Philips Healthcare Localizes Business for Key India Market
The $4.8 billion Indian health care equipment market is dominated by three large multinational companies—Philips, GE Healthcare India, and Siemens—which together account for a major share of high-end equipment. Dutch company Philips, is the market leader.
To keep ahead of the competition, Philips India’s operations will re-organize shortly
Three factors, which are unique to India’s healthcare sector, are driving changes in Philips’s business model in India, reports Forbes:
1. Cash-Strapped Sector – India’s per capita healthcare spend, at $45, is way below other BRIC countries. India’s total expenditure on healthcare is about 5.2 percent of its GDP of which 1.2 percent is funded by the government according to PricewaterhouseCoopers data. Enter the PPP model – Private-Public Partnerships: “This model brings in private sector capital and efficiency, uses government infrastructure and draws in modern technology to deliver equitable, affordable and quality health care,” says Chhitiz Kumar, head, Philips Capital and Business to Government and PPPs. He says this model has gained a lot of traction in the states of Rajasthan, Gujarat, Karnataka and Haryana. Philips’ revenues through the PPP route are growing at 70 percent year-on-year, adds Chhitiz Kumar.
The other innovation is the ‘pay-per-use’ model. “The cost of health care equipment works up to 30 percent of a hospital’s project cost, and if this can be eliminated through a pay-per-use basis, the initial investment costs come down dramatically,” says Vishal Bali, former group CEO of Fortis Healthcare. “The pay-per-use structure also helps hospitals price their services aggressively.”
2. Need for Localization – “India-focused innovation brings down costs and gives the much-needed edge in a competitive market,” says Dr Rana Mehta, partner & leader, Healthcare, PricewaterhouseCoopers India. Philips’ Healthcare Innovation Centre in Pune, in the western state of Maharashtra “combines technology and market knowledge. It also helps design products that are unique to India’s needs like that of durability, higher throughput and handling voltage fluctuations,” explains Rekha Ranganathan, head of this institute. The Pune centre has so far launched five products, focusing on the twin aims of affordability and profitability. “When it comes to value engineering, India is the best,” Ranganathan added referring to the company’s initiative to increase manufacturing in India which has been nominated as the global hub for the company’s mobile surgery business.
3. Shift to Services – customers are increasingly seeking to buy better services, and Philips recently launched a Healthcare Transformation Services business. “Health care is shifting from doctor/hospital-centric to patient-centric. Also, delivery is becoming dis-aggregated. Single monolithic entities are giving way to small specialty hospitals. Our focus is to help hospitals change in line with these trends,” says Dr Adheet Gogate, senior director, Healthcare Transformation Services. He and his team study the process flow in hospital wards to find ways to improve productivity—whether it is reducing the time taken to discharge a patient, increasing an equipment throughput or optimizing work flow in operation theaters.