Deal Street Asia: Hybrid Model Seen as Way Ahead for Vietnam’s Digital Health Firms Despite Pandemic Boom
DealStreetAsia.com — Even as a slew of healthtech startups in Vietnam has amassed capital from investors to expand their operations, it will take a while for them to carve out the right recipe for success as consumers are still biased towards traditional healthcare.
“Healthtech in Vietnam continues to be a work-in-progress. To fully realize its potential, there needs to be an inclusive architecture to facilitate a wide range of integrated services, and that’s something I think will happen in the next 3-5 years,” said Trung Hoang, head of VinaCapital Ventures, Vietnam’s largest homegrown VC fund.
To be sure, the pandemic has created a significant demand for healthtech startups, with the nationwide lockdown and social distancing norms prompting people to embrace digital adoption.
Key segments that witnessed traction within the larger healthtech umbrella in the country during the last few months are telehealth, e-pharmacies, B2B e-commerce, digital therapy, online fitness, clinical intelligence platforms, patient triaging, doctor discovery platforms, among others.
The boom prompted many healthtech startups established in the 2019-2020 period to raise funding this year as they gear up to carve out their growth plans.
According to data compiled by DealStreetAsia, healthtech startups in the country secured as much as $13.5 million (announced) so far this year, while the amount raised in 2019 and 2020 collectively stood at about $13 million, per Vietnam Innovation & Tech Investment Report 2020 by Do Ventures.
Challenges galore
The long-term prospects of the healthtech space hinges on several factors such as readiness of clinicians to adopt technology; change in the patient behavior; regulatory clarity and the implementation of healthtech apps by hospitals and insurers.
“It can take a lot of time for all of those elements to be in place before a healthtech startup can actually get its solution or service implemented for the benefit of consumers,” Hoang said.
Given that physical human interaction still remains a core part of the overall healthcare experience, startups need to pour in more resources to educate the market about the benefits of digital adoption to expand their user base.
According to Huy Tien Nguyen, an experienced doctor at the Military Institute of Radiation and Oncology Medicine, telemedicine can contribute to developing the overall public healthcare system as it helps reduce the burden for public hospitals during the pandemic.
“However, telemedicine can never replace face-to-face [physical] medical examinations,” he emphasised. “There are diseases where the tumor is deep in the body and it is difficult to recognise by the patient’s senses. Therefore, it is still very necessary to have a face-to-face examination to be intervened with special tools,” he added.
VMware’s Digital Frontiers 3.0 Healthcare Study, which was released on September 23, revealed that only 36% of Southeast Asian respondents are currently happy to interact with healthcare services providers digitally.
Seemant Jauhari, managing partner at healthcare-dedicated VC fund HealthXCapital, while speaking at the recently- held DealStreetAsia Asia PE-VC Summit, pointed out how the adoption of healthtech is “unlikely to happen overnight.”
“Telemedicine, online pharmacies and virtual consultations have all been around – in some cases for over a decade – but they’ve existed at the fringes,” he added.
This is primarily because the out-of-pocket spending on pharmaceutical products in Vietnam is the highest in Southeast Asia – patients in the country often like to self-medicate themselves by going to the nearest pharmacy rather than going to a clinic or a hospital.
“In order to achieve mass-scale adoption of healthtech, further government support and policy incentives will be required for universal health coverage,” said Valerie Van Vu, associate at Indonesia-based venture capital firm Venturra Capital.
The latest report of Venturra Capital on Southeast Asia’s Healthtech Journey shows that Vietnam is one of the countries that have the lowest government health expenditure per capita.
According to the report, the government spending on healthcare per capita in countries like Vietnam, Indonesia and the Philippines stood at $200, $185 and $128 in 2018, while the number in Singapore was way higher at $2,235. In Thailand and Malaysia, they stood at $510 and $611, respectively.
She points out that there is no regulation on reimbursement schemes from Vietnam’s Social Security, or private insurance providers for telemedicine. The adoption of electronic health records is still low, making medical information management inefficient.
Hybrid approach
“I believe the future will see a hybrid approach, with tools like telemedicine to help with diagnostics and screening, where patients will be referred to in-person consultations and further treatment where necessary,” said Will Klippgen, managing partner of Singapore-based early-stage investor Cocoon Capital.
The VC recently backed BuyMed, the operator of Thuocsi.vn, in its $9 million Series A round.
According to Beth Ann Lopez, co-founder & CEO at Docosan, telemedicine offers a chance to reinvent both virtual and hybrid personal care models.
The company claims to have witnessed a 200% growth in telemedicine bookings in the last two months alone when it offered a COVID self-test kit for delivery, thereby combining it with an optional telemedicine consultation for patients to discuss results.
Going forward, the adoption of mobile wallets and fintech can give consumers more ways to subscribe to a combination of insurance and healthcare products/services, said Hoang from VinaCapital Ventures.
“On one hand, the pandemic has created more weight on healthcare infrastructure. On the other, it has created opportunities for consumers, even those in rural areas, to try and experience digital healthcare solutions.”
Meanwhile, Duc Anh Ngo, CEO and co-founder at Medici, highlighted how the shift towards digital spurred the growth of healthtech firms amid the pandemic.
“Even among the low-income groups, people are increasingly willing to pay extra for quality credible healthcare services. As Vietnamese grow tech-savvy, they are more interested in teleconsultation and e-pharmacies,” he said.
In August, Medici recently raised an undisclosed seed round led by Insignia Ventures.
The silver lining
Investors see artificial intelligence and other tech-heavy applications play an important role in the development of healthtech, particularly in diagnostics and screening.
“We see how AI assists or sometimes even replaces the judgment of medical professionals across all areas, including stroke, cancer, and other conditions. AI is usually applied in image recognition,” said Cocoon Capital’s Klippgen.
Echoing the views, Hoang of VinaCapital Ventures said AI can be used for data that is still scattered across many systems.
The other major technology trend that the sector is going to witness is with regard to the use of genetic testing. Some of these tests can be done through test-at-home solutions, achieving increased accessibility and reduced costs for patients.
Vietnam’s healthcare expenditure in 2019 was approximately $17 billion, equivalent to 6.6% of its GDP. Going forward, the number is expected to touch $23 billion in 2022 at a compound annual growth rate (CAGR) of 10.7%, according to Fitch Solutions.