Affordable Diagnostics
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In 3 sentences: The document discusses the high costs of diagnostics in developing countries and how ReaMetrix is addressing this by developing affordable diagnostic solutions tailored to the local economic environment. ReaMetrix focuses on reducing material and transportation costs, eliminating cold chains, and designing low-cost hardware platforms that can be easily serviced locally. Through these approaches, ReaMetrix has achieved a five-fold reduction in price while maintaining over 60% gross margins.
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Scott Gauvin is the CEO of Macresco Consulting and the Co-founder of the Respect for People Roadmap. With 30 years of experience in operations, he has helped organizations around the world and across industries rethink the path to transformationnot just in process, but in mindset.
A contributing author to Leading With Compassion: Cultivating Connection from the Inside Out, Scott believes real change happens when organizations bridge the gap between culture and strategy. Right now, hes focused on helping organizations unlock performance by systematically cultivating the behaviors that make it possible.
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Affordable Diagnostics
- 1. Innovation driven Affordable Diagnostics Bala S. Manian ReaMetrix Inc BIO Conference May 7 th , 2007
- 2. Disclosure Take what ever I say with a dose of skepticism because: Every pre-conceived ideas with which I started my present activity in India turned out to be totally wrong. After 40 years in the US, while I stilled looked Indian, I had lost my ability to think Indian. I have learned that it is the ground reality check, that differentiates a good product concept from an academic exercise. Therefore you are only listening to the experiences of a budding new entrepreneur from Bangalore, India You will hear only the lessons of 3 years of burned finger experience and not the voices of silicon valley veteran.
- 3. Background Diagnostics is an important component in disease management. Diagnostics is not just about diagnosing illness but it is also about maintaining wellness. It is all about information and diagnostics is an information business. Information is generated to help the physician (and in some cases the patients) make better clinical decisions. It is about cost per unit of information and the local macro-economic environment to support that cost sustainably.
- 4. Anatomy of the Cost of Goods Sold (COGS) Many components contribute to the costs per unit of information. Cost of the acquisition of the sample. Cost of the transportation of the sample. Cost of processing of the sample Tech labor + assay reagent costs. Amortization Cost of the capital equipment investment. Laboratory infra-structure overhead cost. Distribution, field service & support, etc, etc.
- 5. How the costs are influenced? In most developing countries, the diagnostic methodologies used are parachuted from resource-rich countries. During development, the cost economics of these methodologies were highly influenced by the local macroeconomic environment prevailing in those countries. Macroeconomic impact on product design decisions and process developments can be subtle and indirect. Design criteria optimized for one environment may not be the right solution for another.
- 6. Different priorities in different environments In the developed countries: Labor costs dominate the COGS. The emphasis is on reduction of labor both in manufacturing and in process. Less emphasis on material conservation. In the resource-poor countries: Material costs dominate the COGS. The emphasis has to be on material recovery more of the raw material has to end up in finished goods. Labor component has a small contribution to COGS.
- 7. How to change the paradigm? Leveraging local resources to solve local problems is the only way to achieve economically sustainable solutions. Define the affordability index in the context of local macroeconomic environment. Affordability index does not necessarily mean cheap solutions. Affordability index drives the appropriate technology that can deliver the good and services within the affordability index. It is often that no new technology development is required but a new approach to solving the problem locally with local resources.
- 8. Diagnostics ReaMetrix experience ReaMetrix has been able to translate these concepts to diagnostic solution development in India. Five fold cost reduction in price while retaining greater than 60% gross margin. Elimination of cold chain for transportation & storage not only reducing cost but allowing the development new business models. Development of hardware platforms with dramatically reduced costs but designed for easy deployment and local service & support. The technology focus is more on local economic sustainability rather than on just peer reviewed publications in scientific journals. ReaMetrix is all about creating the ethos and the ecosystem to drive entrepreneurial solutions that are economically sustainable.
- 9. The hard lessons learned: One has to look at diagnostic information generation holistically, not just as a set of assay reagents and hardware platforms. It is more about economics and less about technology. Technology development in the absence of a viable and sustainable business plan is like sculpting fog. Import the science but not the implementation of the science great to think globally but sustainable innovations are all local. Rather than just focusing on cost arbitrage, one has to use the cost arbitrage to generate sustainable value arbitrage. Using this model, one can not only address the unmet needs in resource-poor settings but change the way diagnostic information is leveraged globally.