Changing the Paradigm-Affordability and Access Sustainabilty

Changing the Design Paradigm – Affordability
and Access through sustainability.

Bala Manian, PhD.
ReaMetrix Inc.
San Carlos, CA

© 2005 ReaMetrix, Inc. All rights reserved.

What is the context of my talk?

One has to remember that “You can only be as objective as your
subjectivity will permit you to be objective”.
We are all but a prisoner in our thought process and to our own
perceptions of the world.
Case and point: every pre-conceived idea with which I started my
present activity in India, turned out to be totally wrong.
In spite of the fact that I grew up Indian, after 40 years in the US,
I had lost my ability to think “Indian”.
My understanding of the “local” unmet need and the best
approach to address them was highly influenced by my world
view from California developed over the last 40 years.
Therefore you are listening to the raw experiences & confessions
of a budding new entrepreneur from Bangalore, India and not the
voices of “silicon valley” veteran.

© 2005 ReaMetrix, Inc. All rights reserved. Page 2

Why do we need to look at this subject differently?

Simple survey suggests that the past approaches have not
succeeded in addressing unmet needs of the resource poor
settings.
For every isolated local success story, there are many more
unmitigated disasters that not only raised false expectations but
also wasted valuable resources.
Global public health in resource poor settings has to be viewed
within the context of local economic activity.
Without that, any solution rendered will remain forever at the
mercy of charitable organizations and/or changing political
fortunes.


What is the existing paradigm?

The most of the solutions conceived today are habitually western
model centric.
Often the emphasis is on technology as the key driver.
All the solution development takes place in resource rich settings.
All learning from successes and failures remains there.
The “modus operanda” is delivering the completely engineered
solution to the resource poor settings, more like giving the “fish to
fisherman”.
Design decisions are often highly influenced (directly and
indirectly) by the macroeconomic environments prevailing in
which solutions are developed and not where it is to be deployed.
These often lead to unpleasant surprises when solutions are
deployed.


What is wrong in this picture?

There is no focus on local economic participation as a key
component in design criteria.
This is difficult to internalize, in an environment of a “third
party reimbursement” culture.
Seldom there is an awareness of tailoring of technology
development to favor local economic value addition.
There is also an absence of an understanding of the
influence of local economic constraints on design or in
deployment.
Incorporating a local economic stake is the only way to
build “successful” and economically sustainable solutions.


How to frame the big picture?

Diagnostics is an important component in disease
management.
Diagnostics is not just about diagnosing “illness” but it has
to be also about maintaining “wellness”.
It is all about “information” and diagnostics is an
information business.
Information is generated to help the physician (and in some
cases the patients) make better clinical decisions.
What matters is the cost per unit of information and the
local macro-economic environment to support that cost
sustainably.


Anatomy of the Cost of Goods Sold (COGS)

Many components contribute to the costs per unit of
information generated.
• Cost of patient transport to blood collection center.
• Cost of the acquisition of the sample.
• Cost of the transportation of the sample.
• Cost of processing of the sample – Tech labor + assay
reagent costs.
• Amortization Cost of the capital equipment investment.
• Laboratory infra-structure overhead cost.
• Distribution, field service & support, etc, etc.


How the costs are influenced?

In most developed countries, because of the infra-structure
advantages, there is a natural and organic aggregation of
samples.
During development, macroeconomic factors prevailing in
those countries such as labor costs, transportation costs
etc do influence key design decisions.
Macroeconomic impact on product design decisions and
process developments can be subtle and indirect.
Design criteria optimized for one environment may not be
the right solution for another.


Different priorities in different environments

In the developed countries:
• Labor costs dominate the COGS.
• The emphasis is on reduction of labor both in manufacturing and in
process.
• Material conservation is not often a priority because it takes high
labor cost for realization.
In the resource-poor countries:
• Material costs dominate the COGS.
• The Labor cost is low but how does use that cost arbitrage to impact
high material costs?
• The priority has to be on material cost reduction – more of the raw
material has to end up in finished goods – this is sustainable in the
long run.
• Reliance on the utilization of labor demands innovation. It is
required to minimize human “error” which is by-passed in the
developed countries by eliminating or minimizing labor.


How to change the paradigm?

Import the science but the implementation of that science locally
has to be started from a clean slate.
Define “the affordability index” in the context of local
macroeconomic environment. Affordability index does not
necessarily mean always lowest cost solutions.
Affordability index drives the appropriate technology that can
deliver the good and services within the affordability index.
The demand at the bottom of the pyramid then drives the cost
economics
However, local economic participation is what assures long term
economic sustainability.


What are some case studies?

ReaMetrix as a company, has been able to translate these
concepts to diagnostic solution development in India.
Five fold cost reduction in COGS by focusing on improving
material yield of Antibody used in assay KIT formulation.
Elimination of cold chain for transportation & storage – allowing
the development new business models in distribution.
Development of multi-purpose hardware platforms designed for
easy deployment and local service & support.
Technology focus on is more on local economic sustainability
rather than on peer reviewed publications in scientific journals.
It is all about creating the ethos and the ecosystem to drive
entrepreneurial solutions that are economically sustainable.


Dry Reagents

In places like India, cold chain transportation costs
can be higher than the cost of reagents.
A unique process for drying down the assay reagents
enables ReaMetrix to ship the reagent without any
cold chain requirements.
While dry reagents were developed to drive
transportation and storage costs down, it opened
opportunities to explore new business models for local
economic value add.


Sample collection & centralized processing
There is a huge problem in timely and temperate transportation
of blood samples from remote areas to centralized testing
centers.
Because of poor infra-structures and long distances, this results
in “aged” blood samples (> 48 hrs) that are unusable.
To solve this problem, enormous effort & resources have been
spent of ways to stabilize the blood sample.
However, with dry reagents, it became possible that blood can be
collected, stained and fixed at the point of collection before being
shipped to a central testing facility to add value at the local level.
Through serendipity, it was discovered that after processing and
fixing the blood sample, it can be stored for up to 8 days without
any significant difference in CD4/CD8 counts.


Post fixation stability of blood sample

Stability of CD4 counts
70
60
50
CD4 Counts

40
30
20
10
0
1

2

3

4

5

6

7

8
ay

ay

ay

ay

ay

ay

ay

ay
D

D

D

D

D

D

D

D


Unintended benefits derived from dry reagents

Unitized test – reduces human error.
Distributed value addition in sample processing – creating local
economic activity.
With the sample coming into the central lab ready to be run, the
throughput per machine increases dramatically.
Capital investment tied up on the expensive flow system
amortizes much faster – lower cost to patient.
Longer shelf life of the reagent (>12 months at room
temperature).
Thinking differently does offer its rewards


Thinking differently
on
Healthcare Delivery


Saantwanam – A health screening project
Kerala (India)

Fighting life style diseases – A novel project by HAP,
Kumbashree & State Bank of India.
Objectives - Screening for Diabetes mellitus, obesity,
hypertension and growth retardation.
Referral to physician & health education.
Strategy – rely on locally recruited and trained young
women with high school education but from poor families
and deploy them in an entrepreneurial business model to
accomplish the objective.


A Training Session


The first batch


Glucose-Measurement


The Investment

Item Cost [Rs]
Measuring equipment 15000
Motor Cycle 29000
Mobile phone 2500
Preliminary expenses 3500
Total 50000

Rs 7500/- is given as subsidy by the government


Expense Income

EMI against loan 1800 10 glucose estimations 250

Fuel charges 750 15 blood pressure 150

Telephone charges 500 10 BMI 50

Consumables 3000 Average income per day 450

Total 6050 Total per month 1250

Net income anticipated - over Rs 5000 per month
Over 150 care givers servicing 200K screens/ year
20% earning over Rs. 10,000 per month.


What questions that arise from this observation?

What more can be done using this model of healthcare
delivery?
How to empower these young women to move up the
value chain?
How to bring other parts of healthy living as an economic
part of this healthcare delivery?
If one believe that compelling self interest is the biggest
factor in compliance enforcement, how to bring about
financial incentives to shift the focus from illness to
maintenance of wellness?


In summary…

One has to look at “diagnostic information generation” holistically,
not just as a set of assay reagents and hardware platforms.
Addressing “the economics” problem innovatively, will lead to
sustainable solutions.
“Import the science” but not the implementation of the science –
great to think globally but sustainable innovation is all local.
Rather than just focusing on cost arbitrage, use cost arbitrage to
generate sustainable value arbitrage.
Using this model, one can not only address the unmet needs in
resource-poor settings but change the way diagnostic information
is delivered globally.


Changing the Paradigm-Affordability and Access Sustainabilty

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