Project Impact

1
Project Impact

• Making Medical Technology And Services
  Affordable And Available To The Economies Of
  Developing Countries

2
4 Billion at Bottom of Pyramid

• Per capita less than 1,500
• A billion people have per capita income less than
  1/day.
• Income gap between rich and poor is growing
  richest 20 account for 85 of income
• Extreme inequity of wealth distribution
  reinforces view that poor cannot participate in
  global economy
• Could swell to more than 6 billion people next 40
  years
• Bottom 4 billion of humanity represent
  multi-trillion market

3
Social Objectives

• Focus on pricing disparity where goods and
  services that provide for basic human needs, such
  as sight or hearing (or life itself!), are
  receding further and further from the reach of
  the poor.
• Demystify costs, gain control of means for
  production and pricing to make products
  affordable to poorer two thirds of humanity
• Create service delivery models to provide
  affordable and high quality products and services
  where price and quality become driving forces to
  convert need into demand

4
Aravind Eye Hospital

• 220,000 eye surgeries per year (10 of surgery in
  US)
• 2 million patients/year examined/treated
• 47 pay nothing, 18 pay two-thirds cost, 35 pay
  well above cost
• For every 1 spent, 1.60 is earned
• Able to be self sustaining and grow while staying
  true to social mission of serving poor
• Replicated in Nepal, India, Egypt, Malawi, Kenya,
  Guatemala, El Salvador, others

5
Dr. Venkataswamy
6
(No Transcript)
7
Surgery at Aravind
8
Financial Viability
Through a unique fee system effective
management, Aravind provides free eye care to 2/3
of its patients. For each 1 spent, 1.60 is
earned
9
(No Transcript)
10
Revenue
Expenses
Profit
11
(No Transcript)
12
(No Transcript)
13
(No Transcript)
14
Al Noor/Magrabi Eye Hospital, Cairo
15
Principles of Cost Recovery

• Understanding the local paying capacity
• Pricing for affordability
• Pricing for all economic strata-multi-tiered
  pricing
• Improving efficiency to decrease costs
• Improve quality to create market demand
• Satisfying customers/being accountable
• Consumers become program planners
• Increase volume to lower unit costs and prices
• Choice to use profit production capacity to
  serve poor
• Nestle control in hands of those doing the work
• Shift of resources from operating costs to start
  up costs for new programs

16
Why is medical technology not affordable?

• WTO keeps drug prices high under Agreement on
  Trade-Related Aspects of Intellectual Property
  Rights (TRIPS). Patents on life-saving drugs are
  treated the same way as patents on ice-cream
  machines.
• Bureaucratic Imperative of Medical Industry The
  ethical responsibility of maximizing return
  on investment to share-holders reduces the
  accessibility and affordability of technology
  oriented medical care in developing countries
• Western companies do not simplify and make
  appropriate for developing countries

17
Aurolab

• Established in 1992 as non-profit business trust
• Organizational mandate to maximize product
  availability and affordability to the poor
• Proven track record in the manufacture of IOLs,
  suture, drugs, eye glasses
• Associated with Aravind Eye Hospital
• One of largest IOL manufacturer in world 600,000
  per year sold to 86 countries
• FDA and CE Mark regulatory fulfillment
• Uses profit and production capacity to serve
  the poor and build capacity

18
Reinventing Pricing

• Pricing is the Issue, Not Cost
• Intraocular lenses 100 vs. 4.5
• Suture 200 vs 30
• Pharmaceuticals 60 vs. .91
• Hearing aid 1500 vs. 50

19
Aurolab Financial Sustainability

• 4.3 million in Annual Sales
• 52 Margin (2.2M Net Income)
• Sustained Growth, little marketing costs

20
Cornea
IOL Implantation into the lens bag
Iris
Lens bag
IOL
21
Clean Room Final Quality Control
22
Next Generation IOL

• Hydrophobic Acrylic Foldable IOL
• Alcon has 50 and AMO 20 of IOL market with this
  material
• 13M IOLs sold WW in 2002 1.4M in USA
• Foldable IOLS account for 96 of US Market
• 1.6B US Market
• Developed novel biocompatible material exceeding
  material properties of competition
• Production in less than a year
• Give IP and know how to Aurolab for social
  mission and license to others for Project Impact
  financial return to support new technology
  development

23
Suture Cold Forming Needles
24
Suture Micro grinding needle tip
25
Dr. P. Balakrishnan Managing Director Aurolab
26
How Affordable Technology Drives Sustainability

• Availability of affordable intraocular lenses
  have enabled eye care programs worldwide to
  provide better quality visual outcomes
• Vision with IOL attracts surgical patients at
  early stage when more still work and can
  contribute toward cost
• Programs become market driving to increase
  market demand which has led to financial
  sustainability

27
Playing the Game

• Beg others to help you or gain control of
  technology, production, distribution and pricing
  
• Transform corporate behavior by playing the
  corporate game and being competitive
• Difficult to change corporate behavior by
  pronouncement better to compete on their ground
  to get them to change how they price their
  product for poorer markets
• Effect of Aurolab pricing lowers prices worldwide

28
Tech Transfer Modus Operandi

• Starting assumption things dont really cost
  that much to make
• Demystify cost and technology
• Find RD people who have worked in leading
  companies with large RD budgets
• Gain control of technology, production,
  distribution and pricing
• Scale costs to result in affordable pricing to
  end user
• Transform the market place by being price
  competitive

29
What can medical companies do to put me out of
business?

• Grand gestures instead of small gestures
• Find ways to sell products in poor countries at
  lower prices in a way that does not compromise
  profitability in developed country markets
• Develop distribution that minimizes leakage into
  higher priced developed country markets
• Put more money into developing country diseases
• Practice generosity

30
The Global Challenge of Hearing Impairment

• WHO estimates 250 million disabling hearing
  impairment
• Average Price in 2003 was US 1,500
• Hearing aid companies are oriented to high
  profit margins and low volume
• Only 6 million sold /year but only 12 go to
  developing countries

• Need is at least 32 million units/yr.
• Poor quality low-priced hearing aids create
  client dissatisfaction
• Lack of cost-effective, financially
  self-sustaining service delivery models for the
  lower economic groups

31
Affordable Hearing Aid
32
Affordable Hearing Aid

• Digitally programmable hearing aid usually priced
  at 1500 is being sold for 0 to 200
• Manufacturing operational January 2003
• Per unit cost under 50
• US FDA approval CE Mark Certification
• Clinical trials completed at U. of Washington
  with successful results
• Sustainable service delivery models developed
  that deliver hearing aids to all economic strata
• Multi-tiered pricing implemented locally
  globally
• 2nd generation high powered digital almost
  complete
• Partnerships developed with Lions, PDA, Al Noor,
  and other social enterprise distributors

33
Affordable AIDs Drugs?

• 42 million HIV positive
• 4 get antiretroviral treatment in poor countries
• Feasibility study
• US 40/yr/patient drug cost?
• Legally possible to produce with violating trade
  agreements?
• Create market driving service delivery model
  (bottom up) to create market demand instead of
  top down?

34
Compassionate Capitalism

• Choice to use profit and production capacity to
  serve poor
• Philanthropy that by-passes the middle man
• Pricing for affordability to poor generating
  sufficient revenue to grow and flourish
• Selling the product for the least amount of money
  rather than the most
• Profit is a means to an end and not the end
  itself
• Return on investment to the community
  (beneficiaries) and not to shareholders

35
Financing Dilemma

• Under capitalization
• Lack of adequate financing mechanism for social
  enterprise
• Traditional donors do not want to invest in
  anything with appearance of risk
• VCs want to know exit strategy and how much they
  will get
• Donors /investors convolute approach of social
  enterprise
• Inefficient capital market for social enterprise

36
Non profit Merger and Acquisition

• Northwest Lions Foundation for Sight and Hearing
  (NLFSH) and Project Impact developing a
  non-profit partnership largest eye bank
• NW will buy over time, the assets of AHAP
• NLFSH shares responsibility for financing and
  executing AHAPs core functions product
  development, distribution of hearing aids through
  non-profit channels, outreach to audiologists,
  and product fulfillment and service activities.
• Project Impact to continue playing role in
  raising funds, developing international
  distribution channels, and technology development
  for AHAP.

37
What Project Impact Gets

• Assurance of sufficient capitalization and
  managerial wherewithal
• Financial strength
• Guaranteed financing for 4 years for new Project
  Impact technology development ventures
• Part owner of commercial asset-future upside
• Assurance of adherence to social mission
• Exit strategy that allows AHAP to be placed in
  competent hands and allows us to stick with core
  competencies
• Sleep well and wake up happy

38
How Ashoka has Helped

• Pro bono legal support of Fried Frank Shriver
  Harris and Jacobson
• Donor / investor network
• Collegiality with other Ashoka fellows
• Declaration that the frog is really a prince
• Psychological benefit of stipend to support risk
  taking behavior
• Involvement with Ashoka to develop Social
  Financial Sector

39
David Green Formula for Getting By

• Make do with very little
• Perseverance
• Embrace the possibility of failure
• Act in spite fear and uncertainty
• Plan for sustainability to get out of dependency
• Boot strapping on a shoestring necessary in
  beginning but should be followed by proper
  capitalization, once certain risks have been
  reduced-- to reduce stress and have a life!
• Thinking makes it so
• Everyone has the same nerve endings