Healthcare in Asia: The innovation imperative is an Economist Intelligence Unit report.

Executive summary

Every nation in the world faces healthcare challenges, and those in Asia are no exception. For poor countries like Cambodia, the issues are about improving access to basic health services, and tackling poverty-related problems such as contagious disease and infant mortality, working against a backdrop of major financing constraints, given low-income levels. For rich countries like Japan, the challenges of development loom large, from battling rising diabetes, cancer and cardio-vascular illness to caring for an ageing population—again with severe financial constraints.

In between the rich and poor extremes lie middle-income countries such as China that are facing a double burden: the diseases of development and ageing are arriving before the problems of poverty have been fully addressed, and before incomes have risen to match the resources available in the developed world. Given that much of Asia still has low incomes, the healthcare challenges are greatest in improving the availability and quality of health services for the poor.

Tackling these challenges demands innovation: to manage healthcare in new ways, more effectively, with better quality and for lower cost. It’s tempting to think of innovation as being about new drugs and better machines. But innovation is just as powerful when applied to financing, to regulation, to business models for delivering health services, and to the nature of partnerships between different types of healthcare organisations, be they private companies, government departments or NGOs.

Yet healthcare innovation is not easy to implement. It often requires patience and perseverance, given issues such as winning regulatory approval. Just as important, the healthcare sector is notoriously resistant to change. It is hard to persuade people to adopt new technologies, new techniques, and new thinking. Moreover, for innovation to be effective it must address a real need, identified through observation and research. All too often, however, healthcare initiatives are based on poor data, vague perceptions, and political considerations rather than what people actually need.

This report examines technical, financial and organisational innovation in Asian healthcare, assessing challenges to adoption and the potential impact of innovation on healthcare systems across Asia. It also seeks to identify best practices for governments seeking to learn from pioneers across the region. Its key findings are as follows:

• Organisational innovation can yield substantial benefits. One of the most promising areas for innovation is in the way that different types of healthcare organisation join forces and work together, from the public sector, to the private sector, to NGOs. Debate rages about their various strengths and weaknesses in providing healthcare. But combining these players in innovative ways can yield impressive results. The key is to understand the incentives that drive each type of organisation. In much of Asia, a consensus believes the private sector is best placed to provide health services, but the public sector should pay for those services and act as regulator. For their part, NGOs have unique skills that can be combined with both the public and private sectors. They are powerful in providing early-stage funding for innovations aimed at the poor before the private sector takes over. And they can help implement health policy in places where governments lack resources or are mistrusted.

• Innovation in healthcare funding, particularly to broaden insurance coverage, is of most importance for poor countries. In low-income communities, insurance is often rare, with most healthcare paid for via out-of-pocket payments. As such many millions are tipped into poverty every year when a family member falls seriously ill. Overall spending on health is closely tied to a country’s per capita GDP, so it is difficult to increase the amount of money available for health. But in poor countries, the little money that is spent on health can be better organised by converting out-of-pocket payments into health insurance premiums. Designing health insurance policies for the poor is challenging, given low incomes, high illiteracy, and low awareness of how insurance works. Despite the challenges, however, more and more micro insurance schemes are appearing.

• “Frugal engineering” can give poor countries access to the latest technology. In the field of medical technology, innovation is often designed for rich countries where high incomes create a greater chance of making a return on R&D investment. Inevitably this means that such innovation is often too expensive and inappropriate for Asia’s millions of poor. But more and more organisations are focused on “frugal engineering”. Frugal technology aims to make healthcare products that are cheap, use local materials, can withstand tough treatment and harsh environments, are easy to repair, and simple to use by healthcare professionals with limited skills or training. Innovating for the poor often means adapting existing technology to new uses rather then developing new technology.

• Delivery innovation is needed to improve coverage in rural areas. Improving healthcare delivery—how to run the infrastructure of clinics, hospitals, and health centres—is critical in many Asian countries because so many people live in rural areas where doctors are thin on the ground. That leaves the poor relying on health workers that have little or no training. Many promising models of healthcare delivery are emerging to overcome the skills gaps in rural areas, from harnessing mobile phones to deliver telemedicine, to building branded franchises of clinics to improving training. Alongside these new “horizontal” models of healthcare delivery—those that address the full range of illnesses—innovative “vertical” models are also being used that tackle specific diseases, such as tuberculosis.

• Governments can do much to foster innovation in their health systems.

— First, they need to think deeply about what role they want to play in their health system. Often it makes most sense to act as payer and regulator of the health system, but to use the private sector to deliver health services.

— In the role of payer, governments can influence the demand for innovation from the private sector by allocating resources for new products and services.

— Governments can also encourage innovation by managing their health spending in transparent and predictable ways so that private sector companies can plan their investments with greater confidence.

— Governments are well-placed to bring together different players in the health system and to act as the focal point for new forms of collaboration. For example, they can facilitate partnerships between academia, business and government hospitals.

— Education is critical for innovation to thrive; not only the quantity, but also the quality. Governments should promote creativity and problem-solving rather than rote learning.

— A stable business environment is a crucial foundation for innovation. Bureaucracy, poor infrastructure and an uncertain legal environment all stymie innovation.

— In poor countries, corruption is entrenched and a great barrier to the adoption of new technology, ideas and business models. Governments have a vital role in fighting corruption and promoting transparency.