Healthcare and new cures

It is not a mystery that the healthcare industry is still a market with a lot of potential for growth. The population of the rich countries are aging and need more care, medecine is still making progress in many untapped territories.

On one hand we have demand for more and better service, on the other hand research is pushing the limits and making more cure available.

A client of mine who came up with very interesting technology made the following reasoning:

"We know that 5% of the population in the rich countries suffer from the disease Z, there are roughly 500 Million people in the targeted countries, therefore our market is 5% x 500 million = 25 million customers" No need to say that the reasoning justified huge investments and ambitious business planning.

However, after studying the market conditions, and different healthcare systems, it appeared that the client had made a major mistake. They failed indeed to understand that while there might be several million potential users of the technology to cure dizease Z, the budget envelope dedicated to reimburse medical expenses is quite limited. The new cure will be actually competing against many other cures for other diseases. Thus, while the cure for disease Z might be promising, it will be probably overlooked in favor of treatments for cancer or other more serious diseases.

In the healthcare industry, don't forget to look at

• the reimbursement schemes: the newest cure might not be reimbursed yet, therefore its adoption and expansion might be greatly limited
• the "competing" diseases : the healthcare budgets are not extensible and your cure (in spite of its theoretical ability to cure an important number of patients) might not be the first priority

As nothing goes in this industry with small numbers, you can only imagine the costs of approximate marketing and strategic planning. Terrible losses.