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Is COVID-19, healthcare’s creative destruction moment?

Is COVID-19, healthcare’s creative destruction moment?

Image: Guernica by Pablo Picasso (1937)

History accelerates in crises. This pandemic may not itself transform the world, but it will accelerate changes already underway.

According to Schumpeter, the “gale of creative destruction” describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”.

Novel coronavirus aka Covid-19 first revealed itself in late November 2019 but the gravity was not understood until late January 2020 when China locked down Wuhan. Since then we have been watching its rapid spread across the globe eventually being declared a pandemic by the WHO on the 11 March 2020. Unlike the 2008 financial crisis, this pandemic is bringing with it massive and unprecedented change. Never have we seen the shutdown of everyday life. Never have we experienced the collapse of both the supply and demand of the economy.

Governments have never had their reputations so damaged and their best laid plans ripped apart. The crisis is highlighting the implications and the limitations of inadequate pandemic planning, healthcare delivery and infrastructure which is now placing population, patients and healthcare professionals at greater risk.

One silver lining to the daily doom and gloom on our TV screens, is that the turmoil is also demonstrating the enormous value of a functioning healthcare system, reminding both politicians and voters to truly value an effective healthcare system, one which they have taken for granted for many decades.

Though Covid-19 may tragically kill between 1% and 4% of those who get infected, it is about to have an impact on a much more complex global economy, one with a fragile geopolitical order and a society with a wealth division never previously witnessed.

Covid19 is placing enormous pressure on individuals, healthcare systems, governments and the economy. Confinement measures aka lock downs are forcing individuals, corporations and governments to rethink how they work.

The New Normal

One consensus is rapidly emerging from this crisis. The post pandemic world will be more digital. Covid-19 is accelerating the adoption of technology into our private and professional lives. You only need to review the amount of media coverage of Zoom, a video conferencing software, alleged security issues to get a sense of how much it is changing!

Take a real primary care example. The combination of lock downs, fear, misinformation and the enormous burden of the pandemic on existing health systems is severely impacting chronic care patients, many with comorbidity, as they are unable to consult their doctor and/or procure their medicine. Thus, compounded the disease burden on the country’s health system.

So much of this situation is avoidable when we consider the breadth and depth of the digital health innovation available across the globe. For example, tele-consultation ventures with proven solutions have blossomed over the past few years demonstrating the ease of consulting a healthcare professional to diagnose a disease.

Combine this with ventures which will take an individual’s swab from their home or workplace to a laboratory and will return the results online to both the patient and their doctor. Or the venture which can convert the digital prescription provided by the doctor online into a delivery of the necessary medicine to the patient’s door.

All this exists in spades, but governments and healthcare stakeholders have stood in the way of the adoption of these innovations by obstructing or the slowing progress of innovation through resisting the development of regulations or policies, often to protect vested interests.

Ecosystem Response

But this paradigm is set to change. Soon, if not already, health system budgets are bust, and all talk of value-based healthcare has been mothballed. The current pandemic phase will likely be followed by a post pandemic phase focused on treating the backlog of warehoused patients and rebuilding health systems’ business models to make them affordable. The entire healthcare value chain will need to be rethought as none will be able to afford the burden of care.

We are already witnessing governments rewriting regulations shifting them towards being more patient centric versus protective of the status quo. Democratising healthcare!

Indeed, in the past four weeks, governments across the globe have been fast tracking the introduction or modification of regulations to accelerate the adoption of digital health solutions to fix their highly stretched and stressed health systems. To name a few:

  • South Korea announced the increased use of remote triage and the temporary implementation of telemedicine and e-prescription, which until now were illegal;
  • Japan has very recently loosened its restrictions on online drug delivery;
  • The US government has shaken up access to telemedicine services including reimbursement to make it easier for people to get advice remotely;
  • Australia announced the increased use of remote triaging and the expansion of Medicare-subsidised telehealth services.

Galen Growth, a leading digital health intelligence firm, are also witnessing healthcare new entrants and incumbents, where biz leaders have understood the imperative value of innovation and the immediacy of building new biz models during the storm. They are compelled by not only the financial value but also by their social responsibility to citizens.

Many leading pharmaceutical companies are actively seeking partnerships with proven medical education, telehealth and drug distribution businesses to fast track the building of digital integrated solutions to enable healthcare professionals and patients to engage.

Funding is also a key driver and indicator of innovation. Investors have tended to claim digital health as too risky either because they are conventional desperately seeking innovation with significant IP walls or they prefer to focus on the short-term potential value upside of debatable business models. Anyone not heard of WeWork!

Capital however has a habit of flying to quality in times of crisis. So, the combination of fast-growing demand, a patient-centric regulatory shift and the more efficient allocation of funding to value-add innovation, will only accelerate the New Normal of healthcare.

What’s Next

This coronavirus crisis is only likely to accelerate the number of economic activities which will take place in digital form, dismantling long-standing practices to make way for innovation and ultimately erasing the suffix “tech” in the industry sector taxonomy e.g. HealthTech.

We are however still very much at the beginning of this storm, so it is still too early to fully assess the breadth and depth of this healthcare transformation. We should however be very aware that the idea that, in a few weeks’ time, we will all be resuming a normal life and picking up where we all left off is highly unrealistic. Or at least, it is according to the scientists and economists.

Amid this chaos one thing is clear: a few firms are set to gain more clout. Already some are a source of financial stability. Apple’s cash pile of over $200B exceeds most countries’ fiscal stimulus. In the long run, these firms will win market share by investing more heavily than, and/or even buying, enfeebled rivals.

The caveat however is that the post-pandemic public will expect a social contract with all healthcare value chain stakeholders especially corporations and investors.

© 2020 Galen Growth Asia Pte Ltd. All Rights Reserved.

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