How a startup is using telemedicine to disrupt the healthcare industry

This article is from an episode on Disrupting Japan. This is heavily revised from the original show transcript. For the full interview, go here.

The medical industry is one of the hardest sectors to disrupt. In some ways, it’s a good thing because it literally involves experimenting with people’s lives. It’s reasonable to be conservative and take things slow.

But looking at the national health insurance system in Japan and the health systems of all developed nations, it’s pretty obvious that improvements must be made.

Kenichi Ishii is the founder of Next Innovation. His company’s long-term strategy involves increasing the use and acceptance of telemedicine in Japan. It developed an approach that has reduced the cost of some medical treatments by more than 70 percent.

Ishii and I talked about two kinds of patients: cost-based and value-based. The former are those who see medical treatment as a means to an end, and they want it done simply, cheaply, and quickly. The latter refer to those who want to be involved, either because of an interest in the treatment or for other social reasons.

Ishii explained why this difference is important and shared his thoughts on telemedicine’s future.

Kenichi Ishii, founder of Next Innovation

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Can you briefly explain what Next Innovation does?

We have three unique points. The first one is our use of text-based communication for consultations.

The second one is we don’t rely on Japanese insurance systems or the national healthcare system, which makes it easier for us to go global. We basically provide online consultation for things like flu shots, erectile dysfunction drugs, hair loss, hay fever, and cat allergies.

The third one is we eliminate the pharmacist’s fee – a requirement of the Japanese insurance system. We deliver the drugs from the clinics to the patients’ homes instead, but we only use generic medicines.

Our target is to let people buy prescription drugs without having to go to the clinic.

Tell us about your background and why you wanted to build a startup.

I was working in pharmaceutical companies from 2001 to 2013 before I became an entrepreneur. I think the industry has great companies, but they’re being limited due to regulations. Medical players are slow to change, and it’s very frustrating. So I wanted to make a change.

When I told my colleagues and boss about my decision to start my own business, they said, “It’s crazy. Don’t do it.” But I thought if people think it’s impossible, it means there’s an opportunity. So I still did it.

What is the reaction towards your service and how did you deal with regulations?

Both doctors and customers were opposed to it because it’s new and different. Doing consultations online was uncomfortable for both sides. But for customers who’ve had some experience with similar services, they said our service is cool and comfortable to use.

About three years ago, the regulations started to change. Almost all doctors in Japan think that consultations have to be done via video-based communication because of the guidelines. But these are just guidelines and not the law, so this is why we are able to offer text-based communication.

A lot of times, doctors don’t directly tell patients what the disease is or why exactly they are giving the medication, but your website offers a huge amount of information. Do you think patients are now asking for more information?

I think there are patients who focus on the value and there are those who think of medical treatments as a cost. The former care about their situation and tend to want to have more information and be more involved in the treatment and diagnosis. The latter, on the other hand, are focused on the efficiency in getting the drugs.

I think the availability of smartphones is key to making information, including health records, more accessible. This is why in the future, we’re also looking to expand our services to also provide access to medical records.

Hospitals in Japan are like social gathering places, where people, especially the elderly, enjoy going to meet their friends. Do you think this will change? What are your thoughts on telemedicine’s future?

I think more than 50 percent of people will still want to go to the hospital and the other half will accept telemedicine. In India, for example, 8 percent of the country’s 1.5 billion population has turned to telemedicine already.

I think it will be much harder to change the attitude from wanting to go to the hospital to using telemedicine. But what’s really important is achieving a mix of both. For example, a patient may go to the hospital for first-time consultation and diagnosis, then turn to telemedicine to take the same medication in the next month.

If you could change one thing about Japan, what would it be?

I’d change the people’s way of thinking so they’ll take more risks. People are afraid to take risks because life here is already too comfortable.

I think everyone has to take risks because the market in Japan is shrinking. The established players will not be the future, given that almost all the business models here are 30 to 40 years old. The big companies are not fit to use disruptive business models. So I think startups will be the future of innovation in Japan.

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One of the most important aspects of this story is how very difficult it is for a startup to build a viable business model in medicine. Next Innovation had to operate completely outside the national health system, and that meant providing services for 70 percent less than the going rate.

Now, this is not just a testament to how innovative Ishii’s team is. It’s also indicative of how inefficient some parts of the healthcare industry are and how badly innovation is needed. If a relatively simple platform is accepted by doctors and patients and it reduces the overall cost by 70 percent, that’s something the government needs to look at so it can become mainstream.

And to be fair, perhaps the government is looking at it. Japan is facing both a rapidly aging population and rising medical costs. Innovation is not going to come from within the system. The clear and only real answer is being open to the innovation and progress that medical startups are making today.