Welcome to the newest Medical Device Summit blog, “Ameing for Asia.” As President of Pacific Bridge Medical, I have helped hundreds of medical companies with business development and regulatory issues in Asia since our founding 26 years ago. The Asian medical markets have grown exponentially since I started working in this field in 1988. Japan and China are among the top four largest medical device markets in the world. I hope that my blog will be informative to medical device companies that either hope to increase their penetration in Asia or get started in the region.
Below are 7 key reasons for Western medical device companies to enter and/or increase their presence in the Asian markets.
1. Strong Growth and Purchasing Power in Asia
Ten years ago, approximately 20 percent of the world’s population had 80 percent of the world’s wealth. Nearly 20% of the world’s population basically consisted of the U.S., Europe, and Japan. Five years from now, 20% of the population will have only 70% of the world’s wealth. This 10% drop signifies that developing countries making up the remaining 80% of the world’s population will be getting more of the world’s wealth.
Much of the increased wealth comes from the developing Asian countries, including China and India. Right now, Singapore and Hong Kong have higher per capita incomes than the U.S. Japan, Korea, and Taiwan have per capita incomes equal to the U.S. or slightly lower. China and ASEAN (Association of South East Asian Nations), such as Thailand, Malaysia, and Indonesia, have rapidly increasing middle classes with higher per capita incomes, too. Many of these wealthier Asian consumers are willing to pay more for higher quality and more effective Western medical devices. Rising per capita incomes and an increasing middle class means that more Asians can now buy high-priced, sophisticated medical technology from the West.
2. Huge Populations = More Potential Consumers
Oftentimes, companies fail to understand the demographic situation globally. With 4.7 billion people, Asia has about two-thirds of the world’s 6.7 billion population. Central and South America combined only have a population of 475 million, hence a population one-tenth the size of the Asian markets. Companies that are becoming more global frequently put the same resources in Central and South America as Asia, but according to the statistics I just mentioned, this rarely makes sense. If a medical device company is already selling their products in U.S. and Europe, and they look to further their international business, it would normally be appropriate for them to put 10 people in Asia and only one person in Central and South America.
3. Increasing Western Lifestyle Diseases in Asia
Asian countries and their people are becoming increasingly “Westernized” in the health arena. This means that many Asians are now overeating, smoking, and getting little exercise. Asians are developing more Western lifestyle illnesses like cancer and cardiovascular diseases, which are now the top causes of death in India and China. More than half of the world’s new cancer cases are in Asia. Many countries in the region (i.e. Japan, Korea) are also aging rapidly, increasing the need for elderly care and treatments for age-related diseases. Western medical device firms that already make products that can diagnose and treat these lifestyle diseases should see increased demand for their products in Asia.
4. Asian Market Opportunities are Ripe for the Taking
While many medical device products from large Western medical device companies are available in Asia, many small to mid-size companies with unique technologies have still not penetrated the region. Small to mid-size medical device companies that are willing to deal with the region’s variety of languages, cultures, and regulatory systems can find large demand for their products. However, medical device executives need to delve into these issues from a local Asian perspective, and not just push “the USA is number one.”
5. Basic Medical Devices in Asia May Work Better than AAA Products
While some Asian countries can afford pricey, top-of-the-line Western medical devices, many of the other countries still need medical devices that provide the basic diagnostic or therapy at cheaper prices. Western medical device companies with high-priced medical devices should also develop a “B-line of products”, where their devices have less bells and whistles and are sold at a discount from their AAA product line. Large Western medical device companies are already looking to make a “B-line” play as they manufacture more of their high priced items locally in Asia and delete bells and whistles that may not be required in order to reduce product prices. To penetrate the Asian markets, Western medical device companies should continue to think about selling a AAA product line as well as a B product line, since many of the Asian countries are still poorer than the Western countries, and hence need more basic devices.
6. Different Opportunities are Available in the Asian Marketplace
At most Western medical device companies, there are a number of positions (or titles) of medical device executives that can benefit from doing business in Asia. Obviously, international sales, marketing, and business development executives need to carefully research each Asian market to determine if there is a demand for your product. All too often, I come across Western executives who just say, “Since it sells in the West, it must be able to be sold in Asia.” While this may be the case in many situations, there are also many situations where this modus operandi will not work. Doing accurate market research to determine the size and growth rate of the markets in each Asian country is important to help Western medical device companies determine the best business strategies.
Regulatory executives at Western medical device companies also need to study and better understand the regulatory process of getting your products approved in each Asian market. It may not be crucial that your own in-house regulatory people understand each Asian regulatory scheme, since consultants can be used on the ground in each Asian country to make the registration process as smooth as possible. However, being culturally sensitive and not being an “ugly” American will help the process.
Manufacturing executives at medical device companies may want to manufacture their products outside of the Western markets to reduce costs or get closer to their customers. Understanding the various manufacturing opportunities requires that Western device manufacturing executives understand the labor costs as well as other sourcing or supply chain factors in each Asian market. Recently, I have seen a trend where the manufacturing costs have skyrocketed for Western medical device companies that make or source their products from China. Today, I am helping Western medical device companies to shift their China manufacturing to other Asian locations, including India and Vietnam.
Western medical device R&D executives should also look at outsourcing R&D to various Asian countries where the cost of a mechanical engineer or chemist is significantly less than in the West. India, for example, has very experienced R&D, engineering, and software executives that cost a fraction of the cost in the West. Of course, protecting intellectual property is crucial in these situations. I have seen many companies now do R&D for different device components in different locations in Asia, so that no one factory in Asia can recreate or reverse engineer the final Western device product.
7. Opportunities in Rural Asia
Medical devices manufacturers that make devices that can be used in rural areas also have good opportunities. Western medical devices that are durable, portable, and do not require significant resources or support to function are increasingly in high demand. For example, in February of 2014, Qiagen successfully released a HPV test in India that was specifically designed for rural areas that have an underdeveloped healthcare infrastructure. The test is cost-effective and portable. It is easy to use, with self-contained reagents and easily understood color-coded menus. The product is also durable and will work in situations of limited electricity, water, and temperature control.
I hope these initial comments are helpful to Western medical device manufacturers. My future blogs will get into more specific situations in each of the Asian countries. To learn more, tune in for my next blog in October!