LeapFrog Investments: evaluating the impact of healthcare interventions

Organisation:  LeapFrog Investments

Signatory type:  Investment manager

HQ country:  Mauritius

The approach, initiative or process

LeapFrog Investments is focused on delivering essential health, wealth and climate solutions to consumers across South Asia, Southeast Asia and Africa. The firm has raised more than US$2.8bn from global institutional investors and is a major contributor to the growth of the impact investing industry, now worth more than US$1.57trn.^[1]

LeapFrog undertook major research to better understand the impact of its investments in healthcare by making use of well-known public healthcare metrics such as disability adjusted life years (DALYs), and social return on investment (SROI). Conducted in partnership with PA Consulting, the research was focused on LeapFrog’s investment in Indian diagnostics chain Redcliffe Labs. Insights from the research can be used to evaluate future value-creation strategies and to measure the impact of interventions.

Preliminary research indicated that metrics such DALYs and SROI could be used to evaluate the impact of private investments. In particular, DALYs allow for a robust understanding of the health and economic impacts of diseases by calculating the sum of life years and healthy years lost to a disease. DALYs are also useful in comparative analysis of the cost of various health interventions, aiding in the asset selection process. Simultaneously, SROI helps in demonstrating the broader social benefit of LeapFrog’s investment in Redcliffe.

Assessing Redcliffe’s DALY impacts required a top-down and bottom-up approach. The top-down analysis served a dual purpose: to quantify Redcliffe’s potential health impacts and to validate the findings from the bottom-up quantification process.

India’s overall DALY burden is significant, estimated at 486 million DALYs in 2017^[2]. This is in part driven by India’s relatively modest healthcare expenditure compared to the average for low and middle-income countries (LMIC).

LeapFrog research suggested that, on average, each person in India loses around 0.345 years (or roughly 126 days) of healthy life from preventable or treatable diseases. Redcliffe’s diagnostic tests were found to address 66% of the most prevalent conditions contributing to these DALYs. On this basis, Redcliffe could potentially address a significant part (49%) of the existing DALY gap – around 0.169 per person. Applied across Redcliffe’s users over five years, this equates to an estimated 500,000 DALYs that could be saved.

The bottom-up approach was a systematic assessment of the various disease areas targeted by Redcliffe’s diagnostic tests and the related patient journeys. First, the LeapFrog impact team developed a Theory of Change to describe how Redcliffe’s activities lead to benefits and improved health outcomes for patients through early diagnosis and treatment. LeapFrog then evaluated data from Redcliffe, alongside academic research, to support assumptions around treatment efficacy, adherence to treatment and impact on life expectancy.

The research focused on six key disease areas: thyroid, kidney, liver and cardiovascular disease, cancer and diabetes. Estimates of the impact of Redcliffe’s interventions indicated they saved 175,000 DALYs per year, reflecting an average reduction of 0.09 DALYs per user. These estimates aligned with the results of the top-down analysis, giving the firm confidence in the findings.

Results from the bottom-up analysis were also compared against various academic studies of similar screening programmes and diagnostic facilities in India and other LMICs, offering compelling evidence for the cost effectiveness of impact investing in healthcare. The data from Redcliffe, analysed with the help of PA Consulting, provides a benchmark for what private investment can achieve in healthcare, offering not just profitability but also genuine social impact.

Redcliffe Labs can leverage these insights to amplify its impact and risk-adjusted returns, for instance by increasing the uptake of tests for diabetes and cardiovascular disease where they can make the most difference, or focusing on enhancing treatment adherence. Finally, LeapFrog’s analysis showed that calculating DALYs for private healthcare companies, while complex, is not beyond the capabilities of most impact investors. These calculations will become easier as data collection and analysis improve across the healthcare sector.

In the months since LeapFrog released the data at the UN General Assembly, the healthcare team has again partnered with PA Consulting to develop a DALY model, extending the methodology across the firm’s entire healthcare portfolio. This model will help estimate tangible outcomes for existing portfolio companies and potential investments, enabling LeapFrog to compare their social and economic impact.

Outline the measures to ensure transparency and generate outcomes

Figure 1. Redcliffe cost per DALY* (US$), compared to other Indian interventions

The DALY analysis showed that Redcliffe is cost effective when compared with global benchmarks and thresholds. The average cost per DALY averted by Redcliffe is around US$200. This compares favourably with the World Health Organization threshold of 1–3 times gross domestic product per capita (US$2,256–US$6,768/DALY), and to more recent thresholds calculated for LMICs of around US$500. LeapFrog used the DALY methodology to conduct a further review and comparative analysis of Indian health research and found Redcliffe interventions were among the most cost effective in India. This is especially true for cardiovascular disease and diabetes, with cost per DALY averted US$166 and US$100 respectively.

In a market now dubbed as the “world’s capital of diabetes”, with more than 80 million cases of the disease projected by 2030, these findings are important for sustainability outcomes in India. Insights into the efficacy of interventions will encourage impact investors to back and scale companies that provide the most promise for disease reduction or reversal.

Impact investing in healthcare has long focused on reach and volume metrics, but this new data digs deeper to quantify economic effects and deliver comparative analysis across the whole healthcare ecosystem. In releasing this analysis to the market, LeapFrog hopes to encourage other healthcare investors to follow suit, building a deeper knowledge base for the broader industry and facilitating a better understanding of healthcare effectiveness across the private market ecosystem.

LeapFrog Investments believes that in future, impact investing in the healthcare sector will rely on DALYs and SROI as essential metrics for private investments, offering a clearer understanding of healthcare outcomes and direct comparison of the efficacy of different interventions.

These efforts underscore LeapFrog’s role in not just identifying profitable opportunities but also in delivering transformative social impact, proving that a rapidly growing healthcare sector can be a catalyst for immense and positive change.

PRI disclaimer: This case study aims to contribute to the debate around topical responsible investment issues. It should not be construed as advice, nor relied upon. It is written by a guest contributor. Authors write in their individual capacity – posts do not necessarily represent a PRI view. The inclusion of examples or case studies does not constitute an endorsement by PRI Association or PRI signatories.