Since January 1, 2018, Russian healthcare market is formally complemented by the telemedicine, once a respective draft law which had been discussed and developed for years, was enacted. Prior to that the companies which provided medical services remotely (they were certainly widely present in the market) were formally engaged in consultancy, not in healthcare. Nowadays, things change. Now a remote advice is accepted as a medical service, while under the law, the remote patient monitoring is qualified as a consultancy service, as well as a doctor to doctor or doctor to patient (the segment which market participants believe to be the most promising) advice. In the future, there will also appear a chance of getting prescriptions remotely. Still, despite a lack of legal regulation, the telemedicine market has been attractive for investors. Ultimately, some of them have become quite active players. But are they ready to operate under the new rules? Have the restrictions been preserved in the market? Is the market looking forward to new participants?
Time for deals
2017 seemed to become a big deals year for the telemedicine market, since it was joined by large IT and finance companies, banks, telecom operators and medical clinics, while the scope of deals reached millions of dollars. The Savings Bank of Russia acquired an 80% share of DocDoc.ru service which could have cost RUR 1 bln ($18 mio), while Yandex jointly with Baring Vostok in turn invested $5 mio in Doc+ service. Plans of entering the market have been voiced by Megafon and MTS telecom operators, European Medical Center group of companies, Mom & Child clinics. Doctor Ryadom and К31+ chains of clinics have launched projects of their own, while Medintorg pharmaceuticals distributor invested in Qapsula startup.
“Hype in digital medicine is quite evident”, Vladimir Gurdus, Founding Partner and COO at Team Drive and a co-founder and member of the Board of Directors of Doctor Ryadom, said in December 2017, summing up Russia’s telemedicine market development results.
According to Vladimir Gurdus, the market was joined by interested investors. It is noteworthy, national healthcare in fact was not expecting those particular investors.
“Those included major banks, IT companies, telecom operators, largest insurance companies. All of them announce launching their new projects. It seems that everyone with some money available, is ready to spend a bit of it to support telemedicine”, Vladimir Gurdus pointed out.
Nevertheless, the industry started receiving investments a bit earlier. In 2013 Mobile Medical Technologies was registered through involvement of Genome Ventures foundation; in 2015 it received investments from Tashir Group owned by Samvel Karapetyan. Yandex has been investing in Doc+ since 2016, while DocDoc obtained $1 mio from Aurora Venture Capital in 2012 and $4 mio from Guard Capital foundation in 2016.
It is also quite evident that investments in the industry have been growing while the approval of a respective legislation was nearing. Its first drafts, one submitted by the Healthcare Ministry, the other, as an alternative, by Yandex, were prepared back in mid-2016.
“IT in medicine have been developing for over 15 years by now”, Denis Yudchits, Mobile Medical Technologies’ CEO, says. “It started with digitalization of recurrent internal processes within medical institutions, such as accounting, for instance, whereas nowadays we see informatization of the medical services and structuring of new business processes”.
To be taken into account
Investments in the new industry which is yet operating outside the national legal environment, have been based on confidence in and awareness of the international experience, since over the recent years the global telemedicine market has been demonstrating a steady growth (over 17%) and according to BBC Research is likely to reach $44 bln by 2019.
The causes for the growth are absolutely identical worldwide. It is a global trend of cuts in healthcare budgets which medical institutions face in every country.
“Healthcare availability is decreasing despite a progress in technologies and appearance of new troubleshooting and curing methods”, Maxim Gorbachev, Managing Partner of RMI Partners, notes. “Digital technologies can help solving the problem though. It’s a global trend and Russia is even lagging behind some countries, as the law on telemedicine has just started to operate here while in the US it is a common practice since long”.
“The main factors stimulating a telemedicine market growth are a decreasing availability of medical specialists and increasing costs of medical services. Such facts are confirmed by the participants of all international conferences”, Denis Yudchits adds. “Telemedicine helps addressing the challenges. We witness this service is much needed and in great demand”.
In essence, the task is to accomplish some sort of an Uberization in the healthcare industry, first of all, to drive costs down, as experts and market players assert. Cost saving applies not to patients visiting doctors and subsequent treatment only, but to hospital treatment as well since a duration of stay at in-patient facilities will decrease and be substituted by a remotely monitored treatment of patients at home.
Another factor is an accelerating pace of life when patients often have no time to personally visit a doctor. There is also a need in remote consultations for babies and elderly.
“If there is a way to employ technologies to deal with the challenge, that area will certainly develop. Methods of making diagnosis will also start to develop and shift away from providing services at points of care. Instead, patients will be able to take required tests by using special devices. When an option of passing the test results to a doctor in an e-format is available, a physical visit to a clinic will no longer be required”, Maxim Gorbachev claims.
Living by the laws
Not long ago it was widely believed that the main obstacle for the telemedicine market development in Russia was the lack of a proper legislative regulation. Indeed, that did prevent many players from entering the market. Still, nowadays, the legislation is available but it triggers many questions and, at times, much criticism. The market players apparently disagree with being prohibited by the law to remotely provide initial consultations. As a result, many companies which had announced their intention to actively establish themselves in the telemedicine market, change their minds. Medsi clinics chain, for instance, will for the time being treat remotely only the patients who have already used its services.
“We will not take risks and will only deal with the existing pool of patients who have had initial consultations with us”, Konstantin Lyadov, director of the hospital cluster at Medsi, told at the Telemedicine in Russia. Launch of the Industry in the Country and 2017 Results business forum arranged by Kommersant Daily in December 2017.
Dmitry Domarev, director of Telemedicine Project at DocDoc.ru, points out that initially the market hoped that the law’s enactment would stimulate industry development, but that has not materialized due to the current legislative provisions.
“Everyone expected the law would allow initial consultations, but that is not specified by the law”, he stresses.
Earlier, while the legislative environment lacked even the very notion of the telemedicine, the market participants could operate by formally rendering information services. These days, they can no longer go this way. Hypothetically, they can offer a remote preparation for the initial personal visit of a patient. Possibly, that will be the format to which the industry participants – who had expected that remote initial consultations could become the core of their business – can adjust their operations. Sooner or later though, supervisory agencies will one way or another make remote consultations meet the legislative requirements. Healthcare Ministry has already published an order On Organization and Provision of Medical Assistance Involving Technologies of Telemedicine, Denis Yudchits notes.
“We can now say that a remote consultation is a medical assistance. That is a meaningful wording which puts an end to a discussion whether it can be seen as an information or a medical service”, he says.
“The companies and projects which are able to adapt to the environment, will have great prospects while those which fail to adjust to the new reality will be left back in the past and will have no chance whatsoever”, Yudchits asserts.
It is now forecasted that the telemedicine market in Russia will be monopolized in a foreseeable future. The key positions may be taken by the players who have already established themselves in the industry and who have substantial financial resources, such as Yandex and the Savings Bank.
“Nowadays, a new market is taking shape. Large companies have millions of available and loyal clients which allows engaging a wide scope of prospect patients”, Grigory Ginzburg, director of Healthcare competences center at Softline group of companies, believes.
Nevertheless, it is still not quite clear what business models, formats, and expertise can guarantee various players a bright future in Russia’s telemedicine market. There are not many such players at the moment, but they all represent totally different branches of the business.
“So far, these are IT players who try to establish themselves in this business, who are entering the industry they are not familiar with but intend to use the existing demand to make good money and come up with a good service”, Dmitry Domarev underlines.
In his view, classic medicine players cautiously eye telemedicine due to the legislative intricacies while many others have announced their involvement with the market merely to establish a foothold in the market.
Nevertheless, medical expertise is extremely important to make a future project successful in the market, Maxim Gorbachev states. He believes it is not sufficient to arrange a service analogous to that of Uber, by merely hiring doctors and allowing patients to award rating points.
“IT professionals will fail in launching such projects since they need to be able to deal with doctors. Doctors should be taught operating the new instrument. To start with, such doctors should be selected”, he notes. “Even Uber experiences problems with its drivers. It will be much more challenging with doctors”.
Denis Yudchits is certain about hybrid services operating at the intersection of medicine and IT, winning the telemedicine market. The situation in Russia resembles that in the US market where many companies including large telecom operators and even Google started entering telemedicine market.
“The practical processes are absolutely alike in all countries and bring about absolutely identical results”, he says. “Only hybrid companies survive, which are a combination of IT and medical services. Despite all their powerful resources, neither AT&T, nor Verizone managed to build up properly operating services”.
It is not clear though if the Russian market will follow the international experience, since the national telemedicine is only taking shape at the moment and remains a new industry which is looking for the options and formats of its further development.
By Olga Blinova