With a paltry 0.7 doctors per thousand Indians and a very real access problem for people outside large cities, it seems natural that connecting patients to physicians remotely should be a winning business idea. Then why isn’t it taking off in the country?
At Lightspeed Venture Partners, we met and spoke to more than 50 entrepreneurs building digital health products in India and elsewhere to try and understand the opportunities and the challenges. Here is a summary of what we learnt.
As a physician, founder of a clinic chain, and later an investor in two hospital chains, I am painfully aware that many Indians don’t have access to great doctors, yet have experienced first-hand the challenge of scaling up brick and mortar models
As a physician, founder of a clinic chain, and later an investor in two hospital chains, I am painfully aware that many Indians don’t have access to great doctors, yet have experienced first-hand the challenge of scaling up brick and mortar models. I wonder what it takes to build a scalable and profitable primary care digital platform. I’m sharing my observations to provoke some thought and start a passionate conversation on what it takes to crack this nut.
To simplify the discussion, let us think of telemedicine as an offering of remote medical consultations, as opposed to booking appointments, ordering tests or even comparing prices of medicines.
The market is small and will evolve slowly
Top-down market sizing yields a seductive billion-plus market, but don’t let that lead you astray. My view is that the addressable market is very limited and will expand slowly. In the US, where large players like American Well and Teladoc have been around for more than 10 years, our estimate is about 30 million teleconsults occur annually, over a transacting base of about 20 million people, corresponding to 11% of the 220 million ecommerce shoppers. In China, where over 450 million people shopped online, we estimate a paltry 10 million teleconsults occur annually.
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India, with a much smaller 12-15 million monthly unique ecommerce shopping base, is likely a market of only ~10 million annual consults at present (see box). And it will grow slowly if consumer preferences in the US and China are indicative of how things might unfold.
Discounts don’t work
When was the last time you went to a doctor because she was offering a 50% discount? Now contrast that with: will you try a new store because it offers 20% discount on your favourite phone? You see where I’m going with this.
First, health is a category where the margin for error is zero and quality is hard to measure. It is not a commodity. So, how does a consumer decide? Ironically, price is one indicator of quality. At my clinic chain, we anecdotally observed reverse price-demand elasticity: people perceived clinics to be of a higher quality when we charged them a bit more! They visited more often and referred more people.
At my clinic chain, we anecdotally observed reverse price-demand elasticity: people perceived clinics to be of a higher quality when we charged them a bit more! They visited more often and referred more people.
Second, there is bit of an overlap between free-loading consumers and those that are ready to transact: they have different questions and care about distinct things. Product-market fit completely shifts once discounts are switched off, and takes time to be rediscovered, adding to the peril of many freemium models. If you’re building a valuable service, charge from day one.
Trust is important, and takes time to build
Let’s go back to the basics. Why should I trust an app with random ratings with my health? Trust is not easy to build, but there is no beating around this bush. My view is that in the early days, the trust will rest with individual doctors — not with the digital platform. Like hospitals, it will take a number of years for a platform brand to emerge and resonate in the minds of people. So, what does one do to build trust?
First, aim for quality and design for a transformational experience. Get the best doctors, aspire to offer the best-in-class care. Provide end to end care — close the loop. As a patient, I don’t gain much from a consult, unless I can also get tests, medicines, and come back to consult you if I’m not getting better. If my doctor is already available to me over WhatsApp, why do I need another service? How does the consumer experience become 10x better?
Get the best doctors, aspire to offer the best-in-class care. Provide end to end care — close the loop. As a patient, I don’t gain much from a consult, unless I can also get tests, medicines, and come back to consult you if I’m not getting better
Second, try to foster a long-term doctor-patient relationship. Can I follow up with my family doctor whom I see offline? Or have a way to return to the doctor I saw the last time? Xingren Doctor (a Lightspeed investment) of China allows patients to follow up with their doctors. DocsApp (India) allows patients to speak with the same doctor over and over again. Third, try to find offline touchpoints (I am not saying build offline presence) so that patients are able to waltz back and forth, find someone if things don’t work out.
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Failure to build trust is the primary reason freemium Q&A models have failed to scale. Yes, they generate a lot of traffic, but over 90% of the volume comes from casual enquiries like erectile dysfunction, impotence and sexual health.
Low value and infrequent use case
Finally, ticket sizes are small ($2 to $5) and the service is used once or twice a year. Pick categories where repeats are high, disease state is long, and spend adds up over time — consider diabetes, pregnancy, cardiac care. Because network effects are limited, growth will have to be efficient — there’s no point pumping marketing dollars here. Over time, the bulk of the revenue might come from pharma and blood tests (at our clinics we saw more than 90% of our revenue come from this and over 60% margin in these categories).
Imagine a diabetic parent wearing a lens that monitors her glucose, a smart drug delivery patch that delivers round-the-clock measured doses of insulin, and her doctor checking in with her remotely every fortnight. Now that’s 10x better!
Going B2B could be the other strategy. Teladoc (US) does over $120 million in revenue, 85% of which comes through subscription contracts with large enterprises. While similar scale in India is hard to imagine (because enterprise spending on healthcare is low), it could still provide interesting clues to building scale. Ping An (China) does more than $100 million in revenues and a large number of consults, but they are all reimbursed through the insurer.
Imagine the future
Imagine a diabetic parent wearing a lens that monitors her glucose, a smart drug delivery patch that delivers round-the-clock measured doses of insulin, and her doctor checking in with her remotely every fortnight. Now that’s 10x better!
I believe that telemedicine will work, but it has to fundamentally transform the consumer experience and bring a step change in clinical outcomes. The reason it’s possible is that there’s a technology inflection in our ability to discover new data (wearables), make sense out of them (artificial intelligence) and act accordingly (smart therapeutics).
If you disagree with me, have a new approach, or are building something interesting, I’d love to hear from you!
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Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.
Lead visual: Angela Anthony Pereira
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