Sales in developing nations grow as health-care standards improve

June 15, 1994

Vendors must work with local partners As health-care standards in developing nations rise, so does demandfor advanced medical imaging equipment. Vendors who sell cost-effectivedevices with state-of-the-art diagnostic capabilities will bebest

Vendors must work with local partners

As health-care standards in developing nations rise, so does demandfor advanced medical imaging equipment. Vendors who sell cost-effectivedevices with state-of-the-art diagnostic capabilities will bebest positioned to take advantage of this growth, say internationalmarketing executives.

Emerging-market sales strategies should take into account domesticmarket needs. It is important that companies measure the utilityof what is being sold in Asia, Africa or Latin America for developedmarkets and consider the market potential of upgrading the installedbase of conventional x-ray systems worldwide.

A discussion of these and other international business opportunitieswas presented in Opportunities for the Imaging Industry: Prospectsand Challenges in the `90s, a conference organized by DiagnosticImaging, in April.

"Life expectancy in India at the time of Gandhi was 35years. Now it is up to 55 years," said Peter H. Grassmann,vice president and group executive for Siemens' Medical EngineeringGroup in Erlangen, Germany. "Once you get beyond the 55-year(life expectancy) level, the use of advanced imaging techniqueswill come into play. Until that point, there is little involvementfor most patients with large machines."

Although the U.S. is the largest market for medical imagingsystems in the world, the international portion of global salesis growing and is expected to expand rapidly in the next decade.Much of this international potential is based on population demographics,according to Jack H. Huston, vice president of sales for PhilipsMedical Systems North America.

Relatively low standards of health care in some of the world'smost populous nations have led to an intensified drive to equalizethe standards of medical care, with imaging playing an importantrole. For example, 56% of the world's population lives in Asia,where many public health systems remain underdeveloped, he said.

"Germany has one doctor for every 324 people, while Bangladeshhas one doctor for every 5500 people," Huston said.

In part resulting from this disparity, international consumptionof medical technology has grown rapidly. In 1990, 40% of the world'soutput of medical technology was consumed outside the U.S. Thatnumber rose to 54% in 1993 and is projected to rise to 60% by2000, he said.

Sales of medical imaging equipment in emerging markets willbe shaped by both clinical and practical needs and the willingnessof vendors to work cooperatively with local partners to meet uniquerequirements, noted Ravi Sharma, vice president of marketing forToshiba America Medical Systems in Tustin, CA.

According to Sharma, factors impacting the market potentialin emerging nations include:

** Whether imaging technology will be manufactured to meetthe core needs for basic care in these health-care systems;

** How scanners will overcome a lack of infrastructure, whichrequires both ease of system use and a high level of reliability;

** How much collaboration there will be between local clinicalspecialists and global medical imaging companies; and

** What the role of telemedicine and picture archiving andcommunications systems will be in the developing world.

"The emphasis in product development will be on low-costand basic systems that produce good images and allow the physicianto diagnose with accuracy," Sharma said.

Imaging systems in demand will be those that are easy to operate,easy to maintain, and highly reliable, while capable of performingstate-of-the-art imaging applications, he said. There will bea need for refurbished as well as new equipment that meet thesecriteria.

However, the provision of imaging systems should only be partof a larger strategy for vendors in the developing world. Opportunitiesalso exist for the manufacturers to assist in training and tocooperate with clinical specialists in promoting imaging research.

"Companies can provide a high level of expertise and assistin market development," Sharma said. "Later, this canevolve into business opportunities for clinicians and some companies."

Sharma believes there will likely be a role for PACS in emerginghealth-care systems. The cost of producing images on film is amajor operating expense anywhere, and can be prohibitive in developingmarkets. Expenses can be reduced by using telemedicine and simplePAC systems.

Two-tier markets. Vendors should also realize that most developingnations have a two-tier market, Grassmann said. They usually havesome institutions that seek high-performance equipment, whilethe bulk of hospitals and clinics have more basic needs. Giventhe large populations of many developing nations, the top tiercan still be a large market. India, for instance, has as manyas 80 million people who fall into the top tier.

The use of low-cost and adaptive technology to serve the largersecond tier in emerging markets has historically been resisted,Grassmann said. Specifically, demand has been limited for x-rayproducts designed through the World Health Organization's BasicRadiological Systems program (SCAN 6/16/93).

"WHO has for years tried to design very adaptive equipment,but it has never been a big success on the sales side," hesaid.

Many developing countries do not have specialized radiologists,Grassmann said. Physicians performing imaging procedures are ofteninternists with some additional training in radiology. Vendorsshould develop flexible product and marketing programs that meetthe needs of these users while establishing the benefits of cost-efficienttechnology.

There is major sales potential in the upgrading of conventionalx-ray and R/F equipment, some of which has been in the field fortwo decades or more, Grassmann said. While outdated equipmentcan be found in the U.S. and other markets, it is particularlyprevalent in Europe. Purchases of standard x-ray devices wereput off during the years that attention was riveted on high-technologyimaging systems, such as CT and MRI.

"In Germany, we are now beyond 12 years of average lifefor (conventional x-ray) systems. More than 50% of systems are15 to 20 years old," he said.

While purchases have been delayed, conventional x-ray technologyhas continued to evolve, Grassmann said. Digitization of imagedata, dose reduction, improved reliability and faster system operationsunderlie a need to update conventional x-ray technology in industrialnations.

Aging technology is not merely characteristic of developednations. WHO reports that 30% to 60% of medical equipment in theThird World is not functioning, according to Huston.

"This points to the fact that an increasing percent offuture growth of our industry will occur outside the U.S.,"Huston said. "Events such as the dramatic transitions inRussia, the industrial awakening of China, and the North AmericanFree Trade Agreement with Mexico all present challenging potentialfor medical imaging and emphasize our transition to global economics."