Forbes India - Sep 16, 2013

Date: 03-02-2015

Medtech Giants Philips and GE Fight Over India

Philips became No. 1 after years of trailing GE in Indian health care. This may change as GE revs up. But both are fighting a battle with their HQs to take the small Indian market seriously
 

Has that exacted a price—like ceding market leadership to Philips? 

“Market share is clearly part of the business, but really I’ve never cared for the number one or number two position, provided I had a plan around what the growth of the market is going to be…Being number one or two doesn’t matter to my customers either,” she says. She looks at the tough Indian market as an opportunity to be more innovative. Recently, GE designated India as a centre for “low-cost disruptive products” and it’s no longer about just the technology. It has to be accompanied by a go-to-market and service delivery model. 

On the India business now lies the onus of proving the economic value of the technologies it develops, not just on its own terms but along with health care providers and customers. “And then [we have to] repeat the study in Indonesia or Brazil so that we can say, here’s the technology, here’s the clinical proposition and here’s the economic value,” says Bresenham.
 
After a joint venture with Microsoft in 2012, this past June GE said it’s going to invest $2 billion over the next five years on software for health care systems and applications. India forms a nerve centre in that strategy as well. It is close to signing a deal with a large private hospital where it will implement its IT-Big Data plan. The idea is to take all the incoming information from health care systems—from primary care physicians to large tertiary care hospitals—and aggregate it and use it to improve hospital operations, be it in manpower, capital or equipment. 

In a year from now, says Bresenham, GE Healthcare would have changed from being a pure technology provider to someone who stands shoulder-to-shoulder with the operator in improving the outcomes of health care, both in terms of costs and the clinical benefits for patients. It already broke new ground in May in Maharashtra, where it announced a public-private partnership with the state government and Ensocare, part of the $7 billion diversified Enso Group. GE will set up and run advanced diagnostic facilities at 22 government and women’s hospitals, providing services at government recommended rates.
 
Such partnerships, or at least the intent in other states, are turning out to be reasonably big opportunities. But a business deal with government hospitals comes with its own risks. In 2008, Hewlett-Packard, or HP India, entered into an agreement with the Maharashtra government for computerisation of 19 hospitals. Five years into it, the breakeven isn’t in sight. “We had planned to do three hospitals in four months, but it stretched to one year,” says S Girish Kumar, practice head, healthcare and life sciences, HP India. 

The rupee’s slide hasn’t helped global companies either. These accounts were sold when the rupee was at 40, now it’s inching towards 70. HP did not create ‘insulation’ for such volatility, says Girish Kumar. Any other vendor, he believes, would have found it difficult to continue. He is working with three state governments closely but these are open discussions and HP isn’t even close to signing any deal yet. 

Any partnership with government may turn out to be an endurance test for companies. Former GE Healthcare Chief Executive V Raja, in whose term GE ventured into a public-private partnership in Gujarat, says if technology companies get into collecting money from the government or hospitals, then probably “every penny will be a pain point”. 

One way out of this, says Girish Kumar, is to have tripartite agreements, involving a service provider or system integrator who can convert capex into opex. GE does have a service provider in Ensocare; how lucrative this approach will turn to be depends on the execution.

Enso group is london based firm led by investor vinay maloo


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