By Ames Gross, President and Founder of Pacific Bridge Medical
This blog post was also published on MedTech Intelligence.
While getting rid of the medical device tax is a key issue for many Western device manufacturers, perhaps a more important issue is global competition.
I recently visited Jakarta, Indonesia, a developing country with over 250 million people, where I met with an old medical device distributor friend, who I had not seen in about 15 years.
During our discussions, I asked him what kind of products he was selling, and he replied: “We used to sell Western medical devices from big companies like GE. However, since Indonesia is a developing country, the prices were too high even though the quality was terrific. As a device importer, we have now replaced medical devices made by big Western companies with products from China. While the Chinese products may only be about 80 percent as good as the Western medical devices, they are 35 percent cheaper.
“Outside of Jakarta, and a few major cities in Indonesia, the country is still rather poor. Each hospital in the rural areas has a strict budget, and price is king. In addition, our margins are higher with Chinese medical devices, even though the product quality may not be as good as the Western products. Over the last 5-10 years, we have been importing Class I and Class II medical devices from China. We are now seeing Chinese medical device companies producing decent quality Class III products,” my distributor friend explained.
Companies like Lepu or Microport are now one billion dollar companies in China, and their quality is improving every day. Western medical device companies need to wake up. Besides China, there are more medical devices being made in Singapore, Korea, and Taiwan than ever before.
Even India, which has historically been known for horrible quality, is beginning to improve their products. Simple products, like a TENS unit, made in India five years ago would break down soon after purchase. However, the burgeoning India device market is improving in quality, too.
Thus, when Western medical device companies go to sell their products in the developing world, they now have more competition from medical devices made in Asia. Solutions include Western device companies making more products in Asia, sourcing more components from Asia, and tailoring their products to the Asian marketplace and Asian customers.