06.22.12
Axendia Inc., an analyst and strategic advisory firm for the life sciences and healthcare markets, has released a report on globalization in the med tech industry. Titled, “Walking the Global Tightrope: Balancing the Risks and Rewards of Med Tech Globalization,” the report surveyed 125 industry executives from 89 companies in 16 countries worldwide.
One of the most pertinent pieces of information that emerged from the report is that 88 percent of respondents expect increased sales in emerging markets in the next three years, and 69 percent anticipate growth in developed markets as well. This is expected to occur despite increasing negative pressure on sales, such as taxes and economic pressure.
“[Med tech executives] are really seeing tremendous opportunities in the emerging markets,” Axendia founder and President Daniel Matlis told Medical Device Now. “The drivers behind that are very similar to what other industries are seeing. There is a growing middle class that is able to participate in the healthcare system outside of the broad, state-funded systems through private insurance or out of pocket expenses.”
It makes sense that the growing middle class with income to spare would be interested in innovative life- saving or life-sustaining devices and technologies. The report shows that companies are using an approach called the “top of the pyramid” strategy to reach portions of the market that can afford new technologies, and then moving to the “platform approach,” which takes its cue from the automotive industry. Medical device companies offer a “continuum of products based on a single platform designed to meet various healthcare delivery models, levels of sophistication, customer needs and market cost constraints,” according to the report. Basically, similar to the way in which an auto maker will use one powertrain platform and build vehicles with different price points around it, so will medical device makers build their technologies at different tiers around a single platform to reach different levels of a market, the report explains.
There’s a major problem with emerging markets, though—their regulatory landscapes. Why does it always seem so difficult to navigate the sea of regulations and requirements in newer markets?
“I think the challenge is two fold,” Matlis said. “One, we are dealing with emerging regulatory frameworks. Then the flip side of that challenge is that in many cases, the brand owners, or the company looking to market the devices, don’t fully understand the regulatory requirements in-country up front. And they sometimes may make assumptions on what’s required based on what their previous experience has been, whether in the United States or Europe or one of the countries they’ve done work with. So the challenge—or opportunity—there is ensuring that brand owners fully understand what the regulatory framework is ahead of time.”
Once brand owners (who Matlis notes used to be called manufacturers until outsourcing became ubiquitous) understand and anticipate the regulatory framework, the challenge then becomes managing through the regulatory framework. It’s not the country that poses obstacles to transparent management, but the “grid of regulations and the lack of harmonization,” claimed Matlis.
International harmonization is the objective of the Global Harmonization Task Force (GHTF), founded in 1992 to “bring together experienced regulators and industry members on a regular basis to discuss ways in which medical device regulatory practices within their jurisdictions could be harmonized.” Musing on change and what that means, Matlis discussed the GHTF’s dissolution after 20 years.
“It’s going to be ending soon, and there’s a new organization, the International Medical Device Regulators’ Forum (IMDRF), that’s going to take its place. We’re still a work in progress. So the challenge is how do the industry and regulators harmonize global regulatory requirements? There’s a lot of work going on in that area. But also—how do we make sure it’s not a cold war-type arms race where regulators are trying to outdo each other?”
That is indeed the question, and competition (the bad kind) is something medtech companies are concerned about, particularly from local partners such as raw material suppliers, distributors, manufacturers, etc. At this year’s annual meeting of the Medical Device Manufacturers Association in Washington, D.C., Amy Hariani, director and legal counsel for the U.S.-India Business Council, said local partners—while vital to introducing outsiders to the local market space—may become a problem in the future. “Get a lawyer,” she advised. Matlis agreed.
“Executives are concerned, especially in emerging economies, with their current suppliers becoming their future competitors,” he said. “We’ve seen that in other industries.”
Most notably, when specifically asked what “keeps them up at night,” 49 percent of the respondents to Axendia’s report said protecting intellectual property. This was the third top concern—the issue proving the most anxiety was product quality (60 percent) followed by maintaining consistent quality standards across internal and external sites (59 percent).
Matlis stressed the importance of finding a “true” partner, rather than simply a “good” partner. True partners, he said, are vital to maintaining quality in an unfamiliar and distant market.
The three keys to maintaining quality, according to Matlis, are:
• Having better control over governments, risk management, and compliance;
• Enhanced visibility; and
• Collaboration.
Matlis recalled working for Johnson and Johnson, when solving an issue was as simple as walking down to the shop floor or, if necessary, flying to a manufacturing facility. Later, he implemented systems to provide visibility across the organization. Now, due to outsourcing, such transparency is rare.
“It has become very difficult to achieve that real-time and on-demand visibility that so many brand owners are looking for. And they see that as significant risk,” he explained. “For example, when we’re talking about perceived risk associated with suppliers, 68 percent of respondents say that they see a moderate to high risk because of their current visibility into critical suppliers. And we’re talking about critical suppliers. Almost seven out of 10 are concerned about that, so obviously that’s a big issue.” Ninety percent of the report’s respondents said they would like to see real-time and on-demand data from their tier-one suppliers.
The entire report gives a well-rounded view of the expectations on the globalization of the medtech industry in the next few years, and gives a good idea of how the med tech “ecosystem” (a term used by the Advanced Medical Technology Association to describe all stakeholders in the industry) is developing. Authors of the report hope to “provide actionable advice to enable the med tech product ecosystem to capitalize on the benefits of globalization while controlling or mitigating the risks.”
One of the most pertinent pieces of information that emerged from the report is that 88 percent of respondents expect increased sales in emerging markets in the next three years, and 69 percent anticipate growth in developed markets as well. This is expected to occur despite increasing negative pressure on sales, such as taxes and economic pressure.
“[Med tech executives] are really seeing tremendous opportunities in the emerging markets,” Axendia founder and President Daniel Matlis told Medical Device Now. “The drivers behind that are very similar to what other industries are seeing. There is a growing middle class that is able to participate in the healthcare system outside of the broad, state-funded systems through private insurance or out of pocket expenses.”
It makes sense that the growing middle class with income to spare would be interested in innovative life- saving or life-sustaining devices and technologies. The report shows that companies are using an approach called the “top of the pyramid” strategy to reach portions of the market that can afford new technologies, and then moving to the “platform approach,” which takes its cue from the automotive industry. Medical device companies offer a “continuum of products based on a single platform designed to meet various healthcare delivery models, levels of sophistication, customer needs and market cost constraints,” according to the report. Basically, similar to the way in which an auto maker will use one powertrain platform and build vehicles with different price points around it, so will medical device makers build their technologies at different tiers around a single platform to reach different levels of a market, the report explains.
There’s a major problem with emerging markets, though—their regulatory landscapes. Why does it always seem so difficult to navigate the sea of regulations and requirements in newer markets?
“I think the challenge is two fold,” Matlis said. “One, we are dealing with emerging regulatory frameworks. Then the flip side of that challenge is that in many cases, the brand owners, or the company looking to market the devices, don’t fully understand the regulatory requirements in-country up front. And they sometimes may make assumptions on what’s required based on what their previous experience has been, whether in the United States or Europe or one of the countries they’ve done work with. So the challenge—or opportunity—there is ensuring that brand owners fully understand what the regulatory framework is ahead of time.”
Once brand owners (who Matlis notes used to be called manufacturers until outsourcing became ubiquitous) understand and anticipate the regulatory framework, the challenge then becomes managing through the regulatory framework. It’s not the country that poses obstacles to transparent management, but the “grid of regulations and the lack of harmonization,” claimed Matlis.
International harmonization is the objective of the Global Harmonization Task Force (GHTF), founded in 1992 to “bring together experienced regulators and industry members on a regular basis to discuss ways in which medical device regulatory practices within their jurisdictions could be harmonized.” Musing on change and what that means, Matlis discussed the GHTF’s dissolution after 20 years.
“It’s going to be ending soon, and there’s a new organization, the International Medical Device Regulators’ Forum (IMDRF), that’s going to take its place. We’re still a work in progress. So the challenge is how do the industry and regulators harmonize global regulatory requirements? There’s a lot of work going on in that area. But also—how do we make sure it’s not a cold war-type arms race where regulators are trying to outdo each other?”
That is indeed the question, and competition (the bad kind) is something medtech companies are concerned about, particularly from local partners such as raw material suppliers, distributors, manufacturers, etc. At this year’s annual meeting of the Medical Device Manufacturers Association in Washington, D.C., Amy Hariani, director and legal counsel for the U.S.-India Business Council, said local partners—while vital to introducing outsiders to the local market space—may become a problem in the future. “Get a lawyer,” she advised. Matlis agreed.
“Executives are concerned, especially in emerging economies, with their current suppliers becoming their future competitors,” he said. “We’ve seen that in other industries.”
Most notably, when specifically asked what “keeps them up at night,” 49 percent of the respondents to Axendia’s report said protecting intellectual property. This was the third top concern—the issue proving the most anxiety was product quality (60 percent) followed by maintaining consistent quality standards across internal and external sites (59 percent).
Matlis stressed the importance of finding a “true” partner, rather than simply a “good” partner. True partners, he said, are vital to maintaining quality in an unfamiliar and distant market.
The three keys to maintaining quality, according to Matlis, are:
• Having better control over governments, risk management, and compliance;
• Enhanced visibility; and
• Collaboration.
Matlis recalled working for Johnson and Johnson, when solving an issue was as simple as walking down to the shop floor or, if necessary, flying to a manufacturing facility. Later, he implemented systems to provide visibility across the organization. Now, due to outsourcing, such transparency is rare.
“It has become very difficult to achieve that real-time and on-demand visibility that so many brand owners are looking for. And they see that as significant risk,” he explained. “For example, when we’re talking about perceived risk associated with suppliers, 68 percent of respondents say that they see a moderate to high risk because of their current visibility into critical suppliers. And we’re talking about critical suppliers. Almost seven out of 10 are concerned about that, so obviously that’s a big issue.” Ninety percent of the report’s respondents said they would like to see real-time and on-demand data from their tier-one suppliers.
The entire report gives a well-rounded view of the expectations on the globalization of the medtech industry in the next few years, and gives a good idea of how the med tech “ecosystem” (a term used by the Advanced Medical Technology Association to describe all stakeholders in the industry) is developing. Authors of the report hope to “provide actionable advice to enable the med tech product ecosystem to capitalize on the benefits of globalization while controlling or mitigating the risks.”