China’s medical device market in 2016 was estimated to be approximately $56 billion USD making it the second largest behind the United States, making it a big surprise that China’s market in 2000 was only estimated at $3 billion USD.
This significant growth in the market size can be attributed to many factors, but more specifically to the rapid pace of urbanization, aging population and increasing incidence of lifestyle-related afflictions. A side effect of this extraordinary growth is the vertiginous development of the medical device industry to supply the new demands of the fast-growing market. For example, public health risks that come with city dwelling, like diabetes, has heightened the need for diagnostics technologies, dialysis systems and intravenous diagnostic technologies shifting the industry from being a supplier of low-technology products like bandages, surgical gloves and first-aid kits to higher-value-added technology segments. Lastly, government policies directed to improve production capacity and innovation of local medical device firms also played an important role in the growth of the China’s healthcare market: for instance, the “Made in China 2025” initiative benefits local medical device producers by setting a goal to supply the 70% of the country’s needs by 2025.
The above initiatives have positioned Chinese medical device manufacturers in advantageous position against their global competitors: they have optimized supply chains, enjoy large volumes for economies of scale and are able to compete well by offering a lower price point to the market. The outcome of these dynamics is a dramatic shift by China medical device and pharmaceutical companies to compete against multinational enterprises in the global arena.
Increasingly, Latin America overall has been on the radar for life sciences companies seeking greater operational efficiency and opportunity, expanded market access, promising demographics, lower-cost land and labor, and emerging pathways to innovation. With a population of over 620 million people across 33 countries with an expected world leading growth rate of approximately 1%, it is represents 8.5% of the world population. The largest countries in the region in terms of population are Brazil, Mexico, Colombia and Argentina. A great advantage of the region is that Spanish is the national language in most countries with the exception of Brazil where it is Portuguese.
National governments across Latin America have improved their stability and are entering into liberal trade agreements with many Asian countries that open the door to increase trade between the two regions. With increasing support for healthcare and growing middle class populations in the region, consumer demands for drugs and treatments are expanding. One report projects healthcare spending across Latin America to grow on average 4.6% annually through 2018. Talent pools also are expanding as more citizens gain access to specialized training and education.
Brazil: Soaring Markets
According to recent medical market studies, medical sales in Brazil are projected to reach US$57.3 billion by 2020, in large part because of the growing purchasing power of the country’s middle class. The trajectory keeps with the growth of Brazil’s per capita healthcare expenditure, which grew by 14% between 2001 and 2011 (more than double worldwide growth rates). Brazil now ranks second among all nations as a medical device market.
Perhaps the greatest emerging opportunity lies in local R&D. Right now, privately funded research is relatively low, but Brazilian public policy is encouraging foreign direct investment and multinational partnerships. Experts are seeing stronger intellectual protections and strengthened support for research park and incubator development.
Mexico: Location, Support, and Quality Standards
For US companies, Mexico is a geographically convenient manufacturing country. Several multinational players house production operations in Mexico, including Merck and Bayer, AstraZeneca, Pfizer, and GlaxoSmithKline. The country also offers a favorable political climate and tightening quality standards. In terms of total gross production, pharmaceutical manufacturing is one of Mexico’s top three manufacturing industries, and its federal government is actively interested in strengthening the associated regulatory framework. Free-trade agreements are now in place with 44 countries, bolstering the nation’s import and export platforms.
Mexico’s innovation is rising as well, with a 7.1% year-over-year growth in PCT applications. Mexico now has the third-highest rate of higher education funding in the world and scores number one for government R&D funds. Furthermore, education levels are rising: 21% of Mexican workers now have tertiary education in engineering and manufacturing, and 6% in science.
Puerto Rico and Colombia: Notable Markets
As a well-established manufacturing hub, the US Commonwealth of Puerto Rico offers the same intellectual property protection and NIH funding opportunities as the rest of the United States as well as a strong pharmaceutical workforce and long history as a center for pharmaceutical operations. The US FDA already has approved 49 pharmaceutical plants and 70 medical device manufacturing sites in Puerto Rico, including those of prominent companies.
As the fourth-largest economy in Latin America, Colombia experienced notable year-over-year growth of PCT life sciences applications at 26.3%. With its increasing stability and trend toward market liberalization, it is another promising target for future development.
The Latin American Lure
China’s healthcare industry has gone through an extended period of development and vertiginous growth to become the second market in the world. Throughout the evolution, Chinese players have optimized their supply chains, enjoyed the growing market demand and economies of scale and public emphasis on the industry. Fueled by its large population, changes in demographics and government initiatives to strengthen the industry, China’s healthcare industry is now well positioned to compete in the global marketplace.
With its fast-growing populations, improving national healthcare systems, and attractive clinical trial environments, Latin America is gaining the attention and investments of medical device, pharmaceutical and bioprocessing companies from around the world. However, to be successful in the region, it is important to understand and consider the differences and similarities from country to country to formulate the correct strategy taking into consideration the symbiotic private vs. public healthcare system models, socio-economic development and cultural aspects to select the right approach for market entry. If you are interested in learning more about the opportunity in the Latin American healthcare industry, please contact ARC Consulting for professional guidance.
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