Guest Column | November 19, 2018

The World's Scariest — And Most Promising — Medical Device Market

By Julio G. Martinez-Clark, bioaccess.

insiders-view-JGM2

Medical device imports in Mexico — which boasts a population of about 130 million, claimed a GDP of US$1.15 trillion in 2017, and embraces Spanish as its official language — were about $4.8 billion in 2017.10,2 This article analyzes the current medical device market in Mexico and its potential. There is heavy competition on the Mexican medical device market, it is not exactly well-regulated, and innovation is unstable, but it still is expected to grow.

Rising GDPs, an expanding middle class, increased life expectancy, and increased disposable incomes should lead to a much higher demand for medical devices across Latin America.7 After Brazil, the Mexican medical device market is the second-largest in the region, putting it in a spotlight.8 Nevertheless, according to World Economic Situation and Prospects 2018, there are some risks in Mexico, such as the country’s cheerless economy in recent years, unethical business practices — which have a heavy influence on the country’s healthcare system — poor infrastructure, and bad distribution of resources, to name a few.4,9

Healthcare Providers And Patient Demographics

According to the U.S. Department of Commerce, public healthcare institutions in Mexico account for 70-80 percent of all medical services provided. Private institutions cover 25-30 percent of the Mexican population. In the public sector, there are 1,169 hospitals, 194 of which are highly specialized medical units. The private sector comprises 3,560 hospitals, only about 100 of which have more than 50 beds and offer highly specialized treatments.3

Mexico’s obesity rate is worrisome; over 70 percent of Mexico’s overall population in 2015 was considered obese, versus the global average of 34 percent. In 2013, Mexico surpassed the U.S. as the world’s most obese country.4 As a result, diabetes — the chronic disease most directly linked with obesity — is spreading rapidly in Mexico, affecting 16 percent of the adult population.15 According to a study published by Cambridge University Press, the cost of treatment for obesity related diseases in Mexico is projected to grow almost 150 percent by 2020 and 211 percent by 2050.17 

Still, chronic diseases in Mexico remain largely undiagnosed because of low levels of patient awareness. Awareness and, subsequently, prevention, are key to both avoiding and diagnosing chronic diseases. Medical device manufactures must establish strategic alliances with their distributors and service providers to put together outreach programs to generate demand for their products. 4

Further, growing body of research points to a dramatic demographic transformation in Mexico. Although Mexico’s population is relatively young — with a median age of 27.9 in 2015 — median age is expected to swell to 42 years by 2050. The rapid growth in Mexico’s median age also reflects the nation’s growing population of people 65 and older, which is expected to triple to 20.2 percent by 2050.5 The demand for specialized services for the Mexican elderly has far outstripped the country’s ability to meet them.16

Most large hospitals in Mexico desire modern and specialized medical devices. Due to limited budgets, some private hospitals buy used or refurbished equipment, but current regulations prevent public hospitals from buying used or refurbished products. This forces many public hospitals to hire companies that offer and provide service “per event,” offering all products required to perform a procedure.3 Thus, foreign medical device manufacturers may have to work with local distribution partners to provide packaged services when trying to sell to underfunded hospitals in Mexico, increasing the complexity of selling devices there.

Medical Device Regulation In Mexico

The regulatory approval timeframe is one of the biggest obstacles to entering the Mexican market. COFEPRIS (the agency responsible for medical device regulation in Mexico) is working on a new, more efficient regulatory system to refine the registration process for medical devices, but low funding and inefficacy over the past two years, have delayed the agency’s ability to issue timely registration and marketing approvals.3,7

A medical device marketing authorization in Mexico is valid for five years and is granted to a local entity; it allows the holder to market the medical device in the national territory. In most cases, a review process is necessary, which can take from six to twelve months if it’s conducted by COFEPRIS — or about four months, if the review is conducted by a private third-party authorized by COFEPRIS.

Reimbursement for a medical device depends on its inclusion in the benefits plans through the Mexican Social Security Institute (IMSS), Seguro Popular (a public health insurance entity for the working class), the Mexican Civil Service Social Security and Services Institute (ISSSTE) (a health and pension plan for federal workers), or PEMEX (Mexico’s state oil company). The General Health Council, representatives from COFEPRIS, IMSS, and other member agencies form an interagency committee for healthcare policies in Mexico.

Manufacturers and public institutions can propose new technology; each member of the commission evaluates it using specific guidelines and provides an opinion — the medical device’s ability to save costs and improve people’s health are the deciding factors, especially for high-cost chronic diseases. The National Center for Health Technology Excellence (CENETEC) then produces health technology assessment (HTA) reports for the commission. The final decision is made by consensus and is published to the council’s website within 10 days — a timespan during which the decision can be appealed — before being published in the government’s official gazette.1

Medical device companies in Mexico can freely set the price-to-market without any regulation or benchmarking. However, the number of competitors — and the fact that the private and public sectors’ decision to purchase is mostly based on price — mean that original prices often are modified.

Adding another layer to the equation of device pricing is the process of healthcare service pricing: through the interagency committee, all providers of the public system negotiate pricing for their services. Every year, the council negotiates the price of all items on a list of approved procedures, following applicable law for acquisitions, leases, and public sector services.1 Mexico’s list of approved procedures is called Cuadro Básico y Catálogo de Instrumental y Equipo Médico. Patients in Mexico receive complete coverage for the procedures and devices included in this list.1

In general, coverage policies are defined for procedures and don ́t specify device brand or model, and for that reason the healthcare system may reimburse without explicit one-by-one device evaluation. Mexico’s healthcare system allows the adoption of medical devices without individual comprehensive assessment.

According to third-party studies, Mexico’s healthcare medical device industry suffers three main areas of deficiency: a) some medical device regulations are based on insufficient clinical evidence; b) follow-up and methodology are not always good; c) price often guides decisions, therefore not meeting the required needs of clinical procedures. These studies show how countries with inefficiencies, such as Mexico, should follow the steps of countries who have overcome these same issues. To ensure the smooth functioning of a healthcare system, it is necessary to have a clear and efficient legislation, which must be implemented nationwide and consistently in Mexico; this will enable patients to have access to the latest medical technologies. 12, 13, 14

Because of its high quality, aftersales service, good prices (compared to competing products), and proximity, the U.S. is the number-one supplier of medical devices to Mexico4  — a market expected to grow from $4.9 billion in 2015 to $6.5 billion by 2020. The incidence and prevalence of chronic diseases, and their growing risk factors, as well as an aging population, mean that Mexico's healthcare infrastructure has had to grow to keep pace. But, because of low domestic investment on research and development, most of the Mexico’s demand for medical devices is taken care through imports; this means 90 percent of the medical devices sold in Mexico are imported. This makes Mexico the leading medical device importer in Latin America. 7,11

In addition, Mexico receives a large number of medical tourists, primarily from the U.S. (its nearest country), seeking lower prices on treatment for conditions not covered by U.S. insurance.11 This — combined with having a large part of its population enrolled in private insurance programs; having one of the highest out-of-pocket expenditures in Latin America; and having a new leftist, populist, anti-establishment president likely to increase healthcare coverage for low-income individuals (over 50 percent of Mexico’s population) — opens a number of opportunities for medical device companies in Mexico.

Global players already operating in Mexico include Medtronic, Boston Scientific, St. Jude Medical, Becton Dickinson, and CR Bard.8 Importers can expect fierce competition from such manufacturers, given that they control more than 50 percent of the current Mexican import market. 7

Political–Legal Environment

According to the World Economic Situation and Prospects 2018,9 the Mexican medtech market’s risks include dull GDP growth, with consistent growth rates of less than 3 percent,10 including just 2 percent growth in 2018.2 All of Latin America has felt the impact of weakening local currencies, and healthcare has had little alternative but to import from abroad.

Finally, unethical business practices have led to monetary losses in the billions in the Mexican healthcare system. Several Latin American countries rank among the world’s most corrupt nations. This environment forces the Mexican healthcare system to limit available resources, lowering the effectiveness and efficiency of services, and likely lowering quality of overall care. Much of the corruption stems from political figures (as high as the presidential offices) and unethical behavior in the public sector, such as fraud, crimes against public health, falsification of documents, selling of poor-quality medicines at inflated prices, kickbacks, bribery, conspiracy, influence peddling, illegal collection of fees, illicit association, insider trading, billing for services never rendered, selling expired medications, tunnels to smuggle medicines out of the hospital for illicit sale, etc.

Transparency and accountability must increase in Mexico to diminish the impact of corruption on its healthcare system. Until then, poor infrastructure and bad distribution of resources cause the government to rely on private companies that can offer nationwide high-quality care and treatments at a reasonable cost; these private companies stand to make significant gains.4

Conclusion

The Latin American medical device industry is affected by unstable economic, political, and social environments. Despite this hardship, the industry expects some growth. In Mexico, that optimism is fueled by an expanding middle class, widespread chronic disease, and an aging population. Still, with that opportunity comes risk in the form of extreme competition for the local market, corruption, complicated administrative procedures, currency fluctuations, accounts receivables with distributors, etc.

About The Author

Julio G. Martinez-Clark is CEO of bioaccess, a U.S.-based contract research, regulatory, and market access consulting company focused on Latin America. Julio holds a bachelor’s degree in electrical engineering (B.S.E.E.), and a master’s degree in business administration (M.B.A.).

References

  1. Medical Devices: From Licensing to Coverage. Highlights from Argentina, Brazil, Colombia and Mexico. Retrieved from https://www.tandfonline.com/doi/full/10.1080/17434440.2016.1245611
  2. The World Bank In Mexico. Retrieved from http://www.worldbank.org/en/country/mexico
  3. 2016 Top Markets Report Medical Devices Country Case Study Mexico. Retrieved from https://www.trade.gov/topmarkets/medical-devices.asp
  4. Opportunities in Latin America’s Healthcare Sector 2016. Retrieved from http://globalhealthintelligence.com/ghi-analysis/opportunities-in-latin-americas-healthcare-sector-2016
  5. Aging in Mexico: Population Trends and Emerging Issues. Retrieved from https://academic.oup.com/gerontologist/article/57/2/153/2646622
  6. Wearables and the medical revolution. Retrieved from https://www.futuremedicine.com/doi/full/10.2217/pme-2018-0044
  7. MEXICO – Overview of medical device industry and healthcare statistics. Retrieved from https://www.emergobyul.com/resources/market-mexico
  8. The Mexican medical device market is the second largest in Latin America. Retrieved from https://www.tecma.com/mexican-medical-device-market-second-largest-latin-america/
  9. WORLD ECONOMIC SITUATION AND PROSPECTS 2018. Retrieved from https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-2018/ 
  10. State of the 2017 Medical Device Market in Mexico. Retrieved from http://globalhealthintelligence.com/ghi-analysis/state-of-the-2017-medical-device-market-in-mexico/
  11. Mexico's medical device market to $6.5B by 2020. Retrieved from http://www.todaysmedicaldevelopments.com/article/mexico-medical-manufacturing-healthcare-market-53116/
  12. The regulation, assessment, and management of medical devices in Mexico: How do they shape the quality of delivered healthcare? Retrieved from https://safetyinhealth.biomedcentral.com/articles/10.1186/s40886-017-0055-8
  13. How does the knowledge environment shape procurement practices for orthopaedic medical devices in Mexico? Retrieved from https://bmcmedinformdecismak.biomedcentral.com/articles/10.1186/s12911-016-0324-1
  14. Effects of procurement practices on quality of medical device or service received: a qualitative study comparing countries. Retrieved from https://bmchealthservres.biomedcentral.com/articles/10.1186/s12913-016-1610-4
  15. 2016 OECD Reviews of Health Systems Mexico. Retrieved from http://www.oecd.org/publications/oecd-reviews-of-health-systems-mexico-2016-9789264230491-en.htm
  16. An aging population with limited services. Retrieved from https://mexiconewsdaily.com/news/an-aging-population-with-limited-services/
  17. Obesity prevalence in Mexico: Impact on health and economic burden. Retrieved from https://www.cambridge.org/core/journals/public-health-nutrition/article/obesity-prevalence-in-mexico-impact-on-health-and-economic-burden/94533D50B7FACF869C887F0D77A04A07.