When a US-based medical devices business looks to launch its international operations, geographically speaking, its strategic options are either to adopt a market ‘concentration’ or ‘diversification’ strategy. A traditional concentration strategy would be to focus on market share in Europe, for example. A diversification strategy on the other hand, plays out well in emerging markets.
Emerging markets such as Brazil, Russia, India, China, and South Africa represent genuinely enticing prospects for immediate traction and rapid growth in the medical devices industry. These markets are attractive given their favorable economic tailwinds that they continue to reflect growth rates consistently faster than most of the developed countries, and that have a rapidly growing consumer middle-class. Opportunities exist in meeting the burgeoning health demands of rapidly expanding urbanites and middle classes particularly in Russia, China, and India. These upwardly mobile groups are likely to focus on healthy living and seek access to the increasingly available spectrum of health care products, including diagnostics (especially the convenience of point-of-care and home-testing products).
For example, India’s medical devices industry is becoming more and more attractive as there is an anticipated doubling of public health funding and health insurance coverage in the near term. The regulatory environment for medical devices may become more attractive and less bureaucratic with the anticipated introduction of updated regulations.
China represents the most attractive of the BRIC nations. It remains one of the fastest growing markets in the world and the prospects for spending in the areas of medical devices and diagnostics is huge. Under current social plans, many thousands of healthcare facilities are marked for construction, with the government promoting the private sector to serve the medical demands of the wealthy and middle classes. And there are encouraging indications that this reform is being sought in partnership with international supplier expertise.
Although there are clear opportunities for growth in untapped markets, BRICs also present some challenges. For example, many of the accessible private markets in the BRICs have already been significantly targeted, while access to the general public through often underfunded public health care systems is both complex and costly. Another challenge facing the BRICs is the presence of increasingly adept and agile domestic manufacturers (see FSG’s Local Competition in China). These companies often have the advantage of not being constrained by the same health care compliance rules (c.f. US ‘Sunshine Act’) or other burdensome administrative concerns that are now obligatory for US and European suppliers. And in all of the BRIC countries – despite the attractiveness of dealing with very rapid growth and the potential of accessing large populations, the reality remains that the per-capita spend on health care when compared to the US and Europe, is very low indeed.
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