Healthcare Sector International Vision

www.pwc.com/global-health

PwC

What is a new entrant?

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A disruptive, recent arrival to a market or industry. These may include companies whose core businesses reside entirely outside of the new industry, or businesses expanding into new roles.

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Key findings

• New entrants are poised to disrupt the world’s healthcare market, which is estimated to be around US$9.59 trillion

• Where urgent needs prevail in a less regulated environment, health solutions offered by disruptive new entrants can take root more quickly

• As the world pivots towards the “virtualisation of care”, new entrants from sectors including telecom, technology and retail will be well positioned to offer amazing breakthroughs

• Filling gaps between consumer expectations and the current medical infrastructure provides opportunities for new entrants

• The growing wellness and fitness market, estimated to be about US$1.49 trillion, offers a more flexible entry for businesses considering ways to shake up the healthcare industry

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The Landscape

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New entrants poised to disrupt the US$9.59 trillion global healthcare economy

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US$8.1 trillion

Government & private providers

US$1.49 trillion

Global fitness & wellness market

Source: PwC analysis

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The world faces many healthcare challenges

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In the emerging markets, lack of healthcare access continues to be a challenge.

Challenges in developing markets

Challenges in developed markets

In the developed world, rising healthcare costs are an ongoing problem.

Ageing populations Increasing incidence of chronic diseases

Lack of infrastructure

Increasing incidence of chronic diseases

Lack of healthcare access

Rising healthcare costs

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Mexico ranks 14th in the global economy, 16th in exports, and 11th in the world market of health products

Pharmaceutical & medical device industry is projected to grow from

$17.6billion in 2013 to $27.9 billion in 2020 Key drivers of growth include a growing and aging population, an increasing incidence of chronic and life-styled related diseases, accelerated urbanisation and increased access

Mexico’s public expenditure on healthcare increased significantly

due to health care reform and in 2012 represented 52% of healthcare spend.

In 2012 Mexico spent 6.2% of GDP or approximately $73 billion on healthcare and is projected to continue increasing

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Source: PwC Mexico, Megashifts: A driver for the healthcare sector, Doing business in Mexico (2013); Global Data, CountryFocus: Healthcare, Regulatory and

Reimbursement Landscape – Mexico (August 2014); Pan American Health Organization, Health Situation in The Americas: Basic Health Indicators 2014

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Population growth and chronic diseases will continue to place strain on Mexico’s health systems

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As the Mexico’s population continues to grow, the demand for healthcare workers and health facilities will continue to increase, as will the number of people diagnosed with chronic diseases The confluence of these factors will place an incredible burden on Mexico’s healthcare systems which will be unsustainable in the mid- to long-term Therefore, Mexico will need to leverage new and novel approaches to ensure that people have adequate access to quality care

Source: Pan American Health Organization, Health Situation in The Americas: Basic Health Indicators 2014; PwC Mexico, Megashifts: A driver for the healthcare sector,

Doing business in Mexico (2013)

2000

60 million

2015

80.5 million

2050

75.5 million

Mexico’s 15-64 Year Old Population

Future State Current State

Prevalence of Lifestyle disorders (mm)

Insufficient workforce

Highly Urbanised Population

In 2010 the urban population was estimated at 86% which represents a 17% rise from just 5 years prior.

Physicians per 1,000 population

Mexico 2.1 physicians

US 2.6 physicians

Canada 2.5 physicians

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Medical technology: once the poster-child of the healthcare is in trouble

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Increasing payer-cost consciousness

& reimbursement challenges

Constant innovation pressures

Limited growth from emerging markets

Barriers to growth

Product lifecycles shortening

Increasing cost pressures for Medtech customers

Increasing regulatory hurdles

Source: Strategy&

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Manufacturing and exporting products present possibilities for the medtech industry in Mexico

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Source: Episcom Business Intelligence, The Medical Device Market: Mexico, (18 November 2014); Peter Vogel Strategy Consulting, Building a World

Leading Medical Devices Ecosystem in Monterrey, Mexico (2013)

Expanding global exports

Opportunities

Challenges

Low-cost, high efficiency manufacturing Greater government procurement of medical technology

Certificate of need regulations

Delays in regulatory approval of new devices

Techno-surveillance regulations

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The vast global arena is ripe for collaborations between incumbents and new entrants

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With consumers now at the centre of healthcare, new business models that depend on collaboration are required. No single organisation has the requisite competencies needed to support the continuum of care.

Nexxus Capital, the largest independent equity firm in Mexico, purchased a 30% stake in Genomma Lab and helped grow the company from a mid-sized company managed by a group of friends to the first pharma company to list on Mexico’s Stock Exchange. Shares have appreciated over 350%.

Nexxus Capital

Genomma Lab

Sanofi Canada, the Canadian affiliate of pharmaceutical firm Sanofi S.A., partnered with Telus Health, a division of telecommunications company Telus, to launch a private web-based platform that offers patients self-management and monitoring tools.

Spanish operator group Telefonica recently acquired a controlling share in the Brazilian chronic care management provider Axismed.

Telefonica

Axismed

Sanofi Canada

Telus Health

Source: EMPEA (11 June 2012); “Telus Health partners with Sanofi Canada to launch Starsystem platform” news release, (28 May 2012); “SK Telecom Enters into the

Chinese Healthcare Market” news release, (04 July 2014); Dawinderpal Sahota, “Telefonica eyes e-health opportunity with Brazilian acquisition”, telecoms.com, (4 February

2013)

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The Leapfrog Effect: Why Developing Countries Innovate Faster

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The leapfrog effect: developing countries can innovate faster

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Innovations can spring more rapidly from emerging economies than from developed countries, where healthcare systems are more entrenched and regulated.

• Where urgent needs prevail in a less regulated environment, health solutions offered by new disruptive forces can root more quickly.

• Technology is becoming less of a barrier.

• New entrants can test their products and services in more receptive markets before launching proven business ventures in more regulated nations.

Source: Claire Read “Looking to Mexico for medical hotline innovation”, HSJ, (8 April 2013)

Telehealth and telemonitoring programs have been widely piloted in Latin America to provide increase healthcare access with documented success. Countries like the US are now starting to pilot similar programs to address access issues in rural America.

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Mobile health opportunity in Latin America is expected to be US$1.6 billion in 2017

33%

45%

13%

9%

mHealth opportunity, 2017

Rest of LatinAmerica

Brazil

Argentina

Mexico

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• Mexico, Brazil and Argentina are expected to be the 3 largest mHealth markets

• Mobile operators are expected to lead the market with a bulk of their revenues coming from monitoring and treatment, followed by device vendors and wellness applications

Source: PwC, Touching lives through mobile health: Assessment of the global market opportunity, (February 2012)

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Virtual Democratisation of Care

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As the world pivots towards the “virtualisation of care”, amazing breakthroughs can occur that erases boundaries

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Global focus on driving wellness and preventive care as compared to episodic care

New business models in resource-poor settings

Integration of medical technology

Increased telecom penetration

Greater mobility in terms of health access

Increased patient and physician acceptance

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Consumers today demand a convenient and transparent healthcare experience

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• Virtual care is replacing traditional notions of care delivery

• Public and private partnerships can streamline delivery systems, but consumers today want their medical services to mirror the ease of banking, retail, transportation and more

Filling gaps between consumer expectations and the current

medical infrastructure provides an opportunity for new players to move forward into healthcare with fresh ideas and skills

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Virtualisation of care: Mexico & US case studies

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Medicall Home Mexico

Telehealth subscription service

• Partnership with TelMex, a leading Mexican telemedicine provider to provide telehealth services employing Cleveland Clinic define protocols

• Provides affordable and convenient access to primary care to over 5 million patients for as low as $5 USD per month.

• Approximately two thirds of patients resolve their issues over the phone reducing the number of primary care visits.

AliveCor US & India

mHealth platform for cardiac patients

• To improve access of care, AliveCor, Inc., US maker of FDA-approved smartphone device to detect atrial fibrillation, partnered with Apollo Hospitals to provide smartphone-enabled devices to patients throughout India

• The devices will wirelessly record, display, store and transfer the heart rate and single-channel ECG to help prevent heart arrhythmia and strokes

Source: Claire Read “Looking to Mexico for medical hotline innovation”, HSJ, (8 April 2013); “Apollo Hospitals and AliveCor Announce Exclusive Collaboration”

news release, (9 September 2014)

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Filling Gaps in a Global Consumer Health System

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The trend toward lower cost care settings is consistent in developed and emerging markets

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• Building much needed health infrastructure is a major challenge in many rapidly growing nations, Mexico was the first country in Latin America to pilot healthcare PPPs to address its infrastructure challenges.

• Fewer opportunities to build health facilities exist in developed markets where governments and private providers are closing hospitals or converting them to chronic care facilities

• The trend over the past 15 years has been to move services out of the hospital to outpatient care; now, the shift of services is to wherever the patient is. In Mexico, there is a greater focus on early detection and wellness, exploring varying distribution channels to extend reach.

This trend is consistent around the world, reflecting the need for new entrants that can connect hardware, software, networks, diagnostics and biopharmaceuticals into integrated care solutions

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Case study: Carlos Slim is partnering with telco to monitor high-risk pregnancies

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“The current maternal mortality rate demands innovative models of care that use a

systematic approach”

Roberto Tapia-Conyer President

Carlos Slim Health Institute

• The Carlos Slim Health Institute, created in 2007, has collaborated with Qualcomm Inc., to develop a kit used by health professionals and community healthcare workers to monitor high-risk pregnancies.

• The initiative was established in an effort to meet the UN Development Millennium Goals.

• Innovations may find more fertile ground in developing countries, such as Mexico, where access and quality of care is a prevalent concern.

Source: “Carlos Slim Health Institute, West Wireless Health Institute and Qualcomm collaborate on maternal health kit”, news release (8 November, 2010).

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Path of Least Resistance: Wellness and Fitness

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PwC 23

$113.4B

Natural &

organic foods

$109.5B

Supplements

$43B

Natural and organic

personal care &

household products

$125.1B

Functional

foods

$19.4B

RPM/

Telemedicine

$78.4B

Global

fitness

industry

$391B

Global

nutrition

market

$236.5B

Sporting

goods

and apparel

$595B

Weight

loss

industry

$8.02B

Mobile

health apps

$114B

Alternative

medicine

$48B

Medical

tourism

$3.1B

Wearable

devices

The growing global wellness and fitness market offers a path of least resistance

• New entrants are already successfully offering services and products such as fitness, reducing weight, etc.

• Growth in chronic diseases as nations become more affluent is compelling governments to invest in preventative medicine

• The growing awareness of healthy workers as a corporate responsibility is a strong trend in the developed world

• Successful entrants are diversifying into different products to improve profit margins

US$1.49T total global ancillary/ wellness market

Source: PwC analysis

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Given the pervasiveness of non-communicable diseases in Mexico, the market is ripe for new entrants in the health and wellness space

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Obesity rate

of 33%

1 in 8 have diabetes

59% of years of healthy life lost to disability due to

non-transmissible disease

Mexico

Health

Challenges

A recent study estimates that 32% of mobile and tablet users in Mexico use mobile apps to access health and wellness information.

Given the steady rise of internet use in Mexico, eHealth and mHealth are seen as promising mediums for addressing obesity and poor lifestyle issues in Mexico.

Qualcomm Wireless Reach piloted the Dulce Wireless Tijuana program, which employed 3G mobile technology to facilitate diabetes management for a marginalised population in Tijuana, Mexico.

Source: The World Factbook; International Community Foundation, Annual Report 2012; Doctoralia Insights, Doctoralia Report on Health and Internet 2014,

International Diabetes Federation, IDF Diabetes Atlas (2014)

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What this Means for Your Business

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What this means for your business: Traditional and government providers Choose partners wisely. Doing business with reputable new entrants provides an opportunity to build sustainable solutions that meet policy and business goals. Be open to innovation. New entrants can challenge the status quo and may run counter to long-time practices. Examine their business plans and make sound decisions based on evidence rather than fear of breaking with tradition. Develop consumer analytics. Closely track work with new entrants to gauge consumer response. Bringing in a new player or product should be considered the start of a process that can be fine-tuned, discontinued or renewed.

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What this means for your business: Life sciences/biopharma and medtech industry Move beyond the treatment. In most markets, payers are migrating to outcomes-based reimbursement models, which will force biopharma and medtech players to move beyond the episode of care and understand where and how they play in the continuum of care. Develop partnerships. Biopharma and medtech will need to partner with new entrants to create new business models that support care anywhere. Understand the value of data. Consumers expect solutions that integrate with their preferred mobile devices, apps, peripherals and wearables. Solutions and data should ensure that all parties are apportioned economic value relative to their contribution to the consumer’s health.

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Thank you

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www.pwc.com/us/healthcarenewentrants

www.pwc.com/global-health

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Brian S. Williams Director Tel: +1 317 504 0082 Email: brian.s.williams@us.pwc.com