Market forces ‘insufficient’ to roll out low-cost tech

Tuesday, 4 March 2014 10:48 GMT

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Using market dynamics to roll out new technologies for development can bring unexpected challenges, say the developers of a low-cost innovation to treat jaundice in newborn babies, whose initial plan to let the tech ‘sell itself’ backfired.

D-Rev, a US-based non-profit set up in 2007 to redesign medical devices to meet the needs of poor people, has faced corruption, collusion and an unfamiliar regulatory environment in its efforts to get products to as many people as possible.

Their first product, a phototherapy unit called Brilliance — which sells for US$400 compared with US$2,500 for competing units — features cost-cutting designs. For example, rather than the typical fluorescent tubes, it uses blue LED light bulbs that last 16 to 25 times longer and consume less energy.

But despite this, uptake for Brilliance has been slow. D-Rev had aimed to treat two million newborns in India alone by 2017, according to their website. Since the product’s launch in November 2012, the units have treated 15,650 newborns globally, and the organisation has revised its target to treating one million newborns worldwide by 2017, says D-Rev product manager A.J. Viola.

“We were really excited because we had this product that was as effective as the best Western devices in treating jaundice that cost about one tenth of the price,” says Viola. “We just figured that it was going to sell itself.”

D-Rev’s main market is India’s 30,000 or so public hospitals. But they have been hardest to reach, says Viola, with just 170 units installed.

Breaking into the market has been difficult not only because of a tight regulatory environment, including the requirement for particular medical devices in India to be certified for purchase by public hospitals, but also because regional government tenders often favour competitors cosy with officials, says Viola.

D-Rev has also found that it has to micromanage the distribution process: one dishonest distributor was re-selling the units at a mark-up of US$2,000.

Not all innovations can drive a market demand, points out Theo Papaioannou, an innovation and development researcher with the Open University’s Innogen Institute.

“Economic demand should not be confused with basic need,” he says. “There may be basic needs for healthcare innovations … but these needs may never convert into economic demand.”

Development organisations can use markets to disseminate innovations on a large scale, but they must have “a thorough understanding of when and how those markets can fail to distribute innovations for the people intended”, adds Papaioannou.

Private-sector innovations like M-Pesa, the popular Kenyan mobile banking service, have shown how markets can sustainably scale new technologies, driven by local demand rather than being “supply-led”, says Emily Darko, a research officer specialising in the private sector for the UK-based Overseas Development Institute.

But while market-based innovation models are a “growing interest” among development organisations, most are too new to talk about anything more than “early stage success”, she says.

“Creating the perfect storm of a commercially viable and developmentally impactful product is still a big challenge,” she adds.

“Markets are intrinsically linked to the context they exist in. Both the operating environment in terms of infrastructure, and also the nature ofgovernment regulation and engagement, including governance and corruption, can have big impacts on how markets function — or don’t function — and how organisations can operate within them,” says Darko.
Finding a market-based model that works for an NGO is a process of trial and error, adds Darko, who advises innovators to “be flexible, adapt and expect that your approach will need to keep evolving”.

D-Rev has learned that it must fine-tune its models for different products and environments, says Viola.

The organisation will outsource the production of their next product to hit markets, a low-cost prosthetic knee, rather than licensing it to distributors. This will allow D-Rev to keep more control over the technology’s marketing.

“It’s not a one-size-fits-all,” says Viola. “It may be that for certain kinds of products and certain kinds of markets, it is fine for D-Rev to license and walk away, and in some markets we might need to have a much more hands-on approach.”