Innovation Indicators for Health Care in Emerging Countries: Understanding and Promoting Innovation in Emerging Markets
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Innovation Indicators for Health Care in Emerging Countries: Understanding and Promoting Innovation in Emerging Markets

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Emerging markets present much promise for innovative solutions to global health needs. Learn about leading indicators of health care innovation in these regions.

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Innovation Indicators for Healthcare in Emerging Countries Understanding and Promoting Innovation in Emerging Markets
A Deloitte Research Report
Introduction Innovation plays a critical role in addressing global health needs. As chronic and communicable disease rates continue to climb, governments, private payers, and nongovernmental organizations will wrestle with how to provide, disseminate, and pay for adequate prevention and treatment. Increasing the development rate of effective and affordable innovations will be a key factor in addressing this issue, as will improving the diffusion of these innovations in markets throughout the world.
Meeting this challenge will not be an easy task, since the development of innovative solutions has become increasingly complex and costly. At the same time, the emergence of targeted medicine makes the prospect of “blockbuster” products and solutions much less likely.
* Emerging markets play a key role in addressing the challenge— serving as a wellidentified source of innovation for multinational health care companies seeking to increase innovation capacity and/or reduce 1 development time and cost. The health care and life sciences companies originating in emerging markets are also growing, building on local capabilities and offering advantages to potential partners related to talent, knowledge of local consumer preferences, and the ability to navigate regulatory processes within the country.
For organizations located in both developed and emerging markets, emerging nations also represent an expansive and growing source of consumers, as 2 they represent 80 percent of the global population. Catering to their growing health care needs, coupled with rising income levels, present new opportunities for 3 business growth in emerging markets.
For the governments of emerging market countries, the promotion of innovation offers the promise of addressing longstanding priorities such as communicable diseases (i.e. malaria, tuberculosis, and HIV/AIDS), as well as the increased incidence of chronic diseases brought on by changing lifestyles (i.e. diabetes and cardiovascular diseases).
A comparative assessment of innovation indicators for healthcare in emerging markets will be a valuable tool for those seeking to strengthen the pace and reach of innovation to meet pressing global health needs. The objective of this tool is to focus both public and private sector attention on the innovation issue and facilitate discussion and collaborative action among governments and regulatory agencies, non governmental organizations, public and private payers, the healthcare and life sciences industry, the medical community, and patient groups. The pilot study is built around a framework that recognizes the broad range of components and conditions that are necessary to promote innovation in emerging countries. The scope of the study is solely focused on healthcare products and technologies, and does not seek to touch on healthcare delivery or services. Gauging the Relative Performance of Nations As the promotion of innovation in emerging markets is gaining importance for international and domestic healthcare and life sciences companies, analysis of the relative strengths and weaknesses of each country will become increasingly critical. This paper outlines a proofofconcept study to benchmark emerging market countries based on each country’s ability to promote innovation relative to its peers. The study features 10 emerging market countries, with four developed countries to serve as a baseline for comparison. A mix of key emerging market countries from Asia, Eastern Europe, Latin America and Africa are included: China, India, Singapore and South Korea from Asia; Czech Republic and Poland from Eastern Europe; Brazil and Mexico from Latin America; and South Africa from Africa. For the purpose of comparison, France, Germany, the United Kingdom and the United States are also included in the study.
* Emergingmarket countries are typically defined as those with low to middle per capita income that are experiencing strong economic growth after working to open their economy through economic development and reform. Emergingmarket countries include large, resourcerich nations such as China, India, Russia, and Brazil, as well as smaller countries such as Mexico, Romania, Hungary, Thailand, South Korea, Argentina, Nigeria, and South Africa, among others. Lists of emergingmarket countries can vary depend ing on the specific criteria that are used. Source: Reem Heakal, “What is an emerging market economy?” <http://www.investopedia.com/articles/03/073003.asp>.
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Primary Objectives There are three primary objectives of this initiative:
 Facilitate a continued public / private dialogue with the goal of a shared, common understanding and a baseline definition of how to foster innovation in health care and life sciences
 Understand what the private / public sector can do to encourage innovation in a given geography
 Identify and prioritize the levers that can have the greatest impact on innovation and help achieve appropriate balance between industrial policy and improved access to innovative health solutions
Approach to Analysis Promoting innovation involves consideration of an array of factors related to four fundamental pillars: Development, Ownership, Diffusion and Environment. Development refers to all of the activities and influential factors that come into play in the discovery and creation of new innovations. Ownership reflects the factors that have an impact on securing a return on investments made in innovation. Diffusion refers to all of the activities involved in the distribution and adoption of innovations. Finally, the Environment pillar encompasses the fundamental conditions required for doing business. These components and conditions are 4 highlighted in Figure 1.
Figure 1. Elements of Promoting Innovation
Ownership (Securing a Return on Investment)
Source: Deloitte Research
Development (Creating New Products)
Promoting Innovation
Environment
Based on this analytical framework, a set of levers that can be used to assess each pillar have been identified, based on extensive research and expert group inputs. (See Figure 2.) They are “levers” in the sense that public and private actions in these areas can influence the promotion of innovation. Several of the levers effectively represent surrogates or indicators of underlying conditions that can significantly impact a given pillar. The key levers affecting Development include appropriate planning, availability of resources including talent, financing mechanisms to fund innovation, and other facilities to foster innovation. Combined, these represent resources to support the R&D process. Similarly, the levers that comprise the Ownership pillar are policies that reward or value innovation and intellectual property, including the ability to price commercially. The Diffusion pillar encompasses coverage of products or services in public or private health plans, uptake capacity, as well as diffusion outcomes and other factors vital for diffusion of innovation. The Environment pillar includes measures of political stability and economic development, as well as other business environment levers.
Diffusion (Ensuring Access)
Development (13)
A. Policy 1.# of pharmaceutical patents in the emerging market 2.IP office staff strength
Figure 2.
Ownership (10)
Financing
Innovation index
Development
Plan
Facilities
Political stability & economic development
Business environment
People
B. Uptake 1.# of hospital beds per capita 2.# of physicians per capita 3.# of nurses/midwives per capita 4.Total telephone subscribers (Per 100) 5.Technology readiness 6.Technology usage 7.# of medical schools
Environment (10)
Diffusion (15)
A. Plan (R&D Focus) 1.Total GDP on R&D by government 2. # of researchers
B. People 1.Public expenditure on education as % of GDP 2. Total tertiary enrollment 3. Research publications
C. Financing 1.R&D spending by companies 2.Strength of university & industry research collaborations 3. Venture capital availability
A. Coverage 1.Per capita expend. on health 2.Accessibility of healthcare 3.Outofpocket expend. on health 4.Pharmaceutical market growth 5.Pharmaceutical imports growth over previous year
A. Political Stability and Economic  Development 1.Political stability 2.Real GDP growth 3.Macroeconomic stability B. Business Environment 1.Ease of Doing Business 2.Regulatory quality 3.Corruption perception index 4.General infrastructure 5.Judicial Independence 6. Financial market sophistication 7.Worldwide Press Freedom Index
Environment
Figure 3.
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E. R&D Output 1.# of pharma patents filed in the WIPO by firms located in the emerging market
B. Intellectual Property 1.Index of Patent Rights 2.Period of data exclusivity for new drugs in years 3.IP protection and enforcement
D. Facilities 1.# of science parks 2.Quality of scientific research institutions 3.# of clinical trials 4.# of CROs
Each lever is comprised of select measures which capture the quantitative essence of the levers when viewed in sum. Overall, 48 measures (Figure 3) are included in the assessment tool. Each was individually evaluated and selected from the more than 200 measures initially identified and researched.
Outcome
R&D Output
Ability to price
Policy
Coverage
C. Ability to Price 1.Price negotiations as a pre condition of product approval a.Clearly laid out policies for Pricing b.Unbiased policies for imports and local products c.Opportunity to negotiate price with Government 2.Regulations influencing pricing a.Absence of National Medicines List/Formulary b.Regulations against parallel imports
Diffusion
Ownership
Update
Intellectual property
C. Outcome 1.Primary care immunization  national coverage rates 2.# of MRI & CT scanners per capita 3.# of patients organizations (per million)
A comparative assessment of the emerging market countries is based on their individual performance across each of the four pillars. The methodology for individual pillar scores for each country is a function of each measure’s normalized score and assigned weight. The scores are normalized for each measure on a scale of 1–7, using a linearscaling technique that accounts for any outliers. The data are standardized, if necessary, using appropriate factors such as GDP and population. Scores for factors that negatively impact promotion of innovation have been appropriately inverted.
5.22 4.83
Mexico
Czech Rep. India
China
Poland
Brazil
3.11
Brazil
3.10
3.41
2.90
4.19 4.41
4.14 4.89
3.76
2.24
South Africa South Korea
Turkey
France Germany
5.36 5.25
4.55 4.18
3.93
2.29
2.51
Preliminary Output / Findings The preliminary output shows that among the 10 nations included in the initial assessment, the leading emerging markets in terms of promotion of innovation are Singapore, South Korea, Czech Republic, Poland and South Africa. Singapore and South Korea have very strong scores, comparing favorably with developed market scores. In both instances, the countries excel in the Environment and Development pillars. On the other
Singapore
Singapore
Poland
France Germany
Turkey
Turkey
Brazil
South Africa South Korea
Mexico
Poland
Singapore
South Africa South Korea
2.59
Czech Rep. India
China
Mexico
4.33
3.67
Turkey
France Germany
Development
Figure 4.
3.61
2.95
2.11
hand, the Czech Republic’s score in Diffusion compares favorably with the developed markets. Interestingly, most of the selected markets have strong scores in the Environment pillar. Although the sample size may be too small to draw definitive conclusions, the preliminary index results begin to point to interesting insights. The emerging market country performance, by individual pillar, is provided in Figure 4.
3.73
1.88
2.50
3.93
4.59 3.46
3.52
4.47 4.84
4.16
3.52
3.41
3.17
5.75
2.14
2.22
3.52
4.84 5.42
Czech Rep. India
China
UK US
4
Environment
4.09
3.07
3.50 2.63
3.02
Brazil
Poland
3.51 4.35
Singapore
Ownership
4.80 5.08
UK US
4.34 4.70
4.85
UK US
France Germany
China
UK US
Czech Rep. India
Mexico
South Africa South Korea
Diffusion
As the data indicate, the larger emerging market countries such as Brazil, China and India tend to perform poorly in certain key areas. India’s performance in the Diffusion pillar is lowest among all the emerging market countries. China’s performance, on the other hand, is driven by low results in the Development pillar.Similarly, low results in Development also affect Brazil’s overall outcome.
Conclusions The study reveals several key findings:
 Data needed to structure a viable healthcare innovation index are generally available for emerging markets.
 Scores indicate that Development is generally the weakest pillar for the emerging markets reviewed.
 Strong Ownership performance tends to correlate well with strong Development scores, suggesting a potential linkage between the two pillars.
 Selected emerging markets appear to have an environment conducive to promoting innovation. Environment is the strongest pillar for 8 of the 10 emerging countries assessed.
 Perhaps surprisingly, strong performance in the Environment pillar does not seem to translate into a strong Diffusion score.
While these conclusions are intriguing, additional valuable insights that are more specific to each country and region could be generated if the number of countries included in the assessment were to expand beyond the current set of ten nations. A larger pool of country scores would allow for a greater number and variety of comparisons, which could help crystallize as yet unidentified issues and drivers related to healthcare innovation.
Limitations aside, this study and resulting data and insights certainly bring into focus an important question that must be addressed in the immediate term: How do we connect with governments on this topic and engage in a dialogue that encourages them to support innovation more fully?
End Notes 1 Steve Usdin, “Doing business in India,”BioCentury: The Bernstein Report on BioBusiness, 12:34, August 2, 2004, pp. A1A24.
2 Reem Heakal, “What is an emerging market economy?” accessed October 17,2007 http://www. investopedia.com/ articles/03/073003.asp.
3 Business Monitor International, Ltd, “Tapping the grey dollar: Opportunities in aging populations,”Emerging Markets Monitor, 13:8, May 28, 2007, pp. 13.
4 Robert Go and Laura Eselius, “Promoting and Protecting Life Sciences Innovation in Emerging Markets”, Jan. 2008, Deloitte Research, Deloitte Services, LP.
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Authors Robert Go DTT Global Life Sciences and Health Care (LSHC) Industry Leader +1 313 324 1191 rgo@deloitte.com
Neal Batra Senior Manager Deloitte United States (Deloitte Consulting LLP) +1 212 618 4891 nebatra@deloitte.com
Acknowledgements We wish to thank: Terry Hisey (Deloitte Consulting LLP, United States), Dean Arnold (Deloitte Consulting LLP, United Kingdom), Matthew Hudes (Deloitte Consulting LLP, United States),Yvonne Wu (Deloitte Touche Tohmatsu CP, China), Charu Sehgal (Deloitte Touche Tohmatsu India Pvt. Ltd, India), Ira Kalish (Deloitte Research, United States), Pete Mooney (Deloitte Consulting LLP, United States), Paul Keckley (Deloitte Center for Health Solutions, United States), Laura Eselius (Deloitte Research) and Patsy Bolduc (Deloitte Touche Tohmatsu) for their insightful comments during the development of this paper.
We are also grateful to Anantharaman KV (Deloitte Research, United States) and Shatdal Kumar (Deloitte Consulting LLP, India) for their invaluable contributions throughout the development of this paper.
Contact Information Please visit the Life Sciences and Health Care Industry site at www.deloitte.com/ lifesciences for more information about our global practice.
DTT Global Life Sciences and Health Care (LSHC) Industry Leader Robert Go +1 313 324 1191 rgo@deloitte.com
DTT Global Life Sciences Sector LeaderJohn Rhodes +1 973 683 7296 jorhodes@deloitte.com
DTT Global Health Care Sector Leader Dean Arnold +44 20 7303 5199 deanarnold@deloitte.co.uk
DTT Global LSHC Consulting Leader Pete Mooney +1 617 437 2933 pmooney@deloitte.com
DTT Global LSHC Financial Advisory Leader David L. Jones +44 20 7007 2259 davidljones@deloitte.co.uk
DTT Global LSHC Tax Leader David Green +1 973 602 6287 davgreen@deloitte.com
LSHC - Asia Pacific Keiji Watanabe Deloitte Japan +81 3 6213 3493 Keiji.watanabe@tohmatsu.co.jp
LSHC - Europe, Middle East and Africa Stuart Henderson Deloitte United Kingdom +44 1223 259392 stuhenderson@deloitte.co.uk
U.S. Industry Leader – Health Sciences and Government John Bigalke Deloitte United States (Deloitte LLP) +1 407 246 8235 jbigalke@deloitte.com
U.S. Sector Leader – Life Sciences R.T. (Terry) Hisey Deloitte United States (Deloitte Consulting LLP) +1 215 246 2332 rhisey@deloitte.com
About Deloitte Research Studies Deloitte Research studies deliver ideas, fact driven insights, and innovations designed to improve organizational performance. Through the contributions of research and practice professionals from the member firms of Deloitte Touche Tohmatsu, and the contributions of academic and industry contributors, Deloitte Research reports and articles bring ideas that matter to executives, boards and leading business journals. To access the latest research, please visit www.deloitte.com/research or contact Doug Tuttle, Global Director, +1 617 437 2212 or dtuttle@deloitte.com.
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