The ten nations that make up the Association of Southeast Asian Nations (ASEAN) — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — together have a population of over 610 million, almost twice the population of the U.S. The ASEAN countries’ combined GDP is more than $2.28 trillion, or about 25% the GDP of China. The region had a 2013 GDP growth of around 5.9%, compared with an estimated 2.5% GDP growth in the U.S. and .01% growth in the EU.
The ASEAN countries also have rising per-capita incomes, resulting in an expansion of the middle class — which made up about 20% of the ASEAN population in 2010 and is projected to represent almost 65% of ASEAN by the end of the 2020s. An expanding middle class means increased healthcare spending. Similar growth has been seen in ASEAN’s medical device market — worth about $4.6 billion in 2013, the ASEAN market is expected to be valued at more than $9 billion by 2019. Malaysia, Indonesia, and Thailand make up 65% of the current device market in ASEAN.
At the same time, ASEAN’s medical device market is underpenetrated, providing opportunities for foreign device firms that can effectively manage ASEAN’s different cultures, languages, regulatory environments and local competition systems.
ASEAN REGULATORY STANDARDS FOR MEDICAL DEVICES
One of the greatest difficulties for foreign device firms in ASEAN has been the unpredictable regulatory environment. For instance, each country often has different — or no — regulations for post-market surveillance, quality control and product registration.
In 2004, to address this variety of regulatory systems, the ASEAN Consultative Committee on Standards and Quality (ACCSQ) established the Medical Device Product Working Group (MDPWG). The ASEAN Medical Device Directive (AMDD), the most recent set of draft regulations released by the MDPWG in 2012, should be fully implemented by the member states by January 1, 2015.
The AMDD develops a harmonized regulatory model for ASEAN countries. Issues addressed in the AMDD include basic requirements for assessing conformity, a single classification system based on risk, regulations on device safety and performance as well as the Common Submission Dossier Template (CSDT). Grounded for the most part in guidelines put forth by the Global Harmonization Task Force (GHTF), the ASEAN classification system is composed of 4 device categories:
- Class A (low risk, such as bandages)
- Class B (low-moderate risk, such as suction equipment)
- Class C (moderate-high risk, such as bone fixation plates)
- Class D (high risk, such as implantable defibrillators)
In-vitro diagnostics (IVDs) are classified according to the same system. Based on the classification, clinical requirements, processing timeframes and government fees differ. If desired, each nation will be allowed to establish its own expedited registration processes. Most, if not all, of the ASEAN countries will follow Singapore’s model in implementation of the AMDD.
However, each country maintains its own system of regulations until implementation of the AMDD framework.
KEY ASEAN COUNTRY-LEVEL ASSESSMENTS
The 4th largest country by population in the world, Indonesia will have an estimated healthcare expenditure of more than $140 per person by 2015, compared to less than $40 in 2005. Indonesia’s medical device market is growing more than 14% annually and is valued in excess of $900 million. The domestic device industry is very underdeveloped — imports account for more than 90% of the Indonesian medical device market’s total value.
The government has called for more public spending on healthcare, investing hundreds of millions of dollars to upgrade public healthcare facilities and instituting a universal healthcare scheme in January 2014 — with the stated goal of providing at least limited coverage to all Indonesians by the end of the decade. These government spending plans should double the total value of the healthcare industry to $50 billion over the next 7 years. Out of a population of 250 million, just over 150 million Indonesians currently have health insurance coverage.
Unlike other ASEAN regulatory systems, almost all medical device licenses in Indonesia must be held in the name of the local distributor — an independent 3rd party cannot hold a foreign medical device company’s license on their behalf. As such, it is very expensive and difficult for a foreign manufacturer to drop a poorly performing Indonesian distributor.
Although the population of Malaysia is only 30 million — barely more than 11% that of Indonesia — Malaysian per-capita healthcare expenditure is close to $375. Malaysia’s total spending on healthcare was almost $13 billion in 2013 and is expected to be more than $18 billion in 2016. The medical device market in Malaysia, valued at approximately $1.1 billion, is predicted to double by 2020.
The Malaysian government has officially specified both medical devices and healthcare as major areas of national economic focus, backed up by growing government supported promotion and development. Over the past several years, Malaysia has put hundreds of millions of dollars into health related sectors, such as clinical research development, enhanced healthcare infrastructure, etc. Local Malaysian medical device companies manufacture mostly lower end products — approximately 62% of rubber gloves and 79% of catheters are produced by Malaysia.
In 2012, Malaysia passed its first comprehensive medical device regulations. All devices imported into the country need to be registered and approved through the new electronic Malaysian Medical Device Centralized Application System (MEDCAST). Furthermore, a newly created Medical Device Authority has been put in charge of enforcing medical device regulations in Malaysia. Any device manufacturers that do not register by July 2014 could have their devices recalled from the market — and even face monetary penalties and time in jail. Foreign medical device firms are now quickly working to get their products approved by this deadline.
Singapore, with a population of only 5.5 million people, has one of the most developed economies in the world — and a correspondingly sophisticated healthcare system. Singapore’s healthcare spending was $14 billion in 2013, roughly equal to the total healthcare expenditure in Thailand (with 67 million people). Healthcare spending on a per-capita basis in Singapore has increased close to four-fold over the past ten years, reaching almost $2,500 last year.
The medical device market in Singapore was worth $600 million in 2013. The country is also used as a regional trans-shipment hub for many foreign medical product companies. Singapore maintains four levels of healthcare reimbursement, alongside government-provided subsidies and programs. Almost 2,000 private clinics provide about four-fifths of the country’s primary healthcare services, with the remainder provided by 18 public polyclinics. There are also 6 national specialty centers and 7 public hospitals.
Singapore’s Health Sciences Authority (HSA), the government agency in charge of medical device regulations, maintains a risk-based classification system based on the ASEAN format described above: Classes A (low risk) through D (high risk). Applications are submitted in English, as specified by the ASEAN CSDT format, and are made online through Singapore’s Medical Devices Information and Communication System (MEDICS). If a device has already received approval from specific international regulatory agencies — like the U.S. FDA or the Japanese PMDA — it could qualify for registration in Singapore through immediate, expedited or abridged approval channels.
Thailand’s 68 million citizens spent about $225 per person on healthcare in 2013, up from less than $80 a decade ago. Thailand’s universal healthcare system was instituted in 2002 and today officially provides at least limited coverage to 99% of the country’s population. Thailand has approximately 1,500 public or private hospitals.
The medical device market in Thailand was valued at $950 million in 2013 and is growing at more than 15% annually. Thailand’s local medical device firms primarily manufacture very low-end devices like gloves and syringes. This makes Thailand dependent on imports from foreign medical device companies, especially for higher-end devices like diagnostic imaging equipment. Most of the top U.S. device companies sell their medical device products in Thailand.
The current Thai medical device regulatory regime has been in place since 2008 and requires foreign device firms to register their medical devices. Under Thailand’s Food and Drug Administration (FDA), the Medical Device Control Division (MDCD) oversees medical device regulation enforcement. The device classification framework in Thailand is based on a risk system that is the complete opposite of most other classification systems — devices are categorized as Class III (low risk) through Class I (high risk).
Vietnam’s 93 million people spend an average of $100 each on healthcare, a four-fold increase over the past 10 years. Approximately 65% of Vietnamese have coverage under the country’s universal healthcare scheme and the government plans to provide at least limited coverage to 90% by the end of the decade. Healthcare infrastructure is receiving significant government investment, and an expanding middle class is increasing demand for quality healthcare and medical devices.
The medical device market in Vietnam was valued at almost $650 million in 2013 and is expected to maintain annual growth of more than 15% over the next several years. The quality of state healthcare services is comparatively low, so Vietnamese who can afford to do so tend to use private healthcare facilities — approximately 65% of healthcare spending in Vietnam is private.
Under the Vietnamese Ministry of Health (MOH), the Department of Medical Equipment and Health Works (DMEHW) is the primary government agency overseeing medical device regulation. While locally-produced devices need to be registered with the government, imported devices do not. However, imported devices do require an import license to enter the country.
The Philippines is composed of over 7,000 islands, making logistics and distribution quite complicated — similar to Indonesia. The country has a population of more than 100 million, with average annual per-capita healthcare spending of approximately $110 last year, up from less than $35 a decade ago. The Philippine medical device market is worth more than $315 million and has a 10% annual growth rate. The country has seen growing private sector investment in healthcare as well as rising government and out-of-pocket expenditures. Domestically-produced medical devices account for only 2% of the market — meaning 98% of the market is imported.
Almost 85% of Philippine citizens are provided with at least limited coverage under the country’s universal healthcare scheme. The Philippine system is based the country’s network of public healthcare facilities and hospitals. While these institutions have relative independence in procurement, a lack of funding has made substantial upgrades difficult. On the other hand, private hospitals have more funding and can often purchase high end medical device products. Cancer, cerebrovascular diseases, and heart disease are the top three causes of mortality in the Philippines.
The Philippine FDA, under the Department of Health (DOH), is in charge of medical device regulations; all imported devices need to be registered. The Food, Drug and Cosmetic Act regulates medical devices, IVD reagents, cosmetics, pharmaceuticals/drugs, food and hazardous household substances.
ASEAN EXPERIENCES MORE WESTERN DISEASES
Western diseases are growing more common in Asia. Increasing incomes for many families and longer lifespans have resulted in many Asians adopting Western habits — like overeating, little exercise, smoking, and increased consumption of fast food — heightening the risk of developing lifestyle diseases. Cancer, orthopedic problems, diabetes, cardiovascular-related issues and other Western diseases are increasingly prevalent. ASEAN countries are therefore developing into more attractive medical markets for foreign device companies, as these firms already manufacture products that can treat and diagnose these Western diseases.
In several Asian countries — including China and India — cardiovascular disease is now the most common cause of death. Of the 17 million annual deaths due to cardiovascular disease around the world, more than half are now in Asia. In Southeast Asia, it is estimated that up to 35% of deaths are due to cardiovascular disease. Almost 55% of Malaysians over 30 years of age have hypertension.
Cardiac devices are seeing growing demand, in large part due to the increased attention being paid to prevention, diagnosis and treatment of cardiovascular problems in many Asian countries. Some Western firms that specialize in cardiovascular devices have also begun building research and development facilities, production plants and technology centers for their devices. One example is Medtronic, which opened a cardiac device manufacturing facility several years ago in Singapore.
Asian demographics are also shifting towards an increasing percentage of the elderly. In fact, 50% of the elderly population worldwide lives in Asia, and this percentage will increase to approximately two-thirds by mid-century. As part of this, the percentage of those aged 65 or older in Southeast Asia will increase four-fold by 2050. This demographic shift will result in more people with orthopedic issues. A recent report issued by the International Osteoporosis Foundation (IOF) reported that by 2020 four million Filipinos will be at high risk of developing osteoporosis, increasing to almost 11 million by 2050. And in Vietnam, by 2050 almost 8 million women will have a high risk of developing osteoporosis.
In an effort to increase their market share by expanding their mid-range product lines, some foreign orthopedic device companies have bought Asian orthopedic companies that come with strong local market share as well as good device portfolios. Other foreign orthopedic firms have become more competitive in ASEAN markets by building local production plants to manufacture cheaper, basic versions of their devices that can be more successfully marketed regionally.
Of the 370 million people around the world who have been diagnosed with diabetes, approximately 190 million live in Asia. Indonesia, China and India are already included in the top dozen nations with the most diabetics. Over the next 20 years, other ASEAN countries like the Philippines, Malaysia and Vietnam are expected to have rapidly growing numbers of new diabetes diagnoses. Already, almost 25% of Malaysians over the age of 30 have diabetes — but, fewer than 50% have been diagnosed.
Recent research has suggested that, compared with other ethnic groups, Southeast Asians seem to have a greater genetic predisposition to Type II diabetes. Research has also shown that less obese and younger ASEAN people are afflicted with diabetes than is the case in the West. Western device manufacturers have already developed and market diagnostic and treatment products for diabetics — and more and more of these companies, such as Bayer and Roche, are expanding their businesses in many of the ASEAN nations.
More than 50% of the world’s new cases of cancer are in Asia, where 6 million people are diagnosed with the disease every year. Cancer also accounts for four million deaths in Asia annually. As part of Asia, ASEAN nations have also been experiencing growing rates of cancer, with the most common being liver, lung, colorectal and breast cancers. Uncommon in the West, nasopharyngeal (nose) cancer is also becoming more prevalent in Asia. The causes of cancer in ASEAN nations in particular include polluted air, high alcohol intake, frequency of Hepatitis B, consumption of red meat and widespread smoking.
As cancer rates increase in ASEAN and the most common types converge with those seen in the West, many foreign medical device companies will successfully expand their sales of treatment and diagnostic products.
Bottom line, ASEAN is a market in which foreign device companies can grow their businesses.