BBI Contributing Editor
SAO PAULO, Brazil – The Hospitalaar 2001 exhibition held here this past June showcased the products of medical suppliers in a variety of sectors, with patient monitoring firms among the most prominent on an exhibit floor that attracted some 55,000 visitors to view the wares being offered in Latin America. Global suppliers of patient monitoring equipment in the region include such companies as Philips/Agilent (Andover, Massachusetts), GE Medical Systems (Waukesha, Wisconsin), Siemens Medical Systems (Munich, Germany) and Welch Allyn/Protocol (Beaverton, Oregon). Domestic suppliers include Fundacao Adib Jatene, Transmai/EMAI, Dixtal Biomedica Industria E Comercio Ltda., Cardios and Pro-Life (all Sao Paulo).
Dixtal, one of the stronger Latin America-based suppliers, sells equipment based primarily on designs from Novametrix Medical Systems (Wallingford, Connecticut). Dixtal performs all manufacturing in Brazil, including the making of circuit boards. The company claims a 16% share of the pulse oximetry market in Brazil, and an 80% share of the capnography market. Competitors estimate the company's share of the multiparameter monitor market at about 15%. EMAI has a similar relationship with BCI Medical (Waukesha, Wisconsin), manufacturing pulse oximeters and multiparameter monitors using BCI components, and also distributing equipment imported from the U.S. Cardios is a leading supplier of Holter and ambulatory blood pressure monitoring products in Latin America. The company has a 70% to 75% share of those markets in Brazil and also sells in Argentina. A key product is the CardioFlash, a multimode recorder that provides Holter monitoring, signal-averaged ECG, and 12-lead resting ECG in a single package selling for $1,100.
The market for patient monitoring products in Latin America is growing at 5% to 6% at most at present, according to suppliers. Stronger growth may return to the market long-term, however, because of the steadily improving economic situation of the middle class and a consequent increased demand for advanced health care. So far, suppliers have not seen an impact of the trend toward privatization in the health care market in Latin America, but private-sector buyers tend to be more value-oriented (vs. price-oriented) as compared to government buyers. According to suppliers of patient monitoring products and imaging products such as cardiac ultrasound systems, it is difficult to sell based on value in most of Latin America at present. However, that may change as more buying switches to the private sector.
Foreign suppliers typically have a smaller share of the markets in Latin America than elsewhere, due to the effects of currency exchange rates and import taxes. Agilent claims a share of about 20% of the patient monitoring products market in Brazil, while GE Medical estimates its share at 10% to 20%. The situation is not expected to change dramatically even if tariffs are lowered, because domestic suppliers have now improved their technology so that it is very competitive with that from foreign suppliers. Instead, foreign suppliers are likely to realize better returns by partnering with domestic companies to supply components or design expertise, similar to the approach used by Novametrix. In an overall slow-growth worldwide market for patient monitoring systems, Novametrix reported growth of 48% in its most recent fiscal year for its OEM business, and international sales increased 34%.
Home health attractive to vendors
The opportunity in home health care products and services is attracting numerous vendors in Brazil. Home health care product segments include infusion pumps, oxygen and respiratory therapy products, pulse oximetry products, glucose meters and strips, and cardiac monitoring products. Brasimpex (Rio de Janeiro, Brazil) is marketing the BodyGuard infusion pump, a device developed by the founder of IVAC and Sabratek. In pulse oximetry, Nonin (Plymouth, Minnesota) is achieving strong growth in the home care market in Brazil, although in other countries such as Mexico growth is stronger in the hospital market. Most vendors of home care products are finding that Brazil is the largest market at present, followed by Argentina, Mexico and Chile, with those four countries comprising 90% to 95% of the total home health care products market in Latin America.
Important suppliers of oxygen therapy products in Latin America include Air Liquide (Paris) and Santa Catarina Oxigenio E Gases Ltda. (Sao Paulo, Brazil). Air Liquide is experiencing rapid growth in the home care segment in Brazil after a lengthy period of market development. There is now some reimbursement for home oxygen therapy from government programs such as social security, and the company is now finding some acceptance for more advanced products such as sleep apnea diagnostic systems (the Eclipse). Santa Catarina is achieving 10% annual growth in the home care market and is anticipating further expansion as patients move from using traditional oxygen cylinders to more advanced approaches such as liquid oxygen.
Another segment of the home care market that is strong in certain countries is peritoneal dialysis. Mexico has the highest percentage of renal patients on peritoneal dialysis of any country in the world, and is second only to the U.S. in the total number of peritoneal dialysis patients, with 17,000, according to data from Baxter International (Deerfield, Illinois).
Some suppliers now are beginning to investigate the opportunity for advanced home health care technologies in the region. Tunstall International (Yorkshire, UK), a supplier of electronic call systems and remote patient monitors, is assessing the market for its products in Latin America as a solution to the lack of availability of quality health care for the large rural population. Home telemonitoring also is potentially attractive to the growing private health insurance sector in countries such as Brazil as a cost-saving approach for patient management, allowing patients who only require monitoring following an inpatient procedure to be managed in the lower-cost home setting. Tunstall, previously focused mainly on the European market, has introduced the SAFE 21 Telemonitor, which provides hospital-standard monitoring of temperature, respiration, three-lead ECG, blood pressure and oxygen saturation with a one-button interface. All data can be uploaded to a monitoring center or hospital via modem, and the data quality is the same as in a hospital setting, according to the company.
The use of remote monitoring technology could be particularly attractive in regions of Latin America that have large rural populations, since medical specialists tend to be located in urban centers in most countries. In Peru, for example, 8 million people, or about one-third of the population, are located in Lima, the country's largest city, as are essentially all of the medical specialists. Tunstall is investigating the possibility of marketing its system in that country to allow higher-quality health care to be delivered to the remainder of the population who now find it impractical to gain access to advanced care. Other areas where the technology could be used to advantage include the northern part of Brazil and Venezuela. Tunstall is studying two business models: establishing an equipment sales operation to sell to home health care providers, or an equipment rental service for hospitals and alternate-site care providers.
Air pollution creates market opportunity
Respiratory therapy products, both for home and hospital use, comprise another large segment of the medical products market in Latin America. According to suppliers, respiratory disease is a major problem due to the high levels of air pollution. NS Industria De Aparelhos Medico Ltda. (Sao Paulo, Brazil) is the No. 1 supplier of respiratory therapy products in Brazil, with a 55% to 65% share.
For respiratory therapy products, Brazil is No. 1, followed by Argentina, Mexico, Chile and Ecuador. NS supplies a variety of portable nebulizers, including the EV-1000 Ultrasonic Nebulizer, the US-800 Air, and the Inalamax S3 compressed air nebulizer. While the nebulizer products were first placed in intensive care settings in hospitals in Latin America, newer models are now sold widely to the general public through department stores and other retail outlets. ENGESP (Curitiba, Brazil) is another supplier of respiratory therapy products used in alternate site and hospital settings. An important product for ENGESP is the M ller Reanimator, a $150 device that is used in home health care as well as in emergency vehicles.
Point-of-care testing becoming accepted
Another emerging segment of opportunity in Latin America is point-of-care (POC) testing products. As related by representatives of Radiometer A/S (Copenhagen, Denmark) at the Hospitalar exhibition, the market in Latin America is just beginning to reach the stage at which POC testing can be accepted. Radiometer was about to obtain registration for its ABL 77 point-of-care critical care testing system in Brazil, and believes there will be a large market for such products in the future in the region as a whole. A number of barriers to the implementation of POC testing exist, including a lack of familiarity on the part of non-laboratory users with requirements for consumables storage and with pre-analytical variables that must be controlled in order to obtain accurate results with POC testing systems. In addition, pressures to reduce the length of hospital stay, a key factor driving adoption of POC testing in the U.S. and Europe, are not as intense in Latin America. There is more emphasis on restoring optimal health status before discharging patients. Another barrier is the reluctance of doctors to perform on-site testing, and to perform QC on systems used outside of the laboratory.
Rapid tests, generally qualitative tests for analytes such as infectious agents, drugs of abuse, pregnancy and fertility markers, as well as qualitative and quantitative cardiac markers, represent a major opportunity in Latin America, but issues with misinterpretation and misuse are impeding adoption. Nevertheless, a number of suppliers of such products are actively marketing in Brazil and other countries, including Alfa Scientific Designs (Poway, California), Hypoguard (Edina, Minnesota), OraSure Technologies (Bethlehem, Pennsylvania), Acon Laboratories (San Diego, California), Makro Medical Ltd. (Kensington, South Africa), Ameritek (Seattle, Washington), Phamatech (San Diego, California), Chem Biomed (Medford, New York), and Bioeasy Ltda. (Bellohorizonte, Brazil).
Representative products include the Hypoguard DiaScreen 50 urine chemistry strip for diabetes screening; the OraSure HIV-1, drugs of abuse and alcohol tests for saliva samples; and tumor marker tests (including PSA), cardiac markers, HIV, HCV, drugs of abuse, pregnancy, ovulation and other tests from Ameritek. Chem Biomed also is marketing a qualitative PSA test. Phamatech is beginning to expand marketing of its At Home drugs of abuse test to Latin America, as well as its Quick Kit pregnancy test. A recent pilot marketing study conducted in Latin America with the Quick Kit showed that 25% of those who were introduced to the test would buy it on the spot, indicating a large potential market for home pregnancy tests. The At Home drug test is now selling well in the U.S. and in other countries, including Thailand, New Zealand, and the UK. A lower-cost three-drug version of the test has been developed for Mexico to facilitate market penetration in that more price-sensitive market. It is probable that cost will be a key factor that will determine acceptance in the rest of Latin America. There is clearly a large need for such tests in Latin America, according to Phamatech, and the market is just beginning to develop.
Strategies for success in Latin America
While there are multiple existing and emerging opportunities in the Latin American medical products market, suppliers must be aware of changing trends and different required product characteristics in order to achieve long-term success. Table 4 presents an analysis of expected future trends in the Latin American medical products market that will impact manufacturers. Generally, the climate for investment in the region is expected to remain positive, with certain exceptions in countries exhibiting fiscal and economic instability (e.g., Argentina, Venezuela and Chile). Privatization of health insurance, which is resulting in the emergence of HMO-style health plans, is, on balance, a positive development, helping to eliminate the waste and inefficiency that has hampered government-run health care, and rewarding suppliers offering cost-effective alternatives. Private-sector buyers in Latin America tend to consider value, rather than price alone, in purchase decisions. The privatization trend is still in its early stages, and has not had a major impact so far.
Key Future Trends in the Latin American Medical Products Market
|Brazil||Difficult market for foreign suppliers due to exchange rates and continued import tax barriers. Trend is toward lowering of trade barriers, but unraveling of existing tax laws could require many years to complete. Domestic suppliers will continue to enjoy favored status. Growth of 10%-20% per year in some segments as a growing middle class demands improved health care. In contrast to the past, inflation is expected to be a minor factor in market trend. Privatization of health system places increased priority on cost-effective technologies and services. Rapid expansion of home health care segment over next few years, and long-term emergence of telemedicine segment. E-commerce to play an increasing role. Complex registration process will continue to slow new product introductions.|
|Mexico||Increasingly open market. Low current rate of spending on health care indicates potential for growth, but trends closely tied to U.S. economy. Relative stability of economy favors growth in foreign investment. Low-cost product configura-tions will continue to be favored. Majority of purchasing via large contracts.|
|Argentina||Fiscal problems create major uncertainty and risk in market. High level of health care spending as percent of GDP indicates limited growth potential.|
|Colombia||Slow growth of economy hampers expansion of medical products market; mod-erate rate of health care spending as percentage of GDP fuels only modest growth. Failed effort at health care privatization will delay reform of public system.|
|Chile||Continued high unemployment rate will create drag on economy. Moderate level of spending on health care offers some opportunity for growth, but over-all trend will be primarily tied to performance of overall economy. Minimal effect of Brazilian economic crisis indicates economy may not be affected great-ly by crisis in Argentina. Continuing efforts to privatize health care could cre-ate demand for cost-effective products.|
|Venezuela||Concern regarding investment due to economic instability, but high growth expected in medical products market. Moderate level of spending on health care as percentage of GDP indicates some continued growth potential. Likely trend toward greater government role in health care system with new socialist administration.|
|Peru||Large rural population lacks adequate health care, but providing access remains difficult. Potential opportunity for telemedicine services. Relatively low spend-ing on health care as percentage of GDP indicates likely expansion trend.|
Capital equipment suppliers face issues typical in developing regions around the world, primarily related to the lack of funds to pay for high-ticket products. Financing packages are a key element of the selling process, but entail considerable risk for sellers because of exchange rate fluctuations and economic instability. For smaller companies, there are some approaches that can help to mitigate risk, such as the export credit insurance program sponsored by the U.S. government's export credit agency, the Export-Import Bank of the United States. In some cases, particularly for sales to private-sector hospitals that are subject to import taxes, larger suppliers such as Siemens Medical may offer financing packages. In any case, an important strategy for success in all Latin American markets is to devise approaches to mitigate financial risk.
Effective strategies to compete with domestic suppliers in countries with high import taxes, such as Brazil, also are a must in order to succeed in the Latin American market. Proven approaches include establishment of a domestic company that manufactures locally using components from the parent firm, or OEM arrangements with established manufacturers in target countries. The public health care sector is another alternative, since public hospitals, at least in Brazil, are exempt from import taxes. A third strategy that may become increasingly attractive, particularly with the recent downturn in the equity markets in Latin America, is acquisition of domestic suppliers in target countries. That strategy has been used to advantage by companies such as Becton Dickinson (Franklin Lakes, New Jersey) in the Asian market, and as Latin American medical device suppliers become more competitive in terms of the quality and sophistication of their products, acquisition becomes an increasingly viable and attractive strategy.
For suppliers selling via distributors in Latin America, thorough evaluation of distribution partners, including assessment of compatibility of product offerings and of the distributor's ability to seek out emerging segments of the market, are essential elements of a successful strategy. Suppliers attempting to export to Latin America from the U.S. and Europe often have discovered that their distribution partner is unable to identify and access the segment of greatest opportunity, and that, even when the proper target customer base is identified, support of that base by the distributor is lacking. Perhaps the most successful relationships are those in which the distributor also is manufacturing and marketing complementary products in the target regions.
In the long term, the Latin American medical products market presents an attractive opportunity for suppliers interested in expanding into developing countries, second only to Asia in terms of the size of the potential market. Current trends toward a more market-oriented economy, as well as initiatives to improve the level of health care available to the population in many countries, are favorable. Although business opportunities in the region must be approached cautiously and thoroughly assessed, the Latin American market offers an increasingly sound and growing opportunity for global medical product suppliers.