By Doug Roe, Chief Editor
Historically, medtech companies applied the same methodology in emerging markets as in developed ones – that is about to change.
The business model for device makers usually is dependent on the sale or installation of some type of capital equipment. From there, many make their revenue from single-use or disposable components of that equipment - each high-priced and/or high-margin. Through this model, manufacturers are dependent on hospitals and patients who have the ability to pay for the use of these expensive products.
In the West and other developed markets, where most of the population has insurance coverage, this model works. In the emerging markets, this approach applies only to a very small percent of the population who can afford it. Growth in those markets will come by offering products and solutions available to the larger patient pool.
A recent report from Cambridge Consultants, Emerging Markets: Transforming Global Surgical Care by 2030, states that, to achieve growth in the larger portion of emerging markets — healthcare systems and/or patient populations that don’t have the resources to access top-of-the-line care — everything needs to change.
The Challenges Are Abundant
The report points out that more than 85 percent of the world’s population lives in emerging markets, but most of those individuals do not have access to healthcare. In those countries, the upper and middle class represent a minority of the population; the remaining 60-70 percent of citizens earn a lower income and, even if they have access to a clinician in these markets’ inadequate or fragmented hospital systems, they cannot afford care. As the middle classes begin to grow, the hospitals will grow with them, but this new breed of care facilities will be looking for low-cost solutions to treat a large patient volume.
Another challenge in expanding the base of patients is the limited number of trained caregivers to serve them. Some of this issue is caused by cultural beliefs, which can elevate surgeons to what the report described as “superheroes.” This perceived status creates inefficiencies, due to the tendency to allow surgeons to provide the majority of care for each patient. Nurses and other medical technicians are effectively reduced to onlooker status. This minimization of support staff roles extends to available education and training methodologies for those professions — if they are not surgeons, their knowledge and skills training are seen as less important.
However, the introduction of team-based surgery, as is seen in the US, where the surgeon is the manager of a process, and not the sole participant, will enable healthcare providers in emerging markets to serve a greater patient volume. This will require a philosophical change from “perfect care” for each patient to “good-enough care” for many more.
Compounding the care availability issues is the fact that “systems” supporting healthcare in some emerging markets are new, incomplete, or non-existent. Payers, policy makers, and regulatory bodies, when they do exist, are immature, and others corrupt, according to the report, and they are not capable of managing the coming growth.
Seizing The Opportunity Will Take Commitment
To thrive in emerging markets, medtech manufacturers will have to invest in education, technology, infrastructure, partnerships and, most importantly, boots on the ground. To help a situation, you must first understand a situation. This won’t come from weekend visits or whirlwind roadshows, it will come from time spent in these markets.
Industry has a strong history of being able to steer and solve policy and regulatory issues. In fact, with limited history around such issues in emerging markets, progress could be more rapid than the slow-moving changes in developed markets, a product of legacy thinking creating roadblocks.
Also, as insurance carriers begin to expand in these regions, the payer component of the challenge will be addressed, albeit with affordable, value-based approaches. Which leads to maybe the most interesting area (because of the opportunity it presents) of the report: medtech's need to identify unmet medical needs in the emerging markets.
Building The Future, One Solution At A Time
In developed markets, product development is driven by a technology-push approach. The resulting products are extremely high-tech and very expensive. These types of equipment and devices create natural barriers for emerging markets. The complexities they bring require high levels of skill and training among users, and the costs of acquisition can be a nonstarter.
Rahul Sathe, Head of Surgical Innovation for Emerging Markets at Cambridge Consultants, described what is required: “The concept of needs-driven innovation is the core to unlocking business opportunity and delivery value to patients and healthcare systems in emerging markets.” This approach toward innovation is based on understanding the needs of surgeons, clinicians, and hospitals to drive all decisions regarding a product’s feature and function, he added.
Shifting to this needs-driven method presents its own challenges. Medtech companies will need to re-organize to be able to successfully execute. “The key is to pair local insight with their existing global capability, which is a significant undertaking,” said Sathe. “The future will see large R&D teams being hired, trained, and focused solely on-and-in emerging markets.”
There have been a few market entries by the industry that can serve as examples of this idea. GE Healthcare built a large R&D team in India for in-country product development. Medtronic has an R&D facility in Hyderabad (capital of India's Telangana state), and Johnson & Johnson has established an R&D center in Shanghai. Boston Scientific, too, recently announced plans to build an R&D facility in Gurgaon (in the Indian state of Haryana), which the company claims will be its largest such center outside of the US.
Sathe shared an example of a product created through needs-driven innovation. GE Healthcare launched a portable ECG that changed access to medical care in rural markets in India. This device costs care providers less than $800, and the cost to patients for a test was only a dollar. “The product was successful because it was developed to target users. It was designed to be used in villages and rural hospitals,” said Sathe.
The ECG is lightweight, its small size makes it portable, and it has a rechargeable battery for areas without reliable electricity. It also has a simple interface that is easy to train on, and the system has no display screen, instead relying on simple paper printer technology (a cost-cutting measure).
“Needs-driven innovation relies on objective understanding of unmet needs of all users and stakeholders who will use, interface, or invest with a potential product or solution. This innovation is only successful when the entire multi-disciplinary teamed is involved: Strategic marketing, clinical affairs, and research and development,” said Sathe.
If, as most believe, the future of the medical device industry will be determined by emerging markets, manufacturers need to embrace the idea of needs-driven local innovation for unmet medical needs. By designing products that deliver implicit value to those healthcare systems and stakeholders, device makers can secure partnerships that will allow broader market penetration and sustainable growth.
Look for the full interview with Mr. Sathe in the near future on Med Device Online.