The ASEAN’s large population, rising middle class, and increasing healthcare spending, the 10 countries that make up the Association of Southeast Asian Nations are gaining attention from medical device makers, as posted in the Medical Device Business by Ames Gross, Pacific Bridge Medical on January 23, 2014
For some time now, medical device manufacturers have been looking beyond their traditional markets in the United States and EU, focusing instead on emerging economies such as Brazil, Russia, India, and China—collectively known as the BRIC nations— for growth. But as companies flock to the BRICs and the medtech markets in these countries mature, forward-thinking device makers are searching for the next group of emerging medtech markets. Among those that show promise are the 10 countries that comprise the Association of Southeast Asian Nations (ASEAN)—Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Myanmar, Cambodia, Laos, and Vietnam.
The ASEAN countries have a combined population of more than 620 million, nearly double that of the United States and more than 100 million higher than that of the EU. Topping $2.3 trillion, their combined GDP is equal to around one-quarter that of China, and the region saw GDP growth of about 6% last year, compared with negative growth in the EU and approximately 2% growth in the United States.
Increasing per capita incomes in the ASEAN countries are also leading to an expanding middle class. The middle class accounted for about 22% of the total ASEAN regional population in 2010 and is forecast to increase to more than 62% by 2030. Growing prosperity means more healthcare spending, which is leading to growth in the region’s medical device market. Valued at more than $4.5 billion in 2013, the region’s medical device market is projected to reach $8 billion by 2017, led by Thailand, Indonesia, and Malaysia, which currently account for approximately two-thirds of the ASEAN device market.
But while the ASEAN medical device market is growing, it is also underpenetrated. Opportunities abound for foreign companies that can successfully manage the region’s differing regulatory environments, languages, cultures, and local competitors.
ASEAN Countries Experiencing More Western-Type Diseases
Western- type diseases have become increasingly prevalent in Asia. Increased lifespans and growing incomes have led many to adopt Western habits—such as overeating, consuming fast food, smoking, and engaging in little exercise—putting Asians at an increasingly higher risk for lifestyle diseases. In particular, the growth rates of diabetes, orthopedic problems, cardiovascular disease, and cancer are rising quickly. Western device manufacturers already make products to diagnose and treat these diseases. Hence, the ASEAN nations are attractive markets for Western device firms.
Almost 200 million of the world’s 370 million people diagnosed with diabetes live in Asia. Indonesia is among the top 10 nations with the most diabetics. In addition, Vietnam, Malaysia, and the Philippines are forecast to have increasingly high levels of new diabetes diagnoses over the next two decades. While one in five Malaysians 30 years of age and older have diabetes, less than half have been diagnosed.
Recent research suggests Southeast Asians are more genetically predisposed to type II diabetes. In addition, the disease affects younger and less-obese people in ASEAN countries than in Western countries. Many Western companies already sell a variety of diabetes diagnostic and treatment products in the United States and Europe, and an increasing number—including Medtronic, Roche, and Bayer—are also growing their businesses in ASEAN countries.
Half of the global elderly population lives in Asia, and that share will rise to more than 60% by 2050. In Southeast Asia, the percentage of people over age 65 will more than quadruple by 2050. As people age they have significantly more orthopedic problems. A December 2013 report by the International Osteoporosis Foundation indicated that the number of people at high risk for osteoporosis in the Philippines will reach four million by 2020 and reach 10.2 million by 2050. Also by 2050, more than seven million Vietnamese women will be at risk of developing osteoporosis.
To increase market share, several Western orthopedic device companies have set up local production facilities to make lower cost, more basic versions of their high-end orthopedic devices. Alternatively, other Western firms have acquired local orthopedic device companies with broad portfolios and good market shares, increasing their competitiveness in mid-range products.
Cardiovascular disease is the leading cause of death in several Asian countries. Almost 60% of the 17 million annual cardiovascular-disease-related deaths occur in Asia. An increasing focus on preventing, diagnosing, and treating cardiovascular issues has resulted in an increased demand for cardiac devices. An estimated 25–30% of deaths in Southeast Asia are caused by cardiovascular disease. In Malaysia, approximately half of those over the age of 30 have hypertension.
Some foreign cardiovascular firms are also developing cardiac technology centers, manufacturing sites, and R&D facilities. For instance, several years ago, Medtronic set up a new facility to manufacture cardiac devices in Singapore, taking advantage of large government tax breaks.
Every year, more than six million Asians are diagnosed with cancer, and four million die from the disease. Among new cases of cancer globally, half are in Asia. The ASEAN nations are also experiencing increasingly high cancer rates. The most common cancers in Southeast Asia are lung, breast, liver, and colorectal cancers. The causes include high rates of Hepatitis B, smoking, alcohol use, red meat consumption, air pollution, and genetic factors. Nasopharyngeal (nose) cancer, relatively rare in the West, is increasingly common in Asia.
Many Western device firms are expected to increase their sales of cancer diagnostic and treatment products in ASEAN nations.
Medical Device Regulatory Standards in ASEAN Countries
The unpredictable regulatory situation has been one of the biggest hurdles for foreign medical device companies doing business in the ASEAN countries. Issues such as product registration, quality control and postmarket surveillance are often different in each country or simply do not exist.
To address this variation in regulations, the ASEAN Consultative Committee on Standards and Quality (ACCSQ) created the Medical Device Product Working Group (MDPWG) in 2004. The MDPWG’s most recent draft regulations, called the ASEAN Medical Device Directive (AMDD), were released in 2012 and are expected to be implemented by the end of 2014.
The AMDD provides a harmonized regulatory model for member countries, outlining the basic requirements for medical device performance and safety, conformity assessments, a risk-based classification system and the Common Submission Dossier Template (CSDT). The classification system, based on Global Harmonization Task Force (GHTF) guidelines, consists of four medical device categories:
Class A includes low-risk devices, such as tongue depressors.
Class B includes low-to-moderate-risk devices, such as hypodermic needles.
Class C includes moderate-to-high-risk devices, such as lung ventilators.
Class D includes high-risk devices, such as heart valves.
This classification system also applies to in-vitro diagnostics (IVDs). Government fees, clinical requirements, and processing approval timeframes vary in ASEAN countries, depending on the classification. Furthermore, each country can develop its own expedited registration process under the AMDD. Many ASEAN nations are likely to follow Singapore’s lead in implementing the AMDD directives.
Until the AMDD framework is implemented, however, each nation retains its own regulatory system.
ASEAN Countries Offer Opportunities and Risks
As the medical device markets in the BRICs become increasingly saturated, OEMs should be focusing on the next crop of emerging medtech markets. The ASEAN countries are an attractive option thanks to their relatively high population, growing middle class, more frequent incidence of Western-type diseases, and increasing healthcare spend.
Still, challenges remain. While progress is being made to harmonize regulations, each country in the ASEAN currently retains its own regulatory system. Requirements, registration systems, and fees can vary widely from country to country, making it difficult to establish a regulatory strategy for the region.
But hasn’t stopped many of the top medical device companies from establishing a presence in ASEAN countries. As the region’s medtech market continues to grow, others are likely to follow suit.
Sourcing from ASEAN Countries
Besides selling their device products in ASEAN countries, an increasing number of Western medical device companies are also manufacturing or sourcing their products there.
They are doing so for a variety of reasons, including Asia’s low overhead costs, low labor costs, and improving technical capabilities. While labor costs have increased significantly in China, they remain low in some of the ASEAN countries, including Vietnam.
For medical device sourcing and manufacturing, Vietnam has long been considered a poor second choice to China because of the country’s complicated government oversight and inadequate infrastructure. However, there have been significant advances in Vietnam since the mid-2000s. Improving technical capabilities and a large, hard-working labor force are making it easier for Western companies to collaborate with Vietnamese device manufacturers.
Although ASEAN countries have traditionally been known for low-end medical device product manufacturing, such as simple catheters and drainage bags, this is no longer the case. Some manufacturers in ASEAN countries are now able to produce more sophisticated Class II and, in some cases, Class III medical devices.
Source: Medical Device Business