HIMA report takes optimistic stance on healthcare sales in emerging markets

Imaging vendors watch international sales closely

In the midst of ongoing global financial troubles, medical equipment manufacturers will continue to find international markets for their products this year, according to a new report published last month by the Health Industry Manufacturers Association (HIMA). HIMA’s 1999 Emerging Market Report suggests that many Asian and Latin American countries are still experiencing growth in medical technology.

The document states that the medical device markets of China, Brazil, India, and Taiwan are growing at more than 10% annually, and represent good opportunities for medical device manufacturers in spite of financial difficulties. These markets will continue to grow at a pace that exceeds the annual growth for medical technology in the U.S., Europe, and Japan, the three largest world markets, HIMA predicts. As a group, China, India, South Korea, and Taiwan account for $5 billion in medical device purchases.

HIMA’s findings link emerging market growth to such factors as increased per capita incomes and aging populations in Asian and Latin American countries. The report predicts that by the end of the year, these markets will represent 16% of the global market for medical technology.

HIMA’s findings on Asian markets appear to be supported by Frost & Sullivan’s research on China, particularly the x-ray segment. The Mountain View, CA, market research firm reports that Chinese x-ray sales in 1998 produced revenues of about $221 million and grew more than 9% from the previous year. Frost & Sullivan predicts that China will be one of the few countries with double-digit growth rates for x-ray through 2003. But the report concedes that, in the midst of an unstable global economy where foreign currency is scarce, the Chinese government is encouraging hospitals to buy Chinese products and is monitoring x-ray imports.

Despite these rosy predictions of growth, U.S. industry observers and imaging equipment manufacturers remain cautious about Asian and Latin American markets. Brazil is the keystone economy of Latin America, and its currency devaluation could make waves in an already unstable region. Some vendors wonder if HIMA’s predictions of 10% market growth for Argentina and Brazil, 12% for Chile, and 5% for Mexico in 1999 could be too optimistic in light of Brazil’s currency troubles.

“Analysts estimate that the entire GDP of Brazil, by far the largest in the region, will decline this year by about 5%,” said Nelson Mendes, market manager, Latin America, for GE Medical Systems of Milwaukee. “It’s hard to imagine that with this scenario medical technology would grow by 10%, especially when the (Brazilian) government is in the middle of it, and it doesn’t have any money.”

Vendors like ATL Ultrasound of Bothell, WA, are cautiously optimistic about continuing prospects in Latin America.

“There’s a huge opportunity in Latin America for medical imaging, whether it be ultrasound, MR, or CT,” said Judy Barton, ATL’s senior market development manager for Latin America. “Although Brazil has devalued its currency by about 32%, so far (the devaluation) hasn’t hit the rest of the Latin market. The devaluation hasn’t really impacted people’s day-to-day business—it’s more on the international level. Right now, people are in a holding pattern, waiting to see what’s going to happen.”

In addition to the financial instability in the regions, vendors must negotiate emerging markets’ payment structures and regulatory systems. Many Asian countries are beginning to establish new payment schedules and are considering global budgeting structures more like the Health Care Financing Administration’s DRG (diagnosis-related groups) system, according to Paul Barry, HIMA’s director of global strategy and analysis for Asia. Japan has begun a pilot project to investigate this kind of payment system, and Taiwan and Korea have both expressed interest. But new structures can mean tightened budgets, Barry said.

“A lot of these economies are moving toward some kind of cost containment for their growth and expenditures in healthcare,” Barry said. “We’re seeing a movement in many countries toward global budgeting. They’re seeking to set up some kind of fixed payment, like the Medicare DRGs. Insurance system reform in these countries is going to be very important (for manufacturers) in terms of what the government chooses to fund. There will be some difficulties in getting quality-derived DRG measures: The concern is that they’ll underfund the technical component.”

Many Asian and Latin American countries are in the process of establishing or streamlining their regulatory structures. China has consolidated two agencies into one, and countries like India and Taiwan are beginning to develop regulatory schemes, Barry said. In the last two years, Brazil has established an agency similar to the FDA that replaces an old regulatory entity.

But interacting with new or revised regulatory bodies can be difficult. For example, Brazil’s new agency has proposed new product registration fees of up to $5600 per product. HIMA has been working with the Brazilian government to renegotiate this proposal, according to Donna Slingluff, HIMA’s director of global strategy and analysis for Latin America.

Although the overall outlook for the medical technology industry in Asia and Latin America remains murky, HIMA predicts that healthcare’s intrinsic value will contribute to a viable medical technology market, even in unstable economies.

“Healthcare is one of those areas where, once a level of care is being provided, it’s hard to pull it away,” Barry said. “Once a country has reached a certain level of spending on a healthcare system, typically the population begins to expect it under any conditions.”