It is not everyday that a person gets to see something entirely foreign and new and have their eyes opened to things that delight and surprise them, but I have just returned from a week of that feeling and it was downright revelatory.
It started in November with an invitation I received from the Skolkovo Foundation, an Innovation-focused foundation established by the Russian government (yes, that Russia) to foster innovation across a variety of Russian industries. The invitation was to participate as a speaker and moderator at a conference on digital health which would occur the week of December 9th in Moscow and, while there, to help judge a business plan competition in the same area, all expenses paid. My first thought was that it was one of those scams where you end up having to buy a time share at the end, except that the invitation was co-signed by people who I know to be entirely legit and super smart: Dr. Milena Adamian, who runs the Life Science Angels Network Fund in New York, and well-known tech and health angel investor Esther Dyson. Ok, I figured, I’ll check it out and see if it’s for real, and it was.
Who knew that the Russian government was trying to build a culture of healthcare innovation in their country? I’m sure others did, but not me. We have barely begun to build a culture of healthcare IT innovation in our own country. As I planned for the trip I realized, quite pathetically, that my knowledge of Russian culture and business is derived largely from college history classes, occasional CNN snippets about governmental intrigue and failed diplomacy, space exploration news and James Bond movies. As an investor, there is a lot of industry chatter about the growth and opportunity afforded in the BRIC (Brazil, Russia, India and China), but the last two get most of the attention, and my fund doesn’t invest outside the US, so I have not paid as much attention as I have to, say, economic development in Louisiana or the unexplored areas that lurk on the border of Silicon Valley, like the exotic locales of Santa Rosa and Pleasanton.
It’s not that I’m not interested in the world outside my own immediate zip code-I am without a doubt–but Russia is an especially mysterious place to most Americans. It’s not just foreign, it’s laden with intrigue and stories of hard line government, political prisoners and centrally controlled industry. The day-to-day changes that have taken place there since the advent of Perestroika in the late 1980’s have not made it to prime time TV. There is no Housewives of Downtown Moscow and we do not see Russian designers or even much in the way of their cuisine or entertainment in our own culture stream; every once in a while we see a Russian-born supermodel but rarely does the country’s modern culture become obvious to us. Russia may have had 30 years of capitalism, but most Americans still equate Russia with spy intrigue, borscht, Anna Karenina and questionable elections (which, by the way, are something for which we are also becoming known).
I have just returned from 5 days in Russia and it was an incredible experience in so many ways, especially because it opened my eyes to many things about which I really did not know. There are, of course, many significant differences between the countries (by the way, access to Starbucks and McDonalds is not one of those differences) but also many similarities, particularly around health care system needs. While our US innovation culture has been incredibly different, the Russians are working very hard to join the club and the several hundred entrepreneurs and related individuals that were around the weeks’ events looked exactly like their blue jean-wearing, iPad-toting, nerdy and driven American counterparts.
I could literally write a book about all I learned and experienced this last week. I am going to have to break this report up into multiple posts or this one would make War and Peace look like light bathroom reading.
First, a little context: the Russian middle class has grown from about a million people in 1999 to over 30 million people today and heading up like a rocket. This has led to significant growth in the healthcare, real estate, retail and media industries as well as the financial markets around them. Healthcare accounts for around 4% of GDP in Russia, as compared to 18% in the US, but the two countries have a similar rate of growth in healthcare costs at around 10% per year. Information technology, similarly, accounts for 1% of Russian GDP and about 4% of US GDP. I was reading a newspaper in Moscow Sunday morning which said that the fastest growing IT segments in Russia are cloud, big data, mobile and security systems. It could have been a page out of TechCrunch.
On the healthcare front the differences are profound but there are also some very interesting similarities. The Russian healthcare system is essentially a single payer government sponsored system. While there are private physicians and a nascent and growing private employer insurance market, the vast majority people receive care through the state plan and state-owned hospitals and clinics. Doctors are not revered the way they generally are in the US and make an average of $500 per month salary. That is not a typo. The average US physician salary is closer to $150,000. Fewer than 3% of Russian doctors speak English and this means they are typically never exposed to the latest medical research because it is typically published in English and there is little to no translation to Russian.
Even though all Russians are technically entitled to free healthcare from the central system, upwards of 60% of all healthcare costs are paid directly by consumers themselves. This is because it is often essential to pay the state-paid doctors and hospitals an under-the-table payment to actually get seen and also because many things aren’t covered by the system, like pharmaceuticals. Most prescribed drugs bought at a pharmacy are patient-paid, including the items we all know to be very expensive. When patients need a blood test they go to a lab to get one with no doctor’s orders. Traffic is so bad in Moscow, where a large portion of the population resides, that it can take literally hours to drive to a nearby doctor visit. God help you if you need to be transported by ambulance. Many of the most advanced treatments our US system pays for are just not paid for in the Russian system at all, even when needed. The use of imaging modalities and next generation surgical devices, for example, is vastly different. There is no real concept of “personalization” in medicine yet, by which I mean modifying coverage and interventions to address individual sub-populations. Health plans are focused more around professions and there isn’t yet a willingness to engage in widespread disease management-style programs that are customized to small sub-groups, as we have more and more of in the US.
Lastly, more than 40% of the population smokes and alcohol-related deaths are a considerably higher problem still than in the US, where it’s bad enough. Given the fact that it was a hearty 1 degree Fahrenheit during large portions of my trip, I can understand why they drink: to forget that they have turned into a human Otter Pop. Now I know why they come in blue. A funny side note: when I and my fellow American travelers told our Russian hosts that after the conference we were going to do two days of sight-seeing on foot (with a guide), they looked at us like insane asylum escapees. Even our guide said we were “brave,” which I assume was his mistranslation of whatever the Russian word is for bat-shit crazy. When the temperature drops below your shoe size, one might be advised to stay indoors.
Back to the topic at hand, there are some profound similarities between the US and Russian healthcare systems despite their different core funding streams, structures and cultural histories. For instance, there is a lack of adequate primary care and an over-representation of specialists. There is a growing trend to empower pharmacists and consumers are more and more people are using the pharmacy as a clinic for diagnostics and treatment. Concierge medicine is a growing field as people figure, “hey, I’m paying for it anyway so I may as well get good service.” The medical system has focused more on throughput than outcome, and attitudes towards this are changing. 80% of medical costs are derived from an aging population rife with chronic disease due to poor eating habits, little exercise and a weak preventive health culture. Diabetes, heart disease, respiratory disease–the usual suspects in our system–are the same villains in theirs. Attempts to address chronic illnesses create accountable healthcare consumers and foster state-sponsored wellness initiatives are growing at a massive rate.
In Russia there is a raging debate about growing healthcare costs and what data is needed to induce hospitals and others to pay for new treatments. The advent of inexpensive new technologies, like cheap sensors and smart phones and analytics, is driving the system to seek new ways of fostering patient monitoring, home diagnosis and treatment and better access to the right services at the right time. There are laws that stand in the way of the some the potentially best innovations, particularly laws about practicing “cyber-medicine (aka on-line treatment by a physician) and liability laws. Most common question raised when new products to address these demands were discussed? “Who is going to pay?” Sound familiar? It did to me.
During my visit to Moscow there were two separate but related events, as I mentioned. One was a mobile health business plan competition and the other a healthcare conference on digital health issues of interest to Russia and the US. I am going to cover the first event in more detail in my next post and focus on the conference here.
The Skolkovo Foundation and the government convened the conference, entitled 2012 Health Technology: Opportunities in Transformation to bring Western perspectives and information to Russia while also showing the US representatives what opportunities the Russian market could offer to globally-focused businesses. At a time when the Russian government has made a concerted effort to reform, invest in and improve its healthcare system (sound familiar?), the conference focused on an exchange of innovation-related information in telemedicine, telemonitoring, mobile health self-diagnostics, and other topics in the part of the Venn diagram where IT meets medicine.
Aside from myself, Skolkovo imported several other Americans who focus in this area, including Missy Krasner, entrepreneur-in-residence at Morgenthaler Ventures; Jack Young, Director of Qualcomm Life’s digital health venture fund; Jonathon Feit, CEO of Beyond Lucid, a very cool mobile health company that won this year’s DC-to VC contest; Mike Keriakos, President of Everyday Health Kristin Baker Spohn, Director of Business Development at Castlight Health, and Leon Peshkin, a professor in BioMedical Informatics at Harvard Medical School and who is originally from Russia himself. Pascal Lardier, Director of Health 2.0 International, also attended from Paris. As previously mentioned, Esther Dyson and Milena Adamian also played key roles. Milena was also the conference organizer on the US end and is herself a Russian-born physician who has been operating in the US healthcare industry for many years. Her Russian counterpart in the conference, Polina Kolomenskaya of the Skolkovo Foundation, made the American delegation feel very much at home and, together, she and Milena and their team put on an excellent event. And they stuffed us full of food and drink and sent us home 10 pounds heavier. I am guessing I am going to have to pay customs on that extra baggage!
There were also many notable and senior level Russian conference participants representing industry (telecomm, pharmacy, Medtech, IT), government and venture investors (including ViaMedix, the country’s first dedicated healthcare venture fund), as well as a large group of aspiring Russian digital health entrepreneurs. It was a room of about 150 very smart and experienced people engaged in a common quest to improve the healthcare systems of their own countries and the world. About half the room spoke English and the other half Russian. It was the first time I ever participated in an event where there were behind-the-scenes translators feeding the information into my ear on a device, UN style. It made for some pretty funny moments, like when the Russian translator was speaking about a sensor that used urine as a marker and apologized profusely mid-translation for saying the word “pee”. Hilarious.
The primary foci of the discussions were on technologies and ideas and business models that have or might work in the US and where those might or might not fit into the Russian healthcare ecosystem. There was a specific discussions bout whether it was better for The Russian healthcare system to develop its own solutions or import them from the West. There seemed to be significant bias to the former yet less experience creating such solutions, posing a bit of a conundrum for local entrepreneurship. There was also much discussion of the burgeoning global health market opportunity that the Russians clearly want to get in on as much as American companies do. As I listened to this I was reminded of some of the comments I heard from the CEOs of Medtronic and Stryker about how they were focusing less on product innovation and more on bringing proven products to new markets. I think they will not find themselves alone trying to capture those non-US healthcare funding streams.
It was interesting that most in the room were technologists or healthcare policy people (or investors) but there were few physicians or hospital representatives. Clearly all key parties must work together to improve access, quality and cost, just as they must in every healthcare system. I sensed that this multi-disciplinary approach might not yet be typical of the Russian system–no surprise as no one is particularly good at aligning the incentives of everyone in a healthcare system. It is a very disruptive thing to do and takes much time. I was very struck, however, by a comment made by Dr. Peshkin, who said a key difference between the US and Russia is risk tolerance: Americans are very risk averse while Russians feel risk is a part of every day life. He felt this would enable Russians to more quickly disrupt certain historical patterns in favor of new technology adoption. I found this so curious as I would personally have thought just the opposite. Americans are accustomed to blowing up whole industries in favor of new ways of doing business (witness Amazon, Google, Apple, etc) whereas my perception is that Russia moves quite slowly. On the other hand, Moscow has built in 30 years a commercial culture that rivals New York or Paris in sophistication, breadth and advertising. No doubt they can move quickly should they want to do so.
Health 2.0′s Pascal Lardier mentioned that he had done a quick survey of 50 Health 2.0 chapter leaders around the globe to elicit their view of the key drivers and obstacles around digital health innovation. Drivers included:
Presence of an entrepreneurial culture
Need/demand for solutions
Availability of early stage financing
Strong supporting ecosystems
Open health data
Obstacles noted were:
Stakeholder resistance due to impact on liability/compensation
Poor digital infrastructure
Hostile environment for entrepreneurship (e.g., lack of funding, unfavorable IP laws, lack of human resources)
Lack of financial incentives for innovation
All of these various topics were covered in the conference discussions in some form, including those around human discomfort with interacting with machines instead of doctors, appropriateness of consumers’ being trusted with certain healthcare tasks or information, and people’s willingness to change, even when they know change is right. Marek Dziki, Executive Director of Skolkovo’s BioMed Cluster, captured the concept well when he said that, in his home country of Poland, instead of fixing a damaged road the authorities just reduce the speed limit. Healthcare systems in both countries clearly evidence some of this mentality.
On the other hand, Dr. Elena Golukhova, a surgeon at the Bakoulev Center for Cardiovascular Surgery, lamented the lack of new approaches available to prevent cardiovascular deaths, the leading cause of death in Russia. Her comments made it clear that Russian physicians yearn for new solutions to help their patients, though she tempered her comments by saying the solutions need to come with valid proof of concept, both scientifically and economically (sound familiar?). There ensued a lengthy debate between entrepreneurs and health system representatives over whose responsibility it is to pay for pilot studies and clinical trials to get such proof. The entrepreneurs almost uniformly felt this should not be their expense, which I found interesting. In the US that is a pretty well understood, if disliked, concept; it is a known cost of doing business.
One area of clear agreement between US and Russian entrepreneurs: digital health products that improve patient care AND increase physician pay will be among the first successes. “Follow the money” is clearly a universal concept. Another area of clear agreement: no one has really broken the code on telemedicine yet and how to best get it paid and adopted.
Valery Senko, co-founder of Russian healthcare fund and digital health accelerator ViaMedix, asked what I believe was a key question at the conference, one that I often ask myself at similar US conferences: “Who in the audience has seen digital health business models that have created large revenue streams?” Nothing but the sound of crickets, as it was clear to all that this is a very nascent industry in all parts of the globe. On the other hand, virtually all hands shot up when Valery asked, “logosmallWho believes that digital health is certainly the next big thing in the healthcare market?” He added, quoting from someone unknown to me, “If we are not ready to do anything foolish we will not get anywhere in life.” Amen to that. I will cover that very thought further in my next post on the Skolkovo digital health business plan competition.