CT for the Billions

Introduction
Mr. Krishnan is a real estate sales man living in Hassan, Karnataka, approximately 100 km west of Bangalore. He extensively travels on his motorcycle for business. On one fateful day, Mr. Krishnan was seriously injured while trying to avoid an erratically driven tractor. The tractor driver fled and thirty minutes later, an auto-rickshaw driver arrived to Mr. Krishnans rescue and drove him to the nearest clinic. Although the clinic rendered basic first aid, hospitalization was necessary. This meant another 50 km travel to Hassan. The admitting doctor immediately prescribed for a CT scan. The CT scan was performed in less than 5 minutes and the doctors found severe internal bleeding of the brain. He was rendered emergency surgery butit was too late. Mr. Krishnans story happens on a daily basis in every city, town and village across India. A few, who find a nearby hospital with adequate facilities including a CT scanner, are diagnosed quickly, treated immediately and given the opportunity to recover well. Others are not so lucky. To them the access to life-saving healthcare facilities with equipment like CT scanners at this critical moment remains a distant dream.

The Challenge
Our constraint is the reach and visibility of a CT scanner to the large base of more than 20,000 private diagnostic centers and small private hospitals in tier II & tier III towns. We need to devise a go-to-market strategy to grow CT volumes from 4000 to 10000 over the next 5 years.

The Healthcare Industry in India

A report on Indian healthcare forecasts the USD 70 billion sector to grow at a significant rate per annum. It is expected that the healthcare sector will cross to USD 100 billion in the next five years. The healthcare industry is poised for growth with these drivers: Changing landscape (faster up gradation in technology, new product innovation, burgeoning middle class, political agenda, government expenditure as a per cent of GDP) Improvement in healthcare delivery and financing (large private sector players, rise in insurance, large players targeting small towns) [Type text]

Changing patient profile (increased incidence of lifestyle diseases, rise in disposable income, growing patient awareness, access and preferences, increased life expectancy)

Industry bodies have been lobbying for the healthcare sector to be given infrastructure status and associated tax benefits that will trigger investments in hospitals. If this demand is accepted, it would give an additional fillip to the healthcare industry in India. However, there are some alarming statistics to be shared here. The healthcare industry in India has more than 75% share of private healthcare players. Healthcare expenditure at a per capita level continues to be predominantly out of pocket. Diagnostic equipment and devices market is estimated to be around USD 2 Billion and also growing with the total healthcare market.

Computed Tomography
Computed Tomography (CT) is like the Swiss army knife tool in radiology as it is used in a variety of clinical care areas from injury, trauma, stroke, cardio-vascular, GI, oncology to name a few. It is preferred for its ability to perform a scan within a few seconds, provide high quality and high resolution 3-dimensional images of cross-section of the body to allow doctors diagnose the problem quickly. India leads the world in the number of non-fatal injuries, occurrence of stroke and cardiovascular disease, and with rising awareness a large incidence rate of cancer. CT is becoming a lifeline to diagnose and manage disease with such high prevalence. The total CT market is estimated to be around $125MM with a total installed base of around 4000 scanners across India (EXHIBIT 1). Yearly volumes are estimated to be around 400 units. Access to CT scanners is lopsided, with 75% of the installed base serving less than 25% of the population. Patients in tier 2/ tier 3 cities typically get access to diagnostic services with imaging at ~20000 private diagnostic center or small private hospitals. However, only a fraction of these facilities have CT scanners and charge an average price of INR 2000 per scan. As one of the leading suppliers in

the CT scan market in India, GE has a strong brand image and its products are held in high regard
by medical practitioners (Refer EXHIBIT 2 for some points to note). GE offers a wide product portfolio with varying price points to attract customers. The typical product lifecycle is 3-4 years. For each product segment, vendors refresh their products every 3 years approximately with small enhancements along the way.

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CT scanners allow clinics and hospitals to expand their services (EXHIBIT 3) and also enhances their reputation within their market. However, viability and low patient load are the biggest barriers towards purchasing a CT despite the known benefits. They either refrain from investing in a CT due to the financial risk or purchase an old refurbished CT at a very low cost despite the limitations and lack of reliability. Customers in these markets are neither trained nor skilled enough to use CT scanners. The poor infrastructure and connectivity of these markets makes it difficult for both GE personnel and external engineers who are not readily available to service these markets. Being a medical radiology product, CT scanners are also subject to regulations stipulated by the Atomic Energy Regulatory Body. The ability to use GE equipment is critical for winning in this market and depends on the following parameters: Ease of use & intuitiveness of operation Parts & Service Delivery Maintenance (regular maintenance and replacement of parts) Logistics to serve the population in tier 2/3 towns

Company Background
GE Healthcare provides transformational medical technologies and services that are shaping a new age of patient care. Our broad expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, drug discovery, biopharmaceutical manufacturing technologies, performance improvement and performance solutions services help our customers to deliver better care to more people around the world at a lower cost. GE has a unique capability of providing wing to wing solutions including hospital equipment, software, lighting, financing and water purification. (http://www3.gehealthcare.in/) GE Healthcare is basically structured around 2 pillars. A Product organization, that consists of Regional Product Managers who are sales specialists with deep product knowledge. They are organized based on the segment of CT products being offered by GE (premium CT, performance CT, Value CT for example). The parallel pillar Sales organization is a direct sales force that extends from metros and tier II/III towns. This sales force provides reach and coverage across segments of customers and across [Type text]

regions pan India and handles multiple products based on needs of the segment they serve. For a product like CT, our current reach goes down to tier II towns with the aim of going down to tier III and tier IV towns based on regional dynamics. In addition, GE Healthcare business in India also has a marketing team with functional marketing teams that cover business analytics, MarCom, pricing etc.

Current Market
Although not perfect substitutes, diagnostic centers currently invest heavily higher in X-rays and Ultrasounds as they cost less, effectively increasing the ROI and lowering the BEP. There are 10x more ultrasounds & X-ray installations compared to CT scanners.

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Sr. No.

Modality

Approx. Cost to customer, per scan (INR)

Approx. Cost of an entry level equipment (INR) 5-10 L 5-10 L

Market Approximate Used for Penetration break-even point

1 2

X Ray

200

40,000 40,000

1 year 1 year

Chest imaging & simple trauma All abdomen, including obstetrics & gynecology Head to toe

Ultrasound 500

CT

2000

40 L -80 L

4,000

3 years +

The typical stakeholder map for CT scanner purchase looks like the following. A key issue for the buyers is getting financing. The PSU banks typically operating in these areas have limited understanding of the product and thus securing funding is a challenge. Furthermore, while GE has a financing business, GE Capital, its footprint in Tier 2 3 cities is limited.

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We have attempted to understand the 2 primary consumer segments. A) PRIVATE DIAGNOSTIC CENTRES

B) SMALL HOSPITALS

Town of 900k population in Karnataka, 150 km from the highway & nearest small town with CT scanner diagnostic facility

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EXHIBIT 1: Installed Base of CT Scanners in India

Source: Tech Navio, Market Research firm

EXHIBIT 2: Points to Note Being an emerging market, it is highly unorganized Entry of new players is highly likely There are a large number of non-traditional competitors (example: 3rd party resellers) GE is one of the leading suppliers in the CT Scan market in India

EXHIBIT 3: Uses of CT Scanners

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