This article was also published on Medical Device Daily
Asia’s diagnostic imaging market is growing faster than in any other global region. It is expanding at an annual rate of 11 percent, compared to just 7 percent in the rest of the world. In 2012, the Asian diagnostic imaging market was worth $8.1 billion of the global $24.1 billion market.
Most recent growth has come from ultrasound and X-ray, which lead the market based on sales revenue. Other segments include nuclear medicine imaging, mammography equipment, computed tomography (CT) and MRI. MRI has traditionally had extremely low rates of penetration in Asian countries. However, it is now the quickest growing segment of Asia’s diagnostic imaging market.
Asians are spending more on healthcare — including diagnostic imaging — as they grow older and richer. Until recently, many elderly Asians with chronic conditions (like kidney disease, heart disease and joint disorders) have gone undiagnosed for decades. But as per capita GDP increases, more and more of them can spend disposable income on diagnosis and treatment.
Finally, government reimbursement for many forms of diagnostic imaging has increased considerably throughout Asia. To take advantage of this funding, both public and private hospitals from China to India are investing significant funds in diagnostic imaging equipment.
There are many regional differences in demand, with more demand for mammography equipment and nuclear medicine imaging in markets like Korea and Japan. Ultrasound and CT are high growth sectors in the underdeveloped markets of India, China and Southeast Asia.
The Japanese diagnostic imaging market is the largest in Asia, with a value of more than $4.3 billion. Half of all sales are from domestic companies and half are from imports. While Japan produces most of its own X-ray, CT and ultrasound equipment, it imports most MRI and nuclear medicine equipment from the US.
Factors contributing to demand growth in Japan’s market include high levels of healthcare expenditure and a massive elderly population. Nearly one in three Japanese citizens is older than 60, and many of them suffer from chronic conditions requiring diagnostic imaging. Paying for these procedures is easier in Japan than it is in other Asian countries. Not only do Japanese have high average annual incomes (more than $35,500 in 2012), but they also have a government that provides some form of health insurance to all individuals. Cost rarely gets in the way of medical imaging procedures in Japan.
Growth trends for the future include higher demand for mammography equipment, nuclear imaging equipment and low dosage imaging. Following the 2011 Fukushima Daiichi disaster, most Japanese patients were concerned about the radiation exposure from medical imaging, requesting low dosage procedures.
In 2012, China’s diagnostic imaging market was worth $1.4 billion, growing at an 18 percent annual rate. Imports make up most high end equipment, but low and midrange imaging devices are increasingly produced by domestic suppliers. X-ray machines and ultrasound devices — which constitute the quickest growing sector of China’s imaging market — are now made primarily by local manufacturers.
China’s rural areas have experienced much of the recent market growth. Since the country’s Ministry of Health announced a $124 billion healthcare investment in 2009, urban and rural clinics and hospitals have increased spending on capital equipment including diagnostic imaging devices. Most of China’s best hospitals are starting to upgrade to expensive, sophisticated diagnostic devices, while small and mid-sized hospitals in rural China are starting to invest in midrange imaging equipment.
As a result, foreign medical imaging companies such as Philips Healthcare and GE Healthcare are dramatically expanding their midrange product lines to include more basic products. In addition, they are extending financing options to hospitals and clinics that wish to purchase their equipment.
However, while foreign medical imaging companies have begun moving into small and medium sized hospitals, domestic Chinese companies are producing new devices to compete at the high end level. Chinese company Mindray, for example, has upgraded its product lines and used its government and industry contacts to compete with foreign brands. It is even competing on their home turf. In July 2013, Mindray completed its acquisition of US firm Zonare Medical Systems for more than $100 million. The acquisition of Zonare, which produces sophisticated ultrasound products, has allowed Mindray to expand its R&D capabilities and increase its market reach in the US, Canada, Germany and Scandanavia.
The Indian diagnostic imaging market was worth $650 million in 2012, and it continues to grow at a 12 percent annual rate. Growth is greatest in India’s ultrasound and MRI sectors, and in terms of sales revenue, MRI equipment is the leading category in India.
Much recent growth comes from the expansion of public hospitals, private clinics and diagnostic centers throughout the country, even in rural areas. Until recently, these centers were located in major cities like Delhi and Mumbai, and rural areas had low rates of penetration for diagnostic imaging devices. But now, private Indian healthcare providers have started building in these areas, equipping their facilities with basic imaging devices.
Cost is a major concern for Indian patients, who tend to have less disposable income for out of pocket healthcare expenses. Medical insurance is rare in India, so midrange and refurbished devices are quickly growing market segments. The purchasing committees of many hospitals — public and private — prefer buying refurbished devices, as they can save up to 50 percent on the list pricing.
FOREIGN DIAGNOSTIC IMAGING COMPANIES IN ASIA
Foreign diagnostic imaging companies doing business in Asia often have extensive distribution channels and their own local manufacturing facilities. Since Western imaging devices still make up most of the high end market, many foreign companies have not had to struggle for market share the way that other foreign medical device companies have. But this is changing, as regional powers like Mindray move into the business of high end imaging equipment.
In order to compete in Asian markets, foreign imaging companies have begun making midrange devices at lower price points. Foreign imaging companies have also extended their sales operations into rural areas and the smaller cities of China and India. For example, in 2012, Philips Healthcare launched its so-called “Dandelion Plan” throughout rural areas of China. The plan provides local clinics with specially designed imaging devices, equipment financing options and extensive physician training programs. In this way, Philips hopes to increase its China CT sales by more than 60 percent in the next several years.
In 2011, GE Healthcare launched its “Spring Wind” initiative to develop affordable healthcare products for the Chinese market and offer specialized training to Chinese healthcare workers. In addition, GE moved its X-ray headquarters from the US to China in 2011. In 2010, it invested half a billion dollars in six Chinese “Customer Innovation Centers.”
In 2009, Siemens Healthcare set up a new line of SMART products, completely designed, produced and marketed in India. Prices are as much as 50 percent lower than its competitor products. Siemens has invested close to $255 million in its SMART products line, which includes portable fetal heart monitors and midrange X-ray machines.
Asia’s diagnostic imaging market is booming, as Asians — especially older ones — are spending more on healthcare. Western companies that expand their product portfolios to include more midrange and more tailored devices to meet the market demand will stand a much better chance of succeeding against local rivals in the Asian diagnostic imaging market.