VALUE CHAIN IN HEALTH

CARE INDUSTRY

By:
Abhinab Kumar Sahoo
 VALUE CHAIN
 It is a chain of activities for a firm operating in a specific

industry.
 Products pass through all activities of the chain in order, and

at each activity the product gains some value.

 The chain of activities gives the products more added value

than the sum of the independent activity's value.

 It is important not to mix the concept of the value chain with

the costs occurring throughout the activities

VALUE CHAIN DIAGRAM
 CHARACTERISTICS OF
HEALTH INDUSTRY
 Technological and knowledge-based high value-added industry, links to
improving public health and quality of life.
 Among the BT sector, 80% related to the health industry.

 Stricter legal regulation compared to other industries.

 Regulation on safety & efficiency of products, management of
manufacturing facilities, price of medicine, and health insurance.
 Control & management based on fairness of national quality
assurance in health care services.
 Healthcare services at the core of health industry value chain:
 Main providers of healthcare services, key consumers of health
industry products and technologies.
 Main users of high value-added, future-oriented products and
technologies such as BT, new medicine and tech-savvy medical
device.
 Healthcare Service Service

Feedback Clinical Trial Testing

Pharmaceuticals
Domestic
Distribution Market
(public)
Medical Device R&D
Technology
(Business) Transfer Clinical License/
(Venture) Manufacturing
Trial Authorization
(Research
Food Institute)
(College)
Overseas
Establishment Export
Of Business
Market
Cosmetics
 GLOBAL TREND
Governments and private sectors of developed countries, putting their
nation’s future in the health industry such as BT, are jointly pouring
energy into strengthening the competitiveness of markets and
technologies.

(1) Government Trend:

Trend Focusing investment on bio industry of developed
countries, continuous improvement of policies & regulations that heed to
accelerating industry development.
(2) Business Trend:
Trend Expanding business investment, B2B partnerships and M&A.
(3) Market Trend:
Trend Trade liberalization, further market opening and
industrialization of healthcare services.
(4) Technology Trend:
Trend Convergence of new technologies such as BT,
technological development in treatment of diseases.
OUTLOOK & RESPONSE TO
ENVIRONMENTAL CHANGES IN
HEALTH INDUSTRY
Changes Demander Needs Action Plan

Increase in healthcare Strengthen development of healthcare

Aging
demand (elderly healthcare) service for the aging population

Increase in overseas Enhance competitiveness & improve

Globalization
healthcare demand service of healthcare institutions

Increase in demand for Develop tech-savvy, portable &

Technology
individual customized customized healthcare technologies
Innovation and products
healthcare

Wage Increase in demand for Provide high quality healthcare

Increase high quality healthcare service
 STATUS & PROBLEM OF
HEALTH INDUSTRY
Enhanced cooperation and joint efforts needed among the
government-private sector-academia,
With rapid industrial paradigm shift such as
the recent development of BT technology.

(1) Market Status:

Status Proportion in national economy gradually increasing.
(2) Technology Status:
Status On the stage of acquiring technological competitiveness on
a global level in some areas.
(3) R&D Investment Status:
Status Government investment growing but not at the global
level.
(4) Healthcare Technology R&D Investment Status & Achievement: Achieved
fruitful results through investment for the past 10 years.
(5) Health Industry Development Strategy:
Strategy Need to establish policy and
institutional framework that meet industrial and technological development;
Problems of Health Industry:
Pharmaceuticals
 Lack of appropriate institutional requirements to respond to technology and
product changes:
 Inadequate standards & specifications of technology-applied products
such as biological agents.
 Prolonged license/authorization handling period delays market entrance
of new products.
 Inefficient clinical trial technology which is a key for new drug
development:
 Insufficient number of clinical trial centers, skilled labor and facilities.
 Excessive competition among businesses and low profitability due to
centering on producing duplicates.
 Increasing market dominance by foreign investment enterprises.
 Problems of Health Industry:
Medical Device
 Lack appropriate policy and institutional framework that responds to industry changes:
changes
 Separation of manufacturer approval and product approval results in losing opportunity to commercialize
high technology developed by venture firms with a weak production base.
 Non-existence of standardized specification on license/authorization of newly developed medical devices
and lack of skilled labor delays handling of license/authorization.
 Inadequate globalized responses such as Quality Management Policy.
 Inadequacy & inefficiency in research support :
 Overlapping development of core parts by enterprises.
 Insufficient support for clinical trials and design to improve product quality, due to the technology
development-based R&D support.
 Medical practitioners’ preference for imported products.
 Export centering solely on low-priced products.
Problems of Health Industry:
Food
 Regulatory-oriented requirements which do not meet global standard hinders industry
development:
 Need to improve food code underlining food hygiene from quality-oriented
standards irrelevant with safety.
 Weakened price competition due to rise in production costs such as labor cost and
logistics cost.
 Rise in production costs due to insufficient production of domestic ingredients and high
import dependency on active ingredients for processed food.
 Frequent cases of non-compliance or product returns due to low awareness on food
exporter policy .
 Lack of industry countermeasures to meet rising demand to ensure food safety.
Problems of Health Industry:
Healthcare Service:
 Weak financial structure & low profitability of healthcare institutions:
 Over supply of acute care beds & long hospital stays:
 Number of acute care beds per 1,000 population: 5.2 beds (OECD member countries’
average: 3.1 beds).
 Lack of business management specialty & industrialization capacity:
 Inadequate use of specialized business managers for providing supplier-oriented
healthcare services and improving hospital efficiency.
 Inadequate framework to enhance industrialization and competitiveness of healthcare
services:
 Lack institutional measures for attracting capital (reinvestment capability limited).
 Lack institutional measures for creating profit such as strategic partnerships, chain
hospitals and joint purchases.
 Limited industrialization of healthcare under the health insurance system such as
medical fee regulation.
 Lack technological & institutional measures for developing and penetrating new
healthcare technologies.
HEALTH DEVELOPMENT
STRATERGY

Globalization
 Support exports & overseas ventures
 Globalized standards & specifications

Knowledge Industrialization
Strategic R&D Support
Top 5 Strategies to of Healthcare
Future growth potential sector
New biomedicine, organs & genome Industry Establishment of BT clusters comprised of
Develop Health
hospitals
Bottleneck technology of businesses
Industrialization of hospital clinical trials

Policy & Regulation Improvements

Standardization of license/authorization policy
on BT products
Establishment of policies pertinent to global standards

13
Establishment of policy & legal
framework to accelerate
industry
development
 Pharmaceutical Industry:
 Establish authorization/inspection standards and regulations of high-tech
pharmaceuticals such as cell treatment.
 Extend operation of quick inspection policies.
 Medical Device Industry:
 Clarify scope on reclassification of medical devices
 Distinguish manufacturer approval and product approval
 Specify procedures for permitting changes of identical products
 Food Industry:
 Revise the food code to emphasize hygiene and safety
 Improve food-related laws and regulations
 Cosmetics Industry:
 Standardize labeling & advertisement of cosmetics: introduce substance labeling rules.
 Knowledge industrialization of
high value-added healthcare
service
 Establish basis for industrialization of healthcare services:
 Enhance reinvestment capacity such as facilitating capitalization of healthcare institutions
 Strengthen competitiveness through specializing hospitals and healthcare institutions
 Develop a health industry cluster comprised of hospitals, businesses, colleges & research
institutes:
 Develop links in basic & pragmatic research, clinical trials, technology transfers and
establishment of businesses, centering on general and specialized hospitals
 Support the establishment of a global-level regional clinical trial center (industrialization
of clinical trials)
 Establish policy to support health industry’s overseas ventures:
 Operate a center for supporting overseas ventures of healthcare institutions.
 Diversify investment promotion policies when tapping into overseas markets
 Raise competitiveness of domestic healthcare institutions:
 Penetrate advanced management technology, improve transparency in accounting, foster
small-and-medium hospitals, etc.
Intensify R&D efforts toward
future growth potential sectors
 Pharmaceuticals:
 Expand R&D support toward ‘improved drugs’ and ‘natural-substance drugs’, which are two
strong sectors in Korea
 Provide intensive R&D support toward next-generation growth engines such as new
biomedicine
 Strengthen R&D support toward international joint researches with developed countries leading
the BT industry
 Support the designation of clinical trial centers
 Medical Device:
 Select high-tech medical devices which can be commercialized by 2010 (10 sectors including
home healthcare system)
 Expand R&D support in technology-applied fields such as portable diagnosis/treatment device
 Food & Cosmetics:
 Develop functional ingredients & products .
 Improve shape design of oriental medicinal herb cosmetics
 Healthcare Technology:
 Expand R&D support in developing new healthcare technologies such as genome, stem cells &
cell treatment
Create Value & Competitive
Advantage
 Shows how the health care value chain works
 Uncovers the complexity of product procurement and delivery
 Reveals the pathways and stumbling blocks to improved value
chain operations
 Describes the strategies of manufacturers in three product areas-
pharmaceuticals, medical devices, and medical-surgical products
 Explains the strategies of group purchasing organizations and
wholesaler/distributors
 Reveals the role of e-commerce in the health care value chain
 Compares the health care value chain with the "extended
enterprise" model found in the auto industry
 Offers insights into the hospital customer of the future
ADDING VALUE

 Tele health.
 Tele nursing.
 Tele medicine.
 Tele presence.
 Tele practice.
 CONCLUSION
As we can see technology is and it is going to be the world revolution of
any time. Since scientists, engineers and all kind of people will look for
better ways of make life easier and safer. And the only way to achieve
this is with the help of Technology. This science is growing rapidly and is
offering us great advantages to our life. Like is in the Hospital Industry.
We could see that technology is very important in here because, one of
the most important things for the humanity is our HEALTH, that is why
this industry has to be updated in order to offer new discoveries to help
people to survive and always be healthy. We can see that we don’t have
the same utensils as before, now we are updated and we have the newest
and biggest technology in medicine. This made us think about the big
help that the world needs from us. As a student we can contribute with
anything to the world industry.