Business case of investing in TB diagnostics in Indiatbevidence.org/wp-content/uploads/2011/11/Ajay-Bakshi-Business... · Business case of investing in TB diagnostics in India ...

Business case of investing in TB diagnostics in India Dr Ajay Bakshi [email protected]

24th August, 2011

CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Conference presentation

McKinsey & Company |

Important note

This is a draft/preliminary analysis of the TB diagnostics market in India. Further work is necessary to complete the analysis, based on feedback received during the conference. Any use of this material without specific permission of McKinsey & Company is strictly prohibited

1

McKinsey & Company | 2

Contents Some interesting and relevant mega-trends in India 1

TB diagnostics market in India 2

New TB diagnostic tests – technical specs 3

New TB diagnostic tests – commercial opportunity 4


5 factors will drive the pace of the health-care market evolution in India

Growth in medical

infrastructure led by private

players

Rising prevalence of chronic diseases

Renewed commitment by the

government to health

Growth in household incomes

Increase in health

insurance coverage

1

2

3

4

5


Government of India has made a commitment to increase spending on health

SOURCE: Annual report Ministry of Health and Family Welfare, 2007-08; NRHM progress review, 2008; RBI report of state expenditures 2007-08; team analysis

Annual government health spending1

USD Billion

1.1 1.5 1.74.9

5.97.4

8.69.9

+20%

2009-2010

14.7

3.1

2008-09P

12.8

2.7

2007-08

10.9

2.4

2006-07

8.7

2.0 0.8

2005-06

7.1

1.5 0.7

CAGR Percent

25

20

19

State health spend

NRHM3 spend (central)

Central non- NRHM health spend

1

▪ Government is committed to increase public spending on health from 0.9% of GDP to 2-3% of GDP by 2015

▪ Money being channeled through the NRHM; NUHM to follow


There is a strong correlation between GDP per capita and healthcare expenditure per capita Health-care expenditure and GDP per capita (2006)

SOURCE: Gapminder.com

India

China

USA

Indonesia

Norway

Ethiopia

India is expected to move along the curve as

its GDP continues to grow

2


~520 188-217

▪ Removal of regulatory hurdles ▪ Active market shaping by players ▪ Entry of new competitors ▪ Increasing consumer awareness

Traditional premium-based health insurance

25-30 ~125

▪ Relaxation in income ceiling or enterprise criteria

Social insurance/ welfare funds

35-40 ~50

▪ Employers shifting to premium-based coverage plans

▪ Low growth in public sector employment

Employer provided (sponsored benefits)

30-35 ~35

▪ Increased efforts of NGO/self-help groups Community insurance (self-funded)

2-3 8-10

Health insurance penetration is increasing rapidly – driven by RSBY scheme for BPL population

SOURCE: Secondary press search; IRDA; McKinsey analysis

▪ Provide protection to BPL households from financial liabilities arising out of health shocks

Rashtriya Swasthya Bima Yojana (RSBY)

~300 96-99

3

Components Key drivers 2015 2006

Coverage Million







TB Burden in India is high, though mortality trends have improved

SOURCE: www.who.int/tb/data; RNTCP TB India Report 2011; McKinsey analysis

Estimated prevalence of TB (all forms) Hundred thousands

Estimated mortality of TB cases (all forms) Per hundred thousand

Total number of notified TB Cases (2010) Thousands

15

20

25

30

1995 2000 2005 2010

Incidence in 2010 ~2.9 million (notified cases)

15

20

25

30

1995 2000 2005 2010

Extra Pulmonary

558 Retreatment

Smear Negative

Smear Positive

2,894

440

697

1,199

Pulmonary

Estimated Number of MDR

– TB cases in 2008 ~99,000

DOTS started

http://www.who.int/tb/data


TB Diagnostics in India (1/2)

SOURCE: WHO – Diagnostics for Tuberculosis

Description Evaluation

Sputum Smear Microscopy

▪ This diagnostic method involves microscopic examination of stained sputum smeared on a glass slide

▪ If the bacteria is present in sufficiently high concentrations, it can be readily identified

▪ Sample: Sputum

▪ Sensitivity – High infection: 86% – Low infection: 35-70% (especially in

case of HIV patients, children and extra pulmonary TB)

▪ Specificity: 97% ▪ Duration: 2 hours ▪ Number of Visits: 2-3

Cultures ▪ In this process, bacilli from the sputum is cultured

for a few weeks to detect TB. It requires only 10-100 bacilli per ml as compared to 5,000/ml of sputum required in smear microscopy

▪ It takes a longer time than smear and is more expensive to perform

▪ Sample: Sputum

▪ Sensitivity – High Infection: 100% – Low Infection: 73%

▪ Specificity: 99% ▪ Duration: 2-6 weeks ▪ Number of Visits: 2-3

Serological Antibody tests (Rapid/ELISA)

▪ Involves identification of antibodies which are formed in response to the bacteria with the help of an enzyme linked detection antibody and antigen

▪ This process has lower specificity as the antibodies react with environmental mycobacteria leading to false positives

▪ Sample: Blood

▪ Sensitivity (high only in case of smear positive) – High infection: 76% – Low infection: 59%

▪ Specificity: 87% ▪ Duration: 15 minutes - 1 hour ▪ Number of Visits: 1-2


TB Diagnostics in India (2/2)

SOURCE: WHO - Diagnostics for Tuberculosis

Description Evaluation

Chest x-rays ▪ Radiographic method for detection of

tuberculosis ▪ However many studies have shown that no

radiographic pattern is diagnostic of tuberculosis as many lung diseases have similar radiographic pattern that can easily mimic tuberculosis

▪ Sensitivity : High except in cases of patients infected by HIV

▪ Specificity: Non Specific ▪ Duration: 1 hour ▪ Number of Visits: 1

Tuberculin skin test (TST)

▪ Involves injection of Tuberculin or Purified Protein Derivative (PPD) under the forearm skin

▪ In patients with prior TB infection it causes hypersensitivity and leads to skin thickening at injection site

▪ IGRA tests can be used following a positive TST to support diagnosis of latent TB or as an alternative to TST for screening health care workers

▪ Sensitivity: varies depending on the population tested

▪ Specificity: varies depending on the population tested

▪ Duration: 48 hours ▪ Number of visits: 1

Nucleic Acid Amplification Test (RT PCR)

▪ Involves enzymatic amplification of bacterial DNA, which is detected with an appropriate reading system via a signal generating probe

▪ Sample: Sputum, Blood, Urine

▪ Sensitivity – When smear positive: 95% – When smear negative: 60-70%

▪ Specificity: 98-100% ▪ Duration: 2.5-3.5 hours ▪ Number of visits: 1


Estimated volumes of TB diagnostics done in India

SOURCE: RNTCP TB India Report 2011; McKinsey analysis

Sputum Smears

▪ ~7.5 million sputum microscopy tests conducted every year through RNTCP

▪ Approximately 700,000 to 1,100,000 sputum smears are conducted every year

Public sector Private sector

Cultures and LPA

▪ ~10,000 tests (including liquid, solid cultures and LPA) conducted for MDR-TB cases (also includes DST)

▪ Very few culture tests are conducted as the time taken to obtain results is very long ~ 8,000 to 18,000 tests

Serological (Rapid/ELISA)

▪ Public Sector in India does not use the serological tests

▪ More than 1.5 million tests every year

Chest X- Rays ▪ Public Sector conducts about ~2.3-3.2

million Chest X-Rays every year ▪ Approximately 450,000-670,000 Chest

X-Rays are conducted every year for TB diagnosis

Tuberculin skin test

▪ Approximate 300 vials are used every year for 1 million people. Leading to ~360,000 tests every year

▪ ~20,000 to 35,000 TST’s are conducted every year in the private sector

NAAT (RT PCR)

▪ PCR tests not conducted under RNTCP for active TB

▪ Very few PCR’s are conducted since they are very expensive tests and require high level infrastructure ~1,000 to 1,500 tests

Most common test PRELIMINARY ESTIMATES


7,200

2,600700

CXR Smear Cult. TST

2,500

NAAT LPA ELISA

57 17,000 101

27,000

Private Sector

Public Sector

Total spend

54,891

22,655

32,236

TB Diagnostics – Spend analysis

SOURCE: McKinsey analysis

1 Other Tests include Solid & Liquid Cultures, Tuberculin Skin Test, LPA and RT PCR

Total spend on TB diagnostics (2010) USD, Thousands

Chest X-Ray

Sputum Smears

ELISA

Other tests1

PRELIMINARY







The world needs a new TB diagnostic test

SOURCE: Meeting Report ‘Defining Specifications for a TB Point of Care Test’, France

High TB Burden ▪ In spite of many TB Diagnostics available in the market, TB remains world’s largest treatable

infectious cause of death, killing 5000 people everyday

Poor access to fair diagnostics

▪ 60 % people seeking health care go to either the health post level or peripheral health clinics, where adequate laboratory infrastructure to perform TB investigations often do not exist

▪ Many people living in the rural areas also do not have access to fair diagnostics

Sputum as a specimen

▪ All routine lab based TB tests available to date depend on respiratory specimens which are highly susceptible to significant quality variability

▪ Two most vulnerable populations to TB infection, children and people infected with HIV are either unable to produce sputum or produce paucibacillary specimen respectively

Sensitivity and specificity

▪ Diagnostic methods such as smear microscopy has low sensitivity especially in cases of children, people infected with HIV and extra pulmonary TB

▪ Tests such as ELISA have very low sensitivity and specificity as they are antibody based which can be produced in response to other organisms as well

Time to Results ▪ Diagnostic tests like bacterial culture have high sensitivity and specificity as compared to

smear microscopy but the time to results is so long that the disease gets transmitted to other people till it is diagnosed

High infrastructure, training needs

▪ Tests such as PCR are highly sensitive and specific but their implementation requires high level infrastructure laboratories which are very expensive and cant be made available in rural areas

▪ These tests also require proper training of the staff which makes the test even more expensive


Current understanding of an ideal TB diagnostic

Sensitivity ▪ 95% for smear positive, culture positive patients ▪ 60-80% for smear negative, culture positive patients

Specificity ▪ 95% compared to culture (for both adults and children) ▪ 90% for culture negative probable TB (in children)

Training and controls

▪ Be easy to use for nurse or community health worker (even with minimal training) ▪ Positive control in Test Kit

Time to results and readout

▪ 3 hours maximum, patients must receive the results the same day, desirable would be 15 minutes ▪ Should be readable for 1 hour, should be a simple readout ‘yes’ or ‘no’

Specimen type ▪ Adults: Urine, oral, breath, venous blood ▪ Children: Urine, oral, capillary blood (finger/heel prick)

Cost to patients ▪ Less than USD 10 per test after scale up

Throughput and Power Requirement

▪ Throughput: 20 tests/ staff member / day ▪ Power Requirement: Should be able to run on battery

Sample preparation ▪ Maximum three steps should be involved ▪ No need for pipetting and no time sensitive process should be involved

Instrumentation ▪ No maintenance costs, acceptable replacement costs ▪ Works in tropical conditions, fits in backpack and is shock resistant

Storage and waste disposal

▪ Shelf life 24 months including reagents, stable in high humidity and high temperatures ▪ Disposal: simple burning or sharps, no glass

Test specification Minimum required value

SOURCE: Lemaire et al; Journal of International AIDS Society 2010 – reporting on MSF’s research on TB diagnostics


Key features needed for new TB diagnostic tests in the Indian context


Critical factors for new test in India Potential approaches to get there

▪ Sensitivity >90%

▪ Specificity >90%

▪ Time to result ~ up to 24 hours1

▪ Specimen type – may be urine or blood – NOT sputum

▪ Sample preparation – less than 3 steps

▪ Instrumentation – should work in tropical environment; fit in a back pack; dust and shock resistant

▪ Power requirements – should be able to work on car battery back up

▪ Cost – to patient should be ~ Rs 600/- per test

▪ Pathobiology

– Pathogen based approaches ▫ Attack known biomarkers (e.g., rpoB

gene) ▫ Nuclei acids based tests

– Host responses

▪ Instrumentation engineering

▪ Disruptive approaches e.g.,

– Optical

– Electronics

– Materials technologies etc.

1 As most people in India now have mobile phones, test results could be reported over phone and patients no longer need to wait in the lab for results







Market potential for the new TB diagnostic


Market value USD Million Assumptions Scenario

11

37

7

75

20

Total value of all the scenarios

Market expansion by providing easier access to new diagnostic test to 50% of undetected TB Patients

Enter the public sector by replacing 50% of existing tests (mainly smear) at a price of Rs. 300 per new test

Replace 50% of other tests in the private sector (mainly chest x-ray) at a price of Rs. 600 per new test

Replace the ELISA Market completely at a price of Rs. 600 per new test Scenario A

Scenario B

Scenario C

Scenario D

Total

Additional upside from global exports

~USD 42 million


Commercial approaches for capturing this opportunity

Go your own way

Partnership with existing players

Government focus

Key capabilities needed

▪ Need to develop a go-to-market capability including sales, distribution, collections, after sales service etc.

▪ Need to identify the right commercial partner (e.g., a Pharma/device company with the sales and distribution capabilities), develop the partnership and scale up commercially

▪ Become familiar with government procurement processes and participate in tenders and other contracts

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