Health care at the bottom of the pyramid

There’s an important management book that’s popular with business people expanding to markets in the developing world called The Fortune at the Bottom of the Pyramid by C.K. Prahalad. He also wrote about this concept with Stuart Hart in Strategy + Business.

Professor Prahalad was my professor at the University of Michigan and has had a profound impact on how I look at public health. So when I read The Bottom of the Pyramid, the Schumpeter column in this week’s The Economist (dated June 25, 2011), I was intrigued with the tagline: “Businesses are learning to serve the growing number of  hard-up Americans.”

The logic of the concept of the bottom of the pyramid is that by investing in developing nations, global companies can lift poor people out of poverty, averting social decay, poverty, terrorism, environmental crises, and public health threats that exacerbate as the rich get richer and poor get poorer, globally.

The so-called “fortune” at the bottom of the pyramid is the wealth generated by providing low-cost products and services that the aspiring poor want to consume.

The Economist column points out that in the poorer countries, Tata Motors and Aravind Eye Care have “exotic rings,” more than, say, McDonald’s and Walmart have. “The West’s bottom-of-the-pyramid companies are an unglamorous bunch,” many relying on poorly educated shift workers.

But the Economist points out that the bottom of the pyramid in the U.S. is growing: the average American household lost real income between 2005 and 2009, and millions of middle-class people are “downshifting” — that is, spending less, and in new ways than when they/we felt “richer.” Consumer spending per household actually fell 2.8% in 2009.

Many economists (including me) believe that this New Age of Austerity is a structural shift in the U.S. economy that will last for many years. “The bottom of the pyramid is wider than most people realise,” The Economist concludes.

Health Populi’s Hot Points: The Schumpeter column reminds us that Walmart and Target are moving into basic health care, expanding their product offerings beyond fast-moving consumer goods. Health is another area where Walmart, in particular, has begun to wring out supply chain costs: it’s been a leader in discounting prescription drugs, especially for generics when the company innovated the $4 drug fill for a 30-day supply of generics in 2006.

It won’t be so easy to innovate health care financing and delivery at the bottom of the U.S. population pyramid. This has been the Medicaid program’s bailiwick since the program’s inception in 1965.

Some 46 years later, 30+ million more Americans will be absorbed into Medicaid when health reform is implemented these next few years. At the same time, the health citizen pyramid for Americans is definitely widening at the bottom tier. Can health care be delivered with quality and effectiveness for this growing population? It will take access to primary care to deliver the promise of health reform to health citizens in the U.S., and that’s in short supply right now. Today’s New York Times story about the Department of Health and Human Services surveying primary care doctors’ practices via “mystery shoppers” speaks to that supply shortage.

Health care at the bottom of the pyramid will need to bolster primary care. That’s also true for people in the ‘rest’ of the pyramid. And that care will be delivered through novel channels beyond the traditional doctor’s office to close the gap between the have’s (with medical homes) and the have-nots (without traditional PCPs to care for them). Primary care will happen at the workplace, in schools, churches, pharmacies, and yes — in Walmart and Target, among other retail health touchpoints.

 

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  1. Making health care cheaper: innovating for and beyond the safety net | Health Populi - August 18, 2011

    [...] to C.K. Prahalad’s paradigm of the fortune at the bottom of the pyramid. As I discussed in Health Care at the Bottom of the Pyramid, Prahalad was a big influence on my worldview when he taught at the University of [...]

  2. Making Health Care Cheaper: Innovating For and Beyond the Safety Net | Care And Cost - August 19, 2011

    [...] to C.K. Prahalad’s paradigm of the fortune at the bottom of the pyramid. As I discussed in Health Care at the Bottom of the Pyramid, Prahalad was a big influence on my worldview when he taught at the University of [...]

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