Philippine eHealth: Extremes Open Opportunities

The Philippines’ healthcare ecosystem is characterized by extremes of consolidation of fragmentation.

With pharmaceuticals, Unilab dominates in manufacturing, Zuellig in distribution, and Mercury Drug in retailing. For the last few decades, these leaders have accumulated the majority of profits in this US$4 billion market.

Providers remain undifferentiated and fragmented. Hospital groups such as Metro Pacific and Mount Grace (owned by Unilab) are rolling up private hospitals to build scale. The diagnostics segment is similarly diffused, with Hi-Precision Diagnostics being the largest player despite having only 30 sites.

Payers are also fragmented. The state-sponsored program PhilHealth covers 80% of the population, but over 50% of healthcare expenditure is out of pocket. Another 20% is covered by private insurance, of which Health Maintenance Organizations continue to gain in popularity with employer-driven policies.


HealthTech Trends in the Philippines

The ungainly combination of consolidation and fragmentation foments inertia and opacity in the ecosystem. But it also sets the stage for HealthTech innovators that can capitalize on three opportunities.


1. Segmentation to address market gaps.
From an undifferentiated and fragmented provider market, startups are attempting to innovate on business models to address the needs and price points of specific market segments.

For example, KonsultaMD offers 24/7 phone access to doctor consultations for just US$1.20 per month and minimal per-minute charges. Konsulta delivers brief and affordable doctor consultations to the mass market that aren’t worth consumers spending half a day in traffic and the waiting room. KonsultaMD’s membership grew 10x from 10,000 subscribers after its August 2015 launch to 100,000 subscribers by the end of 2016.

Another telemedicine player, Medifi, addresses a similar pain point, but targeting a more affluent market through video consultations and value-added services.


2. Platforms to promote transparency.
Platforms that meaningfully assemble data for analytics or enable marketplaces are garnering attention. One such platform is mClinica, which harnesses the information it collects from pharmacies to generate actionable insights. At US$6.3 million, mClinica’s recent Series A attracted a wide mix of institutional investors outside of the Philippines.

Another platform, Maria Health, is a health insurance marketplace that also aggregates individuals and small enterprises to offer them better rates.

MedGrocer, recently funded by Ayala Healthcare Holdings, combines both analytics and marketplaces. It administers, augments, and analyzes corporate medicine benefit programs to promote disease management and cost efficiency. At the same time, MedGrocer provides choice and pricing transparency through its ePharmacy.


3. Technology to reconfigure the value chain.
Rapidly consolidating hospital groups and HMOs seek to leverage their scale to efficiently deploy medical resources and capture cost savings. Technology innovation robust enough to work with uneven internet connectivity and hardware cost constraints is key to delivering more efficient distributed healthcare.

Working with enterprise customers like FamilyDoc, Lifetrack’s distributed radiology platform allows radiologists in a provider network to seamlessly access and analyze diagnostic images from any facility. One use case has been the ability to offer everyday x-ray and ultrasound service in hard-to-reach provincial clinics which radiologists could previously only visit every few weeks. As a result, providers can extend their networks to even more remote locations and reach more consumers.


Looking Forward
While the environment for Philippine HealthTech is constrained by a dearth of funding, slow regulatory evolution and dominant players in certain segments, each of these challenges is also an enabler.

The austerity of funding rewards disciplined startups with clear business models for sustainable growth, rather than those pumping a market with endless giveaways for customers. Slow regulatory change means startups have room to experiment and shape regulations. Finally, the dominant players are realizing the potential in HealthTech and are looking for startup partners which can accelerate scaling their innovation.

Investors are beginning to realize this potential. Locally, the country’s oldest conglomerate Ayala has set up AC Health as its investment vehicle for the healthcare sector. Globe Telecom, an Ayala company, set up Kickstart Ventures as its VC arm and was an early investor in Lifetrack. Impact investors such as Unitus Impact and Global Innovation Fund participated in mClinica’s Series A, marking an important milestone for a Philippines-based healthtech startup.

Given that the Philippines is the second most populous ASEAN country , has one of the highest GDP growth rates in the region, and a government committed to increasing healthcare spending, the prospects for HealthTech startups are clear for both potential investors, innovators and entrepreneurs.

About the authors:

Carl Nicholas Ng is the Chief Revenue Officer of Lifetrack Medical Systems.

Jerome Uy is the Founder and CEO of MedGrocer, now a member of Ayala Healthcare Holdings.


Copyright © 2017 Galen Growth Asia

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