PRIVATE HEALTHCARE IN EMERGING MARKETS An Investor’s Perspective IN THE ISSUE: INTERVIEW JUNE 2016 2 Adam Darkins, Vice President for Medical Affairs and Enterprise Technology at Medtronic, discusses the great potential for telemedicine to broaden access to quality care. page MACRO INSIGHTS 4 Macroeconomic analysis of the ongoing global economic slowdown, its impact on emerging markets across sectors, and its implications for the health sector in particular. page CASE STUDY 6 A close look into how Global Health Investment Fund creates incentives for life sciences companies to address public health challenges that disproportionately burden low-and middle-income page countries. OPINION 8 Dr. Bobby Prasad, Chief Medical Officer at the Abraaj Group talks about shaping the health system of the future through the Group’s Global Health Fund. page IFC NEWS & INITIATIVES 10 • Dispatch from IFC roundtable, where healthcare providers discussed opportunities of the Nigerian private health sector. • Overview of IFC’s recent investments page • TechEmerge - a new matchmaking program to connect technology innovators with healthcare companies. INTERVIEW: Adam Darkins, Vice President for Medical CAN TELEMEDICINE BROADEN Affairs and Enterprise Technology at ACCESS TO QUALITY CARE? Medtronic We are used to getting healthcare in physical locations, Q: Telemedicine is changing rapidly—it’s not just video anymore. How is this evolution of digital doctors’ offices, clinics, or hospitals. Telehealth—a multi- solutions changing the kinds of telehealth services media patient record—is a potential game-changer. Consider available? a person with a heart failure. Everything may be normal at a routine clinic visit, yet he or she deteriorates two weeks Telemedicine began in the 1960s as video consultations later at home. A virtual-doctor visit could prevent severe between physicians and patients, virtually replicating face-to- deterioration with admission to an intensive care unit. face clinic visits. It has subsequently ‘morphed’ to involve Although there are investigations, treatments and surgeries other healthcare professionals and adopt functionalities from that need to happen in a physical location care decisions an ever-emerging range of new digital technologies. As for increasing number of people with chronic disease can innovative virtual services have evolved, the words describing be made remotely. Telehealth helps these become shared them have proliferated to include terms like telehealth decisions between patients and clinicians. e-Health, mobile health (mHealth), and virtual care. Services these terms collectively embrace are transforming the patient Mobile solutions quite literally put the ability to make experience and changing healthcare worldwide. these shared decisions into people’s own hands. The term describing this is “connected care.” The care model that has To appreciate the potential solutions telehealth offers, a taken off most rapidly is health and fitness. This is having an definition is helpful as a frame of reference for stakeholders, impact on health promotion and disease prevention, a long- including patients, caregivers, clinicians, managers and standing and elusive public health goal for policy-makers. policymakers. Essentially, what we’re talking about here is Payers of all sorts, governments, insurers and employers, are using information and telecommunication technologies to exploring ways to pay for this because encouraging diet and provide care when patients and clinicians are separated by exercise is better than treating the complications of chronic geographic distance. lifestyle associated conditions like diabetes, if they are Digital technologies can support monitoring people at home avoidable. with chronic conditions e.g., heart failure and diabetes; When people have these chronic conditions, they can also remotely diagnosing digital images, such as screening benefit from mobile solutions to help with self-management for diabetic eye disease; remotely reporting radiology of their symptoms and preventing disease progression. examinations like out-of-hours X-rays; and distance- Apps devoted to diabetes, heart failure, and asthma etc. can management of intensive care patients. So, it is not just improve medication compliance, reduce hospital admissions, video. Irrespective of telehealth technology, successfully help with living independently and prevent long-term making remote diagnoses and delivering care at a distance institutional care. Hospitals, skilled nursing facilities, and requires health information, such as details of the patient’s community services are using telehealth to help manage history and laboratory results. patients across the continuum of care and in doing so, The quantum leap that makes telehealth transformational is creating new business opportunities. Q: combining it with information. This can be done by fax, but is ideally done through electronic health records or as a data How is telehealth having an impact on Pharma? set that is part of the telehealth solution itself. You should think of this combination of telehealth and electronic health information as a “multi-media patient record” that can help Connected care is changing how every sector of healthcare deliver the right care to the right patient, in the right place, at is relating to patients. It’s giving us all new tools to connect the right time. with patients and a better understanding of their preferences Q: How is this multimedia convergence, including and health goals. Improving patient compliance and using mobile solutions, changing the way healthcare is mobile technologies to improve research capabilities are as delivered? What models are taking off the fastest? important to pharma as to the medical device industry. I PAGE 2 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Photo©Intel Free Press: Virtual Care Extends Care Anyware imagine much of what I have said will resonate with pharma. Connected care is not just linking patients in new ways; it’s also linking all stakeholders in patient care delivery in new ways. Q: What is the role of the government in expanding the benefits of telehealth? Q: IFC’s purpose is to expand access to quality Despite its promise, the process of creating large scale healthcare in developing countries. How is Telehealth programs is challenging. The challenges are the telehealth relevant to achieving these goals? people and technology aspects I have already talked about. Taking successful pilots to scale involves having the necessary clinical, technology and business processes to support them. This is a really important question. Digital technologies have Most healthcare systems are organized around hospital care made it possible for developing countries to “leap-frog” in and some proudly state, “when you have seen one hospital, developing new business opportunities in many industries you have seen one hospital.” What are they saying by this? where its infrastructure previously gave the developed They are saying that they do not have standardized processes world many advantages. Now, today’s infrastructure is often among their various hospitals, which hinders telehealth tomorrow’s legacy system. Mobile technologies have given development. developing countries exciting new opportunities in banking and commerce. As I meet colleagues from developing A major element of Telehealth’s value proposition is in countries at meetings and conferences, I am amazed at developing large networks of care. Scarce clinical resources their innovation in healthcare. The challenge for developed e.g., neurologists, cardiologists, and infectious disease countries is the change management of their existing bricks physicians can then be leveraged over larger geographical and mortar legacy systems—hospitals and clinics. Developing areas than where they are physically located, and without countries often have a cleaner slate and an opportunity expense and delay of travel. Making this “knowledge to expand access to higher quality care at lower cost by sharing” possible means the clinical, technology and designing the bricks and mortar healthcare infrastructure business processes need some degree of standardization and they need around connected care platforms that better interoperability. serve patients. We are all creating the hospital of the future In my opinion, this is where the role of the government is where new virtual models of care, e.g., for stroke and renal most vitally needed. It is a shame to see a large investment disease, provide specialist advice faster and more accessibly made in people, technology, and money and find the so the subsequent management of patients is more effective, promise of telehealth is not realized because of lack of efficient, and safe. standardization and interoperability. Governments typically I have focused on the role of Telehealth and connected play a role in fostering development in other industries by care in direct healthcare delivery to the individual. Equally such standardization, something the commercial sector needs important is the role that these virtual technologies can assistance with. play in the education of healthcare professionals and in There is incredible energy and excitement from working mentoring them to deal with complex cases they may only in this area. What makes it most rewarding is that success see infrequently. Telehealth, together with health information comes from using technology to create relationships— systems, has other public health impacts for dealing with relationships between patients, caregivers, and physicians infectious disease by helping to collect information to detect between primary and specialist physicians. Delivering and track the progression of an outbreak, and bringing-in cardiac services over a network makes the network engineer expertise to help deal with it. a vital team member for the cardiologist to interact with, making care possible. When you get it right, clinicians will tell you this is why they chose a career in healthcare, and patients love it. PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 3 MACRO INSIGHTS: CHALLENGES AND OPPORTUNITIES FOR PRIVATE HEALTH PROVIDERS T he global economic slowdown is affecting Real GDP growth (Annual percent change) nearly all health sectors in emerging EMERGING AND DEVELOPED MARKETS (WORLD) markets. It is curbing government funding for public health services and families’ 2010 2014 2015 2016 (p) 2017 (p) disposable incomes. This situation creates 5.4 3.4 3.1 3.2 3.5 new opportunities as well as challenges for private health providers. Demand for health services will EMERGING MARKETS 2010 2014 2015 2016 (p) 2017 (p) continue to rise, regardless of economic cycles, because of Argentina 9.5 0.5 1.2 -1 2.8 aging populations, urbanization trends, and shifts in disease burden. The need is greater than ever for the private health Brazil 7.5 0.1 -3.8 -3.8 0 sector to step up to fill the gaps that the public sector is not China 10.6 7.3 6.9 6.5 6.2 able to fill. Egypt 5.1 2.2 4.2 3.3 4.3 TOUGH YEAR India 10.3 7.2 7.3 7.5 7.5 If 2014 was a difficult year for most emerging market economies, 2015 and the first quarter of 2016 turned out to Indonesia 6.4 5 4.8 4.9 5.3 be even tougher. Global trade contracted, commodity prices Mexico 5.1 2.3 2.5 2.4 2.6 were sluggish, and capital outflows depressed asset prices and drove currencies down, which contributed to tighter liquidity. Nigeria 10 6.3 2.7 2.3 3.5 In addition, governments, corporates, and households were Pakistan 2.6 4 4.2 4.5 4.7 all struggling with high debt loads. This made it hard to finance new investments and curbed demand in domestic and Philippines 7.6 6.1 5.8 6 6.2 export markets, which slowed growth. To cap this, United Russian Fed. 4.5 0.7 -3.7 -1.8 0.8 States interest rates began to edge up, leading to tighter financial conditions around the world and raising the cost of South Africa 3 1.5 1.3 0.6 1.2 borrowing for all. As a result, productivity gains and wage Thailand 7.5 0.8 2.8 3 3.2 increases were modest, and unemployment rose in many countries. Turkey 9.2 2.9 3.8 3.8 3.4 CHALLENGES AHEAD Vietnam 6.4 6 6.7 6.3 6.2 The United States is performing better than most other DEVELOPED MARKETS 2010 2014 2015 2016 (p) 2017 (p) countries, but growth is not sufficiently strong to lift the France 2 0.2 1.1 1.1 1.3 global economy. As a result of these headwinds, the world is stuck in relatively low growth, leaving it vulnerable to a Germany 3.9 1.6 1.5 1.5 1.6 range of economic, political, and market challenges. The five Japan 4.7 0 0.5 0.5 -0.1 main threats are outlined below. United Kingdom 1.5 2.9 2.2 1.9 2.2 • Rising political uncertainty affects advanced and emerging countries to varying degrees. The United States United States 2.5 2.4 2.4 2.4 2.5 has presidential elections. The EU is grappling with a Source: IMF Data multitude of problems. Parts of the Middle East and Africa are at risk from conflict and unrest. • Lackluster growth in developing and developed economies will continue, hurting trade. Government, corporate, and household balance sheets will come under PAGE 4 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Photo©World Bank: Bicycle traffic on the streets in Hanoi, Vietnam GLOBAL ECONOMIC SLOWDOWN greater strain. Incomes and profitability will stagnate. Unemployment is unlikely to ease. The need is greater than ever for the • China’s slowdown will probably continue as its economy rebalances from heavy industry and exports to domestic private health sector to step up to fill consumption and services. This will hurt countries that export to China, especially commodity producers. the gaps that the public sector is not • Commodities remain weak. This may be good for energy able to fill and food consumers, but it hurts producers, especially those in the Middle East, Africa, and Latin America. And low commodity prices are a symptom of weak economic activity. Meanwhile, the world is becoming less energy- intensive, so the growth boost from cheaper oil is smaller than in the past, further delaying economic recovery. • Effectiveness of monetary policy has diminished in advanced economies. Record low interest rates in the Eurozone and Japan have not increased demand for loans much or reignited growth. Even in the United States, where rates are still low, the economy remains fragile. REFORMS NEEDED Low interest rates are losing their effectiveness, so a combination of greater public spending and structural reforms might do more to revive growth in advanced economies. In principle, faster growth would raise employment, increase demand, and make higher government debt more sustainable. And that would boost both global trade and capital flows, helping developing countries to restart their economies. PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 5 CASE STUDY: GLOBAL HEALTH INVESTMENT FUND G lobal Health Investment Fund (GHIF), was is managed by Global Health Investment Advisors, LLC structured by the Bill & Melinda Gates (GHIA), a Delaware company organized expressly for Foundation (BMGF) and JPMorgan Chase & the purpose of overseeing impact investments designed to Co. as a “first-of-its-kind” impact investment advance public health. fund designed to support the development of new drugs, vaccines and medical devices for THE FUND’S INVESTMENTS public health challenges that disproportionately burden low- and middle-income countries. The infectious lung disease, Tuberculosis, killed 1.5 million people worldwide in 2014, the majority in developing The fund focuses on treatment and prevention of infectious countries. GHIF invested $8 million in a convertible diseases, family planning, and the reduction of maternal and bond issued by Epistem Plc (United Kingdom) to support child mortality. GHIF investments are complemented by development and commercialization of Genedrive, a novel global access agreements that obligate investee companies to molecular diagnostic platform, initially targeting point- bring the new products to the developing markets where they of-care diagnosis of tuberculosis. Tuberculosis, especially are critically required. As a “double bottom line” fund, GHIF its drug-resistant form, requires sophisticated diagnostic seeks both financial returns and positive social impact, and techniques for identifying the presence of the disease and both metrics are carefully evaluated when making investment prescribing the proper course of treatment—hard to find decisions. Social impact is measured by tracking public in developing countries. The World Health Organization health outcomes, typically via the reduction in morbidity and (WHO) recommended that countries include new, rapid mortality as a result of successfully delivered interventions. diagnostic tests for tuberculosis into their disease testing GHIF also aims to catalyze global health projects at large programs. If successful, Genedrive will offer a fast, affordable biopharmaceutical companies where products designed and accurate alternative for point-of-care diagnosis of exclusively for high-income countries may crowd-out R&D tuberculosis and potentially other diseases. As part of its financing for products with good prospects for high-volume/ global access commitment, Epistem agreed to make its low-margin returns through large public sector sales in Genedrive platform available for sale in developing countries developing countries. under a pricing framework that reflects the needs of poor Partially mitigating investors’ risks, BMGF provides first- patients in those regions. The company is also developing loss protection of up to 20 percent of investors’ contributed an equally compelling trial for hepatitis C infection on the capital. BMGF has also committed to reimburse investors Genedrive platform. for 50 percent of any additional downside experienced Cholera is an endemic disease in over 100 countries and beyond the first-loss protection, which means that 60 cents afflicts both children and adults, causing 100,000 to on every dollar invested in GHIF is guaranteed by the Bill & 120,000 deaths annually, primarily in low-income countries. Melinda Gates Foundation. GHIF provided a $2.5 million loan and invested $2.5 GHIF achieved its first closing in December 2012 and its million in preferred shares of EuBiologics, a South Korean final closing twelve months later. It has $108 million in manufacturer of an improved oral cholera vaccine for low- committed capital, including an IFC commitment of up to and middle-income countries. GHIF funding supported $10 million. GHIF’s anchor investors are Grand Challenges clinical trials, regulatory submissions, and expansion of the Canada (funded by the government of Canada), the German company’s manufacturing capacity. This investment, plus Ministry for Economic Cooperation and Development collaboration with government and donor organizations, put (acting through KfW) and the Children’s Investment Fund EuBiologics on track to offer its cholera vaccine at $1 per Foundation (CIFF). Other GHIF investors include AXA dose to public sector buyers, once the manufacturing capacity Impact Fund, GlaxoSmithKline, JPMorgan Social Finance, reaches scale. In December 2015, EuBiologics received WHO Merck, the Pfizer Foundation, Storebrand, and a number prequalification as the second supplier of an oral cholera of high net worth individuals and family offices. GHIF vaccine suitable for delivery in places where resources are PAGE 6 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Learn more about GHIF at www.ghif.com Photo©GHIF: Vaccination GHIF - INNOVATIVE LIFE SCIENCES FUND scarce. EuBiologics will contribute to the WHO’s vaccine for either condition would permit an improvement in stockpiling program, which is designed to ensure the antenatal care for tens of millions of vulnerable women each availability of vaccines for mass vaccination campaigns in year. The product, if successful, has commercial potential response to humanitarian emergencies in cholera-endemic in both developed and emerging markets due to improved regions and in conflict affected countries. accuracy, convenience, and lower cost. The investment allows GHIF to catalyze the development and commercialization River blindness is a parasitic infection that affects more than of a dual-market opportunity product in close collaboration 37 million people globally, with the heaviest burden in some with a global life sciences company. of the poorest parts of sub-Saharan Africa. GHIF entered into a development and commercialization agreement with GHIF provided a $6 million venture loan to Atomo Medicines Development for Global Health (MDGH), an Diagnostics (Australia), to support development, registrations Australian non-profit biopharmaceutical company that is and commercialization of an innovative rapid diagnostic test seeking regulatory approval from the United States Food for HIV, malaria, Ebola, and HCV using an innovative casing and Drug Administration (USFDA) for moxidectin to treat platform that integrates needle, blood collection, measuring, the disease. GHIF committed to invest up to $10 million, and test strip blood transfer for improved performance in divided into three milestone-based tranches, to support this both professional and self-testing settings. According to a project. Moxidectin, if successful, would be an affordable recent BMGF study, 10-50 percent of rapid tests are wasted and effective medicine complementing existing treatments due to misuse, lack of test buffer or other disposables. for river blindness, with the potential to significantly Human error accounts for 10 percent of inaccurate results accelerate the eradication of the disease. Following the in professional settings and up to 40 percent in less trained approval of the drug, MDGH has committed to manufacture settings. By reducing waste and errors, Atomo’s rapid moxidectin and supply it at affordable prices for distribution diagnostic tests are expected to save public health systems by donor-funded programs. As most of the moxidectin approximately $150 million by 2030. Atomo’s product, will be distributed through non-commercial channels, if successful, has commercial potential in both developed GHIF’s expected return will come from the anticipated markets and emerging markets due to improved accuracy, sale of a “priority review voucher” (PRV) under a program high convenience, and low cost. administered by the USFDA. The program grants special vouchers to companies that successfully register new drugs IFC’S ROLE or vaccines targeting neglected tropical diseases, and these vouchers can be used to receive priority review of any future In addition to financial resources, IFC supports GHIF drug application—potentially shaving 4 to 6 months off the investments by reviewing environmental, social and standard FDA review timeline. Vouchers are transferable and governance reports prepared by the fund management to can be extremely valuable for pharmaceutical companies ensure that potential investee companies comply with IFC’s eager to receive first-to-market advantage for “blockbuster” sustainability criteria and with environmental and social drugs. performance standards. IFC’s team also provides inputs on the investment proposals to the fund manager, leveraging its GHIF committed up to $10 million to Becton, Dickenson & experience in emerging markets and its in-house healthcare Co. (BD), a global life sciences company, to develop, register sector expertise. The IFC team is an active participant in and commercialize a new point-of-care diagnostic test for the work of the fund’s Investor Advisory Committee and gestational diabetes mellitus (GDM) and/or preeclampsia shares views on questions related to the fund’s strategy and (PE). The WHO estimates that PE accounts for at least 16 operations. percent of maternal deaths in places with scarce resources, which adds up to 63,000 deaths each year. GDM is one of the most common complications of pregnancy, particularly in developing countries, where prevalence is believed to be increasing. An affordable, reliable point-of-care diagnostic PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 7 OPINION: Dr Bobby Prasad Chief Medical Officer SHAPING THE HEALTHCARE The Abraaj Group PARADIGM IN GROWTH MARKETS I n March 2016, IFC committed US$100 million to ecosystems will provide an opportunity for large data, hands- the Abraaj Global Health Fund— US$50 million on research and collaboration with industry in affordable was provided immediately and an additional US$50 healthcare innovation. CARE represents a very good million is phased to align with the Fund’s final target example of how our strategy aims to identify sustainable and of US$1 billion. Dr. Bobby Prasad from Abraaj commercial investments. CARE has re-engineered clinical provides an insight into the strategic aims and delivery, identifying areas where process improvement, objectives of the Fund. upskilling and task shifting work hand-in-hand to ensure better quality outcomes at the same time as reducing the At the Abraaj Group (Abraaj), we consider healthcare to associated costs. This not only produces more value-based be a compelling investment opportunity in growth markets. healthcare, but above all, leads to increased human resource There is a large and growing demand for affordable high- capacity building. quality healthcare driven by demographic trends, rising income levels, urbanization, and changing lifestyles. However, Abraaj will focus on expanding CARE’s integrated supply is lagging and for healthcare delivery to be effective, it healthcare delivery system, especially in under-penetrated requires substantial capital, deep operational expertise, and regions of India. The partnership will bring CARE’s high access to high-quality clinical staff. quality and proven delivery platform to other markets where Abraaj operates, especially sub-Saharan Africa. The Abraaj manages about US$9.5 billion in assets across growth CARE Foundation, the company’s education, training and markets. Our most recent healthcare investment was in rural community outreach program, will be scaled up and CARE, India’s fifth-largest healthcare provider. CARE is expanded to develop and train high caliber doctors, nurses, recognized for its high quality tertiary treatment facilities, technicians, physiotherapists and community workers. including cardiac care and neurosciences. To date, CARE has treated more than six million outpatients and over one million inpatients, a majority of which are from middle- THE NEW DISEASE BURDEN and low-income groups in underserved second-tier cities in India. Prior to acquiring CARE, Abraaj had invested in Today, there is a prescient need to aggressively tackle 27 healthcare businesses across Africa, South Asia, Turkey, the increasing burden of non-communicable diseases Middle East and North Africa, deploying close to US$1 (i.e., cardiovascular disease, strokes, cancer, diabetes and billion. respiratory diseases) and much of our focus in working with CARE will be around developing a broader platform-wide solution for this. BUILDING SUSTAINABLE SOLUTIONS About 80 percent of Non-Communicable Diseases are Creating access to affordable and quality healthcare with preventable with diet and lifestyle choices. Large-scale impact and sustainability is the cornerstone of our strategy. clinical trials highlight that good control of NCDs can This is very ambitious and has never been attempted as have a substantial effect on the incidence of downstream a platform in these markets on such a profound scale. complications. Furthermore, healthcare costs are rising For example, within cancer care, we believe there is the because of the cost of treatment of complications and there opportunity to ‘democratize’ access to good quality and needs to be effective, prioritized and equitable prevention affordable oncological healthcare by working closely with of, and care for, NCDs. This will reduce the suffering, global strategic partners such as Philips, Medtronic and the socio-economic burden, and healthcare costs that afflict Bill and Melinda Gates Foundation. The economies of scale communities in our target markets created by our platform will in turn enhance our ability to Effective NCD prevention includes cost-effective and make quality cancer care more widely available. available interventions using inexpensive technologies and We will also be hugely dependent on embracing cost- non-pharmacological and pharmacological approaches. An effective, technological innovations to make this succeed. Our exciting opportunity also lies with smartphones, mHealth, PAGE 8 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Photo©Abraaj continues to expand its investment in its healthcare portfolio, which includes Nairobi Women’s Hospital and telemedicine to enhance clinical care delivery models and education of patients and clinicians alike. When combined with trained personnel and referral systems, these basic Read Abraaj’ Sustainability Report: technologies enable most patients with NCDs to be identified and treated close to local facilities. If effectively utilized, Investing for Impact in Healthcare these low-cost technology interventions will invariably reduce medical costs and improve the quality of life and www.abraaj.com/sustainability productivity in our communities. A PARTNERSHIP APPROACH To drive this overall vision forward, there needs to be the right leadership, training, and governance structures in place that can facilitate the use of available resources for prevention and control of such diseases. There are clearly multiple stakeholders involved here including government, NGOs, healthcare providers as well as the private sector. A collaborative and aligned approach with those that deliver healthcare and the health information systems they use is essential. With such a global foray of investments across multiple sectors and at multiple price points, the potential synergies uncovered through working together are extremely exciting and could create a healthcare eco-system that is unique and could serve as a model for future clinical care delivery. PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 9 REALIZING THE POTENTIAL OF NIGERIA’S PRIVATE HOSPITAL SECTOR N igeria’s health sector, underpinned by a Regulatory Environment growing population and a large economy, The GON at national and state levels is undertaking a is poised for consolidation and growth. Yet renewed push to create social funding mechanisms for this potential has often seemed just out of healthcare. For example, the National Health Act of reach for private health service providers, December 2014 devotes one percent of the state budget to daunted by the obstacles to working in specific areas of healthcare. Lagos state has also passed a this alluring market. Still, with the right policies, private law that makes it mandatory for all citizens to obtain some providers can contribute greatly to strengthening access to form of health insurance, and other states are likely to adopt quality health services in Nigeria. a similar approach. Implementation of such initiatives may In February, IFC and the Nigerian Sovereign Investment take time and may need further support. The private sector Agency (NSIA) convened a roundtable with 50 local hospital must play a role for the social health insurance to deliver executives and international stakeholders to discuss the against its expected goals. current challenges and future opportunities presented by Real progress will come when GoN begins full Nigeria’s private health sector. The well-attended session implementation of the National Health Act and other was structured around topics that fostered an open debate, approved legislation, such as the Leasing Act. and IFC and the World Bank Group Health in Africa (HIA) teams aim to continue this dialogue. IFC, HIA and NSIA Other useful initiatives could include expedited government have a key role to play not only through supporting the action on a policy for incentivizing healthcare investments private health sector in Nigeria, but also through facilitating and a health Public Private Partnership (PPP) policy. knowledge-sharing between the public and private sectors. As It is critical for the government to engage with the private a follow-up, the IFC team has created an internal think tank- health sector, as it develops related regulation, policy and type discussion group, including Treasury, Blended Finance, development initiatives in order to create sustainable business Financial Institutions, and Equity teams to brainstorm and models. The Healthcare Federation of Nigeria (HFN) has develop innovative solutions for access to finance in this initiated a process through which the private health sector market. can engage with the government in an organized and The session was well attended with active and positive coherent way. engagement. IFC clients included: Hygeia (Nigeria), Ciel Growth in both public and private health insurance schemes Healthcare (Africa Region), Falck (Denmark), and Apollo could lead to new alternative models of healthcare provision (India). in the market—the implementation of the National Health Act will fast-track such a move. ROUNDTABLE HIGHLIGHTS AND KEY MESSAGES Public Private Collaboration The Government of Nigeria (GoN) has an ambitious health agenda to raise quality of and improve access to healthcare While there is opportunity for increased public private services for 170 million Nigerians. The private health collaboration in Nigeria, these initiatives must be carefully providers are able and willing to support GoN in these planned. There have been a number of PPPs with mixed efforts. There are attractive opportunities for the government results. The government has identified service priority to work with private service providers capable of delivering areas with promise for some type of public and private appropriate quality through social health initiatives and collaboration; for example, in the area of primary care public-private collaborations. services. However, currently, there is limited understanding among private providers of how public private collaboration might be structured into the future. Nonetheless, there is significant commitment among some private players to participate and engage further with PPPs. PAGE 10 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Photo©Mike Blyth: Lab worker at ECWA Evangel Hospital, Nigeria Access to Finance assistance to banks. The government has embarked on initiatives to improve access to affordable finance, for Access to finance remains a major problem for private example, with The Central Bank of Nigeria and Bank of health companies of all sizes. A common concern is that Industry. local financing is excessively expensive and not consistently accessible. Currently, many entities are unable to meet their Bankable Models for Growth and Investment full potential, and those willing to consider debt financing are Nigeria’s private health sector continues to be fragmented, affected by cash flows issues. Some potential solutions could but presents an opportunity for consolidation and growth. include development of more conducive lending mechanisms; There are several challenges to address; however, many such as medical equipment leasing models that could include of new project initiatives for addressing them are being some form of portfolio financing, risk sharing, or leasing developed in silos. Some project plans miss critical elements product. Pricing and funding would likely remain an issue for for success; including an anchor investor, capital and access the foreseeable future. to medical personnel and/or appropriate referral mechanisms. Private equity investments in Nigeria have also picked up Broadly, sponsors must improve their business cases and with a number of specialized funds targeting the sector. make them more financially attractive to potential equity This model of funding, however, is also not free of its partners or lenders. This is especially true for large, green- shortcomings, most specifically in terms of the shorter term field projects, where needs are obvious, but critical elements horizon of such funds not being conducive to the health for success are often missing. There is potential for greater sector projects, which require 10+ years of patient capital to collaboration among various initiatives to help achieve the deliver the promised returns. The sector needs to attract more right mix of financing, operations and expertise. vehicles for investment, such as investment companies, or A major trend in healthcare delivery across emerging markets strategic players, in order to bring in the much needed capital is greater use of more integrated care models, which enable to support the above initiatives. better planning and utilization of resources through more Current foreign exchange issues are a major challenge as they efficient and effective delivery of primary, outpatient and limit foreign institutions’ ability to provide debt financing, inpatient services. Laboratories, diagnostics and outpatient and they deplete equity returns. With the foreign currency services are also expected to continue to grow with at official rates being rationed by the Central bank, access opportunities for greater collaboration and integration with to foreign currency at official rates has become increasingly hospital groups. A continued push for better quality would difficult, leading to the emergence of a parallel FX market benefit clinical, management and overall patient experience. at 50%+ premium to the official rate. This situation is Investment in infrastructure and equipment alone is burdening all players and is cited as a challenge by medical inadequate. Shortages of clinical and management equipment suppliers in particular. Investors and financiers professionals in the healthcare sector are a major challenge will be carefully watching the foreign exchange policy of the for attention. Lack of medical staff is a crisis in many GoN before deploying capital into the market. countries, and if left unaddressed, will undermine both public It would be helpful to encourage and grow subsidized and private sector growth. funding programs and to better utilize the existing ones. Access to current funds have been limited due to inconsistencies in the allocation of funds and relatively high Continue reading on page 13 security requirements. More work is needed to support emerging interest from local banks in the health sector to improve their understanding of the sector, through innovative financing and de-risking mechanisms, coupled with technical PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 11 Follow IFC Health on LinkedIn for the news on IFC’s engagement in the private health in emerging markets www.linkedin.com/company/ifc-health IFC INVESTMENT NEWS I FC’s healthcare team has so far been having a very medical outcomes and reduce the burden on healthcare busy 2016 financial year. In addition to our core infrastructure by providing in-home care to post- investment work, we have been ramping up our operative, geriatric, chronic and neo-natal patients. The corporate financial services program—helping our company provides its services across 22 cities in India, healthcare clients look at new markets for expansion, of which over 60 percent are second- and third-tier introducing them to potential partners or M&A cities. It is currently active in 14 states, including NCR, opportunities, and advising them on transactions. Likewise, Gujarat, Haryana and the Low Income States of Uttar we have several interesting studies underway to better Pradesh, Rajasthan and Madhya Pradesh. Portea will understand the private primary healthcare and diagnostics use the investment from IFC to further grow and deepen space in emerging markets, the private sector role in the its presence in these states. The company’s model reduces health systems of five East Asian countries (co-managed the burden on traditional, more costly, hospital-oriented with DFAT), and pharmaceutical supply chains. We are healthcare facilities by providing accessible and quality also starting to gear up for our bi-annual Global Healthcare care for patients in their homes. IFC will help finance Conference, which will be held in the spring of 2017. the expansion of the company’s home-based healthcare Location forthcoming! services in India. Meanwhile, our health investment program continues to • IFC made a US$15 million loan to Conclina, a leading, expand, building on the US$394 million of healthcare high complexity hospital in Quito, Ecuador. The investments we closed in FY2015. In the first half of the year, IFC loan will help Conclina upgrade its imaging and our investments have spanned multiple sub-sectors including laboratory equipment, increase its hospital beds, surgery everything from the support of a home-based healthcare and ICU capacity, as well as improve its energy efficiency. service provider to a leading role in the development of As the first internationally accredited hospital group sustainable PPP models to financing the expansion of hospital in the country, IFC’s support will help expand quality networks into underserved markets. Our investments in healthcare, international standard in the country. the first half of the year have also reached a diverse set of • IFC is partnering with Falck, from Denmark, an emerging markets such as Ecuador, Nigeria, and Bangladesh, international emergency and health service provider, and to name a few. Below are examples of transactions that were the Investment Fund for Developing Countries (IFU) to closed and the impact we expect them to have. form a Special Purpose Vehicle investing in sub-Saharan • Hygeia, an existing IFC client, is Nigeria’s leading and Africa. The vehicle will focus on scaling up primary largest integrated healthcare provider, offering both healthcare clinics, a business model that has proven to hospital and health management services. It operates deliver essential care at relatively low cost by avoiding two hospitals and three clinics in Lagos, a health expensive hospital-based treatments. IFC, through maintenance organization (HHMO), a Community its corporate advisory services arm, also helped Falck Health Plan (HCHC) for low-income families and a assess the African market, including the identification of Foundation (HNLF) for capacity building of medical targeted entry points and potential partners. professionals in disease programs including HIV/ AIDS. Along with three other partners, IFC’s new US$11.7 million financing will support the upgrade and operational expansion of Hygeia’s network. The purpose of the project is to increase access to good quality and affordable healthcare services in Nigeria. • Portea is a Bangalore-based home healthcare services provider, which engages with individuals, hospitals, insurance companies and corporates to improve PAGE 12 PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 Learn more about TechEmerge at www.techemerge.org INTRODUCING TECHEMERGE I FC launched TechEmerge, a new matchmaking Medtronic, Aditya Birla and Philips have expressed interest program that will connect proven top technology in exploring partnerships. innovators from around the world with leading Through an open call for applications, IFC received over corporates in emerging markets to scale commercial 300 applications from interested tech companies. Through business. a competitive process, the best candidates will be selected As part of the program, IFC provides funding and and invited to pitch their product at a matchmaking event assistance to conduct local pilot projects. The inaugural on June 15 in New Delhi. More information can be found at program is focused on the healthcare sector in India, and www.techemerge.org. about 18 qualified Indian healthcare corporates have already signed up for the program, and strategic partners such as Continues from page 11 NIGERIA’S CHALLENGES ARE GLOBAL CHALLENGES The messages from Nigeria are similar to the ones IFC and the World Bank Group Health in Africa team are hearing in other countries. IFC understands the challenges and will be exploring ways to either actively facilitate support or indirectly coordinate further stakeholder dialogue. Given the overlap of these challenges among the countries where IFC works, there is an opportunity for IFC to use its global experience in these markets, which could benefit current and future clients in Nigeria. IFC has set itself some action targets for maintaining the dialogue momentum in Nigeria and with World Bank Group colleagues focusing on the following: • Consider access to finance issues across the spectrum of private health providers • Make available an introductory guide outlining core business case requirements for potential investment cases • Provide further insight into quality expectations for health entities • Conduct targeted road shows for foreign medical education providers interested in investing in Nigeria • Work closely with industry bodies like the Healthcare Federation of Nigeria The WBG Health in Africa (HIA) team will: • Continue to explore and showcase opportunities for the private sector in the GON’s Health agenda • Maintain public sector dialogue and support the private sector in discussion with government stakeholders. Jointly IFC, HIA and NSIA to consult further on future approaches for PPPs. The World Bank Group will explore opportunities for private sector participation in the Global Financing Facility for every woman every child. PRIVATE HEALTHCARE IN EMERGING MARKETS: An Investor’s Perspective | Issue 2 | June 2016 PAGE 13 PRIVATE HEALTHCARE IN EMERGING MARKETS An Investor’s Perspective ISSUE 2 | JUNE 2016 IFC’S GLOBAL HEALTH TEAM Elena Sterlin Charles William Dalton Global Manager Senior Health Specialist Health and Education cdalton@ifc.org esterlin@ifc.org Biju Mohandas Chris McCahan Principal Investment Officer Chief Investment Officer & Medical Technology Lead cmccahan@ifc.org bmohandas@ifc.org Ioan Cleaton-Jones Srividya Jagannathan Principal Health Specialist Senior Investment Officer & icleatonjones@ifc.org Life Sciences Lead sjagannathan1@ifc.org STAY CONNECTED Web: www.ifc.org/health LinkedIn: www.linkedin.com/company/ifc-health Twitter: #ifchealth JOIN DISCUSSION LinkedIn Group on Private Health in Emerging Markets hosted by IFC www.linkedin.com/groups/8429146 QUESTIONS? Please contact newsletter editors: Leticia Crentsil at lcrentsil@ifc.org Irina Sarchenko at isarchenko@ifc.org