Updated on 5 November 2013
The strategies that healthcare multinational firms adopted to succeed in developed markets were constantly challenged throughout 2013. While issues related to supply chain and talent pools continued to haunt the foreign industry in Asia, many companies began to adapt unfamiliar business practices and customer expectations. However, the biggest challenge that the global firms are facing in Asia is that domestic entrepreneurial enterprises have significant cost advantages, have ready access to local talent and are often led by a hard-driving founder.
However, Asia continues to present significant opportunities for MNCs in the smart healthcare segment. "There are clear indications that this industry is going to be a major domain that stimulates economic growth in the region. Some of the key factors driving growth are, a growing middle-class population (with higher disposable incomes and ablity to afford quality healthcare), improvements in the healthcare infrastructure that answers the growing demand, a steadily ageing population bringing in special health management needs, increasing prevalence of non-communicable diseases such as cancer and diabetes that require smart solutions for their management," states Ms Bhavna Thapar, director, healthcare practice at Edelman India, a market analyst firm.
According to a recent Ernst and Young report, the medical device industry is experiencing slower growth in the US. The report attributed this to the tougher regulatory standards, wary investors, and pricing pressures. "Innovation is used to drive growth in the industry. Innovation was itself driven by doctor demand for differentiated products catered to their specifications. However, as payers began limiting reimbursement to cheaper, no-frill brands, innovation suffered. Accordingly, growth in the US industry has slowed dramatically," the report states.
One of the core trends that emerged this year in the medical devices industry is the persistent efforts by domestic Asian players to expand their business, outside their geography. As homegrown products climb the value chain, international companies are set to face a product-pricing crisis. "Asian medical device manufacturers are investing more in R&D to improve their technology and become more internationally competitive. Local firms also have an advantage at home due to their familiarity with customer habits, making them attractive partners for private and foreign players," explains Ms Mei Dong, a partner at KPMG China.
Many players like Nurotron Biotechnology, a Hangzhou-based hearing aid manufacturer specializing in cochlear implants, started looking for global distributors. The company won the rights to produce implants in China and has priced the $25,000-a-piece implants at $10,000 -a-piece.