Frugal innovation is fast gaining ground in the field of medical devices. The developing world rather than the developed world is spearheading this innovation driven primarily by cost considerations. China’s second-tier cities and India’s vast urban areas in particular are booming and a large proportion of their populations are demanding better medical treatment. The Economist estimates that the market for medical devices in China will grow by 15% per year, while India’s is slated to expand at a rate of 23% per year for the next several years. There is a deep thirst for cheap medical devices in these countries leading to multinationals scrambling to get a piece of the pie in a variety of different ways.
Firms such as Medtronic and Stryker have attempted to expand their presence in emerging markets by pursuing local joint ventures and acquisitions. Medtronic expanded its presence in the orthopedic market in China by first entering into a joint venture with Weigao in 2007 and then fully acquiring China Kanghui Holdings in 2012. Similarly, Stryker acquired Trauson Holdings in 2013 to also capitalize on the rapidly growing orthopedics market in China. In these cases, the acquirer and acquired companies worked side-by-side to launch inexpensive, novel products, which are often just stripped-down version of devices sold in the US.
Some international players have also entered emerging markets on their own without domestic partners. GE, for example, recently revamped its operations in India to produce novel products at a reduced cost. GE now produces a no-frills baby warmer in India that is sold to the local market at a significant price discount compared to comparable products in the US. The baby warmer operates with minimal switches and settings and is meant for users with low literacy levels. It also uses up 50% less electricity than a comparable device sold in a more developed market. Siemens has also adapted its Fetal Heart Monitors sold in the US for the Indian market by substituting cheaper microphone technology for more expensive ultrasound technology.
India and China and other emerging markets are going to continue to demand more frugal medical devices as healthcare grows and spreads to countless people in lower-tier cities and villages who were previously ignored. This creates a plum opportunity for manufacturers that can realize substantial profits by introducing modified medical devices for these very price-sensitive new markets.
Interested in learning more? View our Spectrum Report on MedTech Growth Avenues: Where Should the Dollars Go?