The global medical device market’s estimated value is $206.6 billion. While the United States, the European Union and Japan have been industry leaders, emerging markets in Europe, Asia and Latin America continue to grow and gain momentum.
Growth in new medical device manufacturing and sales areas, in large part, follows the demographics for the overall medtech sector. An aging population, by far, is one of the largest drivers. By 2030, people 65 years of age or older will account for 14 percent of the world’s population—a twofold increase; it was only 7 percent in 2008. These numbers fuel an increase in diagnostic testing devices, home healthcare products, implantable devices and products related to disease prophylaxis. In this article, the authors will examine regulatory and business aspects of a few of the growth opportunities in Europe, Asia and Latin America.Growth in the EU: The Czech Republic and Turkey
The magnitude of this unified market is impressive. In fact, if the EU is considered a single medical device market, rather than each country its own market, it is second to the United States in medical device market size worldwide. While Germany leads the European Union with the largest medical device industry in Europe (France comes in second), some of the more recently added member states such as the Czech Republic and Turkey (an officially recognized EU candidate member state and MDD signatory) are just developing their medical device markets.
The European market is lucrative and vast. Efforts on behalf of the European Union, in part through the Council Resolution of 1985 and also the 21 New Approach Directives (which were intended to increase technological standardization and harmonization), have smoothed communication among the countries by allowing for the free movement of goods across EU member states and MDD signatories.
Conformité Européenne, commonly called CE marking, is standard for products outlined in the 21 new approach directives throughout EU countries. Guidelines and regulations, including classification rules, risk analysis, physical and biological properties, and clinical data for medical devices, are defined in the new approach under the MDD 93/42/EEC.
In order to be compliant with the MDD (excluding Class I self-certified devices), a medical device quality system must include: technical files; design dossiers (for higher-risk Class III devices that require substantial clinical data); notified body audits; a legally binding declaration of conformity; conformity to the essential principles of safety and performance as laid out by the Global Harmonization Task Force; a risk assessment; and perhaps ISO 13485:2003 certification. Only after meeting these criterion may a device receive CE marking. With a CE mark, a manufacturer asserts that its product conformsto the appropriate new approach directive and can begin marketing its productsin Europe.
This regulatory harmonization across European member states and MDD signatories has allowed the EU medical device market to be viewed as a single, prosperous market. The greatest challenge to this process is the surfeit of languages, national laws (such as registration requirements) and often region-specific cultural values that are prevalent across the area’s varied market.
The Czech Republic and Turkey are expanding their medtech reaches. In order to enter the medical device market in the Czech Republic (if a company already has obtained a CE mark), the declaration of conformity and all labeling and directions of use must be translated into Czech, and similarly, Turkey requires all labeling to be in Turkish. The Turkish Ministry of Health requires a barcode on all medical device labels from either the International Article Number Association or the Health Industry Business Coding Council, depending on the device and manufacturer. Additionally, limited information on the regulations and requirements are available in English. These additional requirements impose delays and additional costs and obviate lateral movement from one EU member state (and official candidate member state) to another. These examples serve only to illustrate the challenges presented to the European Union and its harmonization efforts. The markets gave great potential and should not be overlooked.
The Czech Republic has a highly competitive market in price, quality of product and quality of service. Import duties generally apply to non-EU manufacturers, as is the case in most countries. Foreign manufacturers wishing to enter the Czech market are advised to contract a local partner and/or representative to navigate the process. Turkey is a relatively new player in the EU medical device market and, as such, is still adjusting to EU standards and getting all of its authorities on the same page.
This slow adaptation and probable poor communication between the Turkish Customs Service and other governmental departments and divisions has created a few obstacles. A common complaint from non-EU foreign manufacturers, for example, is that there is a Europe- only bias for the importation of medical devices into Turkey, and that non-European manufacturers are not able to fully access the medical device arena. In the past decade, however, the Turkish medical device market has experienced rapid growth and development, and improvements in quality have been made.
Emerging Markets in Asia
Though it may seem counter-intuitive, China (despite its size) remains an emerging market. According to Espicom Business Intelligence, the Chinese medical device market will have more than doubled in size from 2006 to 2014 to an industry valued at $28 billion.
The Chinese central government has increased funding for technology research and development to promote the country’s domestic medical device market. The market is expected to grow for two distinct audiences: high-level, competitive devices used in China’s larger cities, and lower-end devices needed for basic medical care in rural areas where current access to healthcare is largely undeveloped. The Chinese government has prioritized rural healthcare reform and efforts to extend coverage to the 800 million rural poor.
For the most part, domestic manufacturers are in need of technological modernization, but some of the industry’s largest players, Mindray Medical International, for example, are experiencing huge gains in revenue and growth. To compete on the international level, domestic manufacturers aim to produce high-quality, competitive devices, at significantly lower costs (as much as 30 percent lower than foreign competitors).
Medical devices are regulated by the State Food and Drug Administration (SFDA), but depending on the device, approval also may be needed by theMinistry of Health and/or the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China.
The law governing medical devices is the “Regulations for the Supervision and Administration of Medical Devices” (Order No. 276, Effective Date: April 1, 2000), which has been amended several times. Twelve documents, and in many cases, files, written in both English and Chinese, must be submitted to the SFDA to gain clearance. Chinese national standards must be followed. These are often similar to internationally recognized norms, but with small, Chinese market-specific modifications.
The rate at which the medical device industry is growing in China is promising for both foreign and domestic manufacturers. Attractive to foreign manufacturers, imports account for roughly 90 percent of the market in China, with equal shares from the United States, Germany and Japan. Additionally, preference for foreign products over the “Made in China” brand serves as an advantage for foreign manufacturers and a challenge for emerging domestic manufacturers. Foreign and domestic manufacturers will need to recognize and appeal to China’s two distinct microcosms: the high-level and competitive urban medical device market and the lower-end rural sector, both of which are making gains.
Vietnam: Haven for Imports
The medical device market in Vietnam is almost entirely dependent on foreign imports. According to a 2007 U.S. Department of Commerce report, approximately 90 percent of the imports are equally divided among U.S., German, and Japanese manufacturers. Vietnamese medical device manufacturers are sparse and typically obsolete. Recently, however, the government has attempted to stimulate the domestic medical device sector through additional funding and support. In fact, the Vietnamese Ministry of Health recently issued a directive to modernize domestic research facilities and increase local production by 2010. The goals set forth may be unrealistic given the short timeframe and the market for foreign manufacturers. As a result, reliance on imports is sure to continue. For foreign manufacturers, the medical devices in greatest demand in Vietnam are imaging diagnostics, laboratory, sterilizing, patient monitoring and emergency equipment.
The Ministry of Health is the overarching governmental body for issues relating to health, but under the scope of the ministry, the Department of Medical Equipment and Health Works (DMEHW) regulates medical devices with additional support from the Ministry of Science and Technology. Foreign manufacturers need only an import license for devices entering the Vietnamese market and must submit a dossier to the DMEHW to be issued the license. Upon the submission of the information, an import license generally is issued within 15 business days.
Currently, Vietnam is working to introduce a new technical regulation on electrical and electronic equipment. The new legislation would require electronic devices to conform to new safety standards (outlined in the proposed regulation) before being granted conformity certification and the seal of approval necessary to sell products on the market. In order to obtain market clearance for any medical device, distributors must be local and assume license ownership. In order to successfully and most easily navigate the regulatory process, it is highly recommended for foreign manufacturers to contract an in-country agent.
The Vietnamese medical device market is estimated to grow 10 percent annually. Accessing the arena is relatively simple for foreign manufacturers, particularly more so than other markets in Asia, namely China and Japan. Medical devices are subject to a Vietnamese value-added tax that is typically 5 percent, but import taxes are low—usually between zero and 5 percent. With projected growth and a heavy reliance on imports, Vietnam’s emerging market may prove to be propitious for foreign manufacturers.
Looking South: Brazil,Mexico and Chile
For years, certain areas of Latin America—Mexico, Puerto Rico and Costa Rica to name a few—have been no strangers to medical technology manufacturing. But the region, traditionally, hasn’t been a consumer powerhouse for medical devices. That’s changing slowly.
Brazil boasts the largest medical device market in Latin America at a value of $2.6 billion. Given the magnitude of its population and size, the per capita medical expenditure is low, approximately $13, and varies drastically between urban and rural areas. By way of comparison, Mexico, which has the second largest medical device industry, spends $17 per capita on health. Brazil has emerged as a player on the global medical device stage. In contrast to many of the other emerging markets, imports account for a small percentage of the Brazilian market. Domestic manufacturers focus on local demand, and, as such, exports are also few in numbers. Devices that are imported typically are manufactured either in the United States or Europe (which together make up 60 percent of total imports) and are usually high-tech and specialized.
Regulation of medical devices is governed by Law No. 6360 of 1976, Decree 74.094/97, and is supervised by the National Health Surveillance Agency (ANVISA), a subset of the Brazilian Ministry of Health. In order to introduce a device to the Brazilian market, the device must be registered with ANVISA. The process to gain clearance is lengthy and can take six months to two years. In an attempt to harmonize and facilitate the regulatory process in Latin America, Brazil is a member of Mercosur (a regional trade agreement), along with Argentina, Paraguay and Uruguay. The registration process, including required documentation, is specified in RDC-185 (2001). The classification rules defined in the aforementioned law, Annex II, are similar to those of the European Union’s MDD. Medical devices must conform to essential principles (Resolution No. 56, RDC/ANVISA, ratified 2001).
With the exception of Class I devices, Class II, III, and IV must submit several documents including the identification of the manufacturer or importer; authorization of the manufacturer to import in Brazil; a free trade certificate (or equivalent) from the country of origin; a copy of the facility operation license; company working allowance (issued by ANVISA); two device label samples; two copies of instructions; a product technical report; conformity certification; a declaration of conformity; import license; and a certificate of Brazilian GMP. Similar to Mexico, the registration documents must be submitted by an entity established in Brazil. Imported devices also are subject to a number of duties and taxes, one of which is applied by Mercosur on all imports from non-Mercosur countries.
While Brazil has the largest medical device market in Latin America, it also has a population of close to 200 million people. The biggest challenge for foreign manufacturers will be appealing to a market that is heavily reliant on domestic producers. In an attempt to be competitive in the Brazilian market, some foreign manufacturers—General Electric, Siemens and Philips Healthcare, for example—have either opened or have plans under way to open manufacturing plants in Brazil. Those that have already opened facilities already are planning on expansion. This is advantageous not only in keeping a competitive edge in an otherwise domestic market, but having Brazilian locations also may provide them tax relief and subsequent financial gains.
Mexico has emerged with the second largest medical device market in Latin America. The market is valued at $1.9 billion, large given its population of 111.2 million. Fruitful for foreign manufacturers, imports account for the vast majority of the total market. U.S.-manufactured devices comprise 70 percent of the total market. The greatest challenges for foreign manufacturers are language (almost all documents are in Spanish only), difficulty in finding in-country representation and a confusing classification system.
The governing law for medical devices in Mexico is the General Health Law (Ley General de Salud). Devices are regulated by the Federal Commission for the Protection of Sanitary Risks (Comisión Federal para la Protección contra Riesgos Sanitarios, or COFEPRIS), a division of the Mexican Ministry of Health. In order to be granted clearance by COFEPRIS, foreign manufacturers must contract a Mexican Registration Holder (MRH) to submit registration documents to COFEPRIS. The MRH must possess working warehouse facilities in Mexico, and the MRH, not the manufacturer, holds the rights to the medical device registrations. In order to circumvent issues regarding license rights, foreign manufacturers can contract an independent registration holder in order to maintain ownership of the registrations though most rely on a distributor. The Regulation of Health Supplies (Reglamento de Insumos para la Salud) stipulates that medical devices on the Mexican market are required to obtain sanitary registration.
Articles 179 and 180 of the Regulation of Health Supplies under the general health laws outline the timelines for the review of submissions by COFEPRIS. The timeline for product registration depends on the medical device class. Classes are assigned Classes I to III, and further guidelines for device classification are delineated by the Health Products Technical Committee. For the most part, the classifications are modeled after the European Union’s MDD 93/42/EEC (Annex IX): the European classification system. An amendment to the regulation (June 19) recently specified that if no answer is received within 30 business days, then the submitted Class I device has been approved. Conversely, in the cases of Class II and Class III devices, if no response is received within 35 and 60, respectively, the devices have been automatically rejected.
The MRH must file the registration submissions for approval on behalf of the manufacturer. Foreign manufacturers are required to submit additional information, stipulated in Article 180 of the Regulation of Health Supplies. The registration form for foreign manufacturers is COFEPRIS-04-001-B. Documents that must be submitted include certificate of free sale from the Ministry of Health in the country of origin; certificate of good manufacturing practice from the country of origin (ISO 13485, CE marking certificate, and Declaration of Compliance with U.S. GMP are accepted); technical and scientific data that demonstrate the safety and efficacy of the device; detailed information on the medical device structure and operation; labeling and instructions for use in Spanish; an overview of the manufacturing and or sterilization process; and lab tests and clinical data, if applicable.
COFEPRIS can take up to several months to either grant clearance or reject the product. Fees are not published and can change per the discretion of COFEPRIS. They are paid at the time of registration submission. Implantable medical devices are required to have an import permit as well. All devices must meet the labeling requirements defined in NOM-137-SSA1-2008 (Normas Oficiales Mexicanas).
The regulatory process in Mexico can seem overwhelming, but it is rapidly growing and potentially remunerative for foreign manufacturers.
Chile: Small Player, Big Spender
Chile is a country with a much smaller population than some of the other Latin American countries covered in this report. The population is approximately one-twelfth the size of Brazil, a mere 16.6 million people.
Its medical device market is valued at $334 million. Though small by comparison on an international scale, Chile ranks high in per-capita spending on health among its Latin American peers. Chile’s business infrastructure is similar to the United States and the countries have enacted a free trade agreement to reduce taxes on and promote trade between the two countries. Certain U.S. medical devices, those coded 9018 through 9022 as part of the U.S. Harmonized Tariff System, are exempt from duties upon entrance to Chile.
The Chilean medical device market largely is characterized by imports of which the United States contributes about 40 percent, followed by Germany, 12 to 15 percent, and the rest of the European Union, another 12-15 percent. The Chilean Ministry of Health oversees the Institute for Public Health (Instituto de Salud Pública de Chile, or ISP), to which medical device regulations must conform. Ruling DTO 825, Article 3 (1998) stipulates that before a medical device can be introduced to the Chilean market, the ISP must issue a certification of conformity and a Certificate of Quality. The regulatory process for foreign manufacturers is relatively simple in Chile, and manufacturers should possess a quality system, conform to ISO standards and have a post-market surveillance system. International certificates of quality are accepted, but they must be approved in order to obtain the required ISP approval affixation.
The market is growing, import taxes are low, and overall, the Chilean medical device market can be highly prosperous for foreign manufacturers. Areas of greatest demand may include medical, surgical and laboratory sterilizers; medical and surgical instruments; cardiac monitors; electro-medical instruments; anesthetic instruments; ultrasonic therapeutic instruments; and X-ray
equipment.
Not Long to Wait
The global medical device climate is growing to meet the needs set forth by a changing world population. While the varying markets in the past have been challenging to navigate, harmonization efforts continue. The efforts of the GHTF are to be lauded for facilitating medical device regulatory harmonization among the GHTF members and also provide examples to countries with less-developed regulatory schemes. As one example, the Association of Southeast Asian Nations, or ASEAN, has drafted the ASEAN Medical Device Directive modeled after the European medical devices directive. From emerging markets to the most well-established areas, the medical device market remains exciting and profitable for manufacturers worldwide.