Increasing numbers of Americans and Europeans are heading to Bangalore and other distant locales for various surgeries. Still other medical tourists are seeking treatments not legally approved at home, such as cancer and stem cell treatments.
Medical tourism has grown to significant scale in just a few years, and is projected to continue growing sharply according to studies by the World Bank, McKinsey & Company consulting firm in conjunction with the government of India, and others. During 2004 alone, Thailand received more than one million medical tourists from Australia, Europe, and the United States. The flow of medical tourists into India tripled from 2002 to 2005 and is projected to rise six-fold in the next five to seven years. Medical tourism is rapidly creating opportunities that biotech companies and investors should be factoring into their planning.
For starters, US biotech companies need to rethink their intellectual property (IP) strategies. Biotech companies can increasingly expect to see their own technologies and products delivered to patients in the new destination markets. If companies continue the traditional strategy of filing patent applications in only the United States, Europe, Canada, and Japan, they will not share in the revenues generated in the new destination countries.
Secondly, of even greater concern, biotech companies must increasingly worry about improvements on their own technologies and products being developed in these overseas locations. Most of the hospitals that are treating the new medical tourists in world-class facilities are also conducting research to develop improvements on the technologies and products, and they are filing patent applications in the United States and traditional markets. Biotech companies that fail to address the medical tourism trend may find their future product pipelines blocked from unexpected directions.
While IP concerns pose some new challenges, medical tourism is also bringing attractive new opportunities for streamlined clinical trials and early commercialization. In the past, several factors limited the feasibility of clinical trials in the destination countries for US biotech companies: Capable contract research organizations (CROs) to manage trials were lacking; the local regulators typically waited for the US Food and Drug Administration (or other developed country regulators) to approve a clinical trial or product first; and the regulators were typically reluctant to allow a foreign company to conduct a clinical trial only in their country (versus multiple countries) for fear of their population being used as "guinea pigs."
Now, in countries where medical tourism is growing robustly, hospitals have set up highly capable CROs, the regulators are establishing new procedures for their own approval of clinical trials, and the regulators are starting to welcome trials conducted only in their country. These changes are opening new opportunities for streamlined clinical trials at lower costs in these countries.
In addition, as medical tourism grows, these countries are increasingly worth considering as initial target markets for early product commercialization by biotech companies. Medical tourists provide an attractive market as most are paying out of their own pocket, and target patients are typically concentrated in just a few medical centers in these countries, limiting the marketing and sales efforts required to reach them. Particularly for novel treatments, due to long traditions of alternative medicine in many of these countries, the regulators and clinicians there tend to be more willing to allow such treatments than are regulators in the United States. This is already quite apparent, for example, with certain stem cell products and with immunotherapies for cancer.
These factors can offer an interesting opportunity, particularly for small US biotech companies, to demonstrate some initial commercial success more readily than in the United States. As the aging population in developed countries increasingly seeks treatments abroad that it cannot afford or cannot obtain at home, biotech companies and their investors will be well advised to position themselves, both offensively and defensively, to benefit from this trend.
Linda F. Powers is a managing director of the venture capital firm Toucan Capital in Bethesda, Md.