Linklaters

Emerging markets are key sources of cost-effective innovation in healthcare, according to research published today by Linklaters.

The research, Fit for the future: encouraging sustainable innovation in health, commissioned by Linklaters, was conducted by the Institute of Global Health Innovation at Imperial College London.  The report includes results of interviews with senior executives at healthcare firms and draws on existing research on innovation in healthcare.  Results show emerging markets to be a hotbed of cost-effective innovation for a number of reasons.

First, cost-effective innovation is more likely to flourish where regulation is less onerous, as is the case in emerging markets.

Second, when competition enables patients to demand healthcare at lower costs, for example in India, there is far greater cost-effective innovation among providers.  More cost-effective treatments become available when several providers in a given market are bidding to provide care for patients who have choices and are vocal about getting value.

A further finding relates to patients’ positive responses to incentives for maintaining a healthy lifestyle.  For example, insurers offering incentives to customers for exercising and eating healthily have seen reductions in both illness and hospitalisation, leading also to savings for the insurer.

Additional insights from the research include:

• External barriers do not stop innovation: companies can take specific actions under their direct control to encourage cost-effective innovation.
• Changes in business models and ways of working are more powerful than technology in encouraging sustainable innovation; technology is most useful when it contributes to reducing labour costs.
• Truly disruptive innovations - those which compromise certain aspects of performance while significantly reducing price and improving access - are most likely to come from new entrants.
• Leadership and culture are critical. 

Nigel Jones, head of Linklaters’ healthcare sector, said:

“If we don’t do something to reverse the upward spiral in costs, healthcare systems around the world are going to go bankrupt.  Average patient expenditure has grown by two per cent every year for 60 years in the OECD.  Healthcare cost is also spiralling in low and middle-income countries, with the prospective economic burden of non-communicable diseases expected to exceed $21trillion between 2011 and 2030."

“We looked at how low-cost, high-value innovation can become a bigger part of the solution.  The findings of this research reflect the increasing significance of the emerging markets – not only for their growth potential, but also as key sources of low-cost innovation that are capable of expanding to the global marketplace.  We also confirmed the importance of local knowledge, agility and cross-sector partnerships in promoting sustainable innovation.” 

To access a summary of the report click here.