Medical device companies are observing acute financial pressures in developed countries these days. Continually slowing growth in these established markets is prodding medical device manufacturers to explore all possible opportunities to reduce costs and increase efficiencies of their products.
As such, the global market for medical devices can rest assured that shrinking opportunities in developed markets can be complemented by rising consumer-base in emerging economies. However, price sensitivity is an acute factor that determines the success of any industry in emerging economies. This applies not just from the consumer’s standpoint, but also puts medical device manufacturers in the good books of the government.
Governments in emerging countries are not taking complaints about overpricing kindly
Many medical device manufacturers have received flak for not offering competitive prices, prompting countries such as India to take complaints about overpriced med devices rather seriously. India is on course to creating the National Medical Devices Authority (NDMA), which will keep a close watch on prices of medical devices. Here, medical devices will soon come under the purview of the Essential Commodities Act as well.
But what is amply clear is that developing economies are also transforming the global market for medical devices. The rising middle-class population in developing economies is leading to an increased demand for a variety of medical devices. For international medical device companies to succeed in emerging economies, which, no doubt, are the best opportunities for their steady future with demands constantly shrinking in established markets, it has become critical to get costs of products under control.
Listed below are the two important reasons why we say considering the factor of cost is so necessary to survive in emerging economies:
#1. To compete with a flourishing regional industry that is offering affordable alternatives: International medical device makers are known to develop innovative technologies of unparalleled quality. Prices of such innovations are also usually higher as they are developed often for the U.S. or Europe. Emerging markets, however, have different needs, especially concerned with costs of such devices. Regional companies enter such markets with the low-cost versions of these premium products by ‘reverse engineering’ product designs and employing locally sourced base materials and manufacturing processes.
Thus, an innovative business model for designing, building, and delivering cheaper versions of blockbuster medical devices is created. Such small businesses gain huge benefits as they serve products with good enough quality, in price ranges affordable in an emerging market.
Many ambitious new businesses from countries such as India and China are treading along similar business paths and are coming ahead with medical devices that can satisfactorily serve as replacements for blockbuster, costly medical devices.
To maintain their competitiveness in such situations, tackling costs is imperative for international brands, which rightfully deserve a good share of sales for all the efforts taken by them in terms of huge funds and time taken in the intense research required for bringing new technologies to the market.
#2. To deliver exactly what the customers will value:
To survive the intense competition that’s characteristic of a consumer goods market, it is critical that companies deliver exactly what the consumer wants. In emerging economies, such as India, China, and Brazil, a larger portion of the consumer base is more conscious about the cost structure of a product than about its features.
Thus, like other industries, such as consumer electronics, automotives, and telecommunication, it is imperative for the medical devices industry to pay attention to the detailed design of its products and look at every opportunity for eliminating excess costs wherever possible. This will allow the industry the flexibility to sell its products more profitably in the price-conscious emerging markets as well as cash-strapped traditional ones.