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Health & Fitness

Innovation, mergers best ways to ride out uncertain year

Anyang Nyong’o
Kisumu Govenor Anyang Nyong’o addresses a Universal Health Coverage conference in Nyeri last September. PHOTO | JOSEPH KANYI | NMG  

Last year had lots of ups and downs on both the private and public fronts for the health sector. Locally, part of it was attributed to interest rate capping and banks’ refusal to lend to SMEs who are the backbone of the industry. The trickle-down impact on cash flows disrupted expansion and plans for many enterprises.

Two emerging themes may lay anchor for the next few years. The first one, a movement towards lowering healthcare costs bankrolled by Amazon, Berkshire Hathaway and J.P Morgan and headlined by star doctor Atul Gawande as CEO. Their goal to get value for payments could offer lessons on how to lower cost of care.

The Universal Health Care (UHC) initiative being piloted locally is the other one. It’s still too early to say what its impact will be, but learnings are expected by end of the next year. For most SMEs, without new revenue streams coming on board or a change in business models, the ramifications are dire. Realignment in our industry is happening across medical equipment, suppliers and care givers. Entry of new innovative players demands a cautious shift towards a more ecosystem-wide approach with either a horizontal or vertical driven value addition.

The number crunchers at big corporations have handed in their prescription and a recurring recommendation is that mergers are the way to remain profitable. Big pharma has already started this, and last month’s GSK-Pfizer merge of sections of their business lines follows a series of similar deals.

On the financial front, banking mergers last year albeit some under duress acquisitions, also point at this shifting market dynamics.

For insurers, the UHC agenda has possible ramifications on their bottom lines. What does it mean to the private sector also if all Kenyans have health insurance and service rendered mainly in public facilities? A definite slump in our cash dominated out-of-pocket payments is in the offing if the scheme works as envisaged. Should health insurers follow suit?

In terms of healthcare human resource, a ‘’surplus” of health practitioners must be anticipated. How do doctors package themselves to stay afloat with close to 2,000 new ones coming through annually? Availability of employable labour opportunities could shrink.

NHIF’s recent acceptance for broader prescription and of claims triggering by clinical officer may be interesting in view of the high number of clinical officers. Ditto pharmaceutical technologists and pharmacists who also have similar annual new entrants into their market. Retail pharma is becoming one of the stiffest businesses.

Opportunities abound for infrastructure and equipment distributors to kit the public facilities given the poor state of diagnostics and point of care capability in public facilities.

Alternative avenues of lending funds both to startups and individual medics have an opportunity in 2019. Adoption of technology provides an opportunity for reaching out to underserved areas.

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