURE. ’’

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