Medical Devices (1)

8/12/2019 Medical Devices (1)

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Indian Medical Equipment Market:

Fortune to be found at the Bottom of the Pyramid

Current Scenario:

Healthcare has emerged as one of the largest service sectors in India. Barely 33% of thepopulation, primarily belonging to the urban areas account for 75% of the current privatehealthcare expenditure. The remaining 67%, the rural India represents an enormousuntapped market in the healthcare sector based on its sheer volume, unmet need andsupply gap and a very small number of companies who have forayed to tap this market.This 67% percent is exclusive of the urban poor, a large market parallel to the rural, interms of dearth of affordable, quality healthcare.[1]

The Indian medical device market is poised as the fourth largest in Asia with a net worthof around $3 billion. Around 90% of the medical devices currently being used in thecountry are imported as the indigenous products are technologically inept and therefore

commercially non viable.[2]

Medical devices are divided into class I, II and III, based on the level of risk tousers/patients, corresponding to logical risk evaluations conducted by the FDA.

Class I devices are the lowest risk classification and include general controls suchas crutches and band aid

Class II controls are more specialized, such as wheelchairs. Class III devices require pre-market approval and clinical demonstration of safety

and effectiveness. Devices in this category include heart valves, catheters,cardiopulmonary resuscitation (CPR) devices and various implants.

However, we would look at the medical devices in two broad category

Private medical devicescould be found in every house hold eg. Glucometer,Thermometers

Community medical devicestypically multi-use devices that would be housedin a community centre ECG, X-rays

The aim for private medical device manufacturers targeting India should not be to expand

the existing market share but to create a new market, the rural India. The hurdles of lowper capita income, challenging topography, discontinuous distribution networks, lackingstatistical data, information asymmetry and inadequate awareness can be overcome bymedical device manufacturers to gain an unparallel head start to access one of the largestunexplored markets in the world.


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The Solution:

The general key to successful medical device marketing in the rural scenario would beaccessibility, affordability and effectiveness. In tandem with the vast scope of theproblem, 5 broad tracks or aspects need to be catered to these are Product, Price,

Placement, People and Promotion.

Product:

The conceptualization of a product targeted towards the 'bottom of the pyramid' needs tobe associated with an exceptional price to performance ratio. In addition India has its owninfrastructure problems (power scarcity, bad roads), illiteracy, lack of experience inhandling sophisticated equipment. Thus, any product that is made for India needs to alsobe customized for India; thus there would also be a need for functional modifications.

Modifications that would be needed are

Ease of use and bilingual interface Low energy consumption, should be able to run on generators and rechargeable

batteries Ease of portability, set up and low transportation costs. Easy availability of consumables The equipment should have a sufficiently long life or should be easy to repair and

service Core functionality should not be compromised on; additional features are

welcome

Price:

The costs associated with any medical device can be categorized into the initialinvestment and the operating cost; essentially a typical case of two part pricing model.For medical devices to be purchased and used by individuals, it is imperative to maintainboth the purchase and the operating costs to a minimum. While a community healthcentre may be willing to shell out a bit more for the device they would then expect thatthe cost of operating the same would be low.

An important characteristic of the Indian healthcare industry is the lack of third partymedical insurance. As a result medical practitioners would lean to products that wouldkeep medical expenses at the lower end. In other words, price is one of the most criticalfactors taken into account while purchasing the product.

Price is a function of costs and profit margins


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Reduction of costs

Sourcing of local parts: cost of manufacturing in India is much lower as comparedto some of the developed markets

Reducing non-essential functionality: Focus on the most essential requirementsand cut down on additional paraphernalia

Using existing networks of either pharmaceutical companies, FMCG, Financialinstitution or NGOs to service the needs of customers; thus decreasing the cost ofoperations

Use of IT healthcare advances as a means of providing value added sevices. Mostrural areas boast of a good telecom network which can be leveraged.

Profits/ Profit Margins

Profits are a function of profitability and number of units sold, in the case ofrural/semi urban markets a trade off should be made to optimize profits

In rural or amongst the urban poor the practice of saving is quite low. An interestingfeature of rural India is that income typically tends to be seasonal, maximum disposalcash post harvest season and the least during the sowing season. Thus, in case of personalproducts there would be a need of providing financing even if prices are kept low.

Rural health centres would also be operating on an easy payment options for theircustomers. Thus, even though they may be able to service the loan they may not be ableto make an outright purchase. Hence there is a need to tie up with a financial partner to be

able to penetrate the rural market

Promotion:

Considering the impact medical devices have on treatment of patients and thereby onhealthcare delivery, there would be an inherent inertia to adopt a new product.Practitioners and users alike would prefer to continue in the current state. Winning thetrust and confidence of customers would be the key in the market.

The two medical category (as per our classification) would require different promotionstrategies.

Private Medical Devices:In this case the customer would be a non-medical person and hence would be ignorantabout the quality, performance of the medical devices. Also, apprehension to use some ofthe devices (injections, glucometer) on oneself would be quite high. A medicalpractitioner would play a key role in convincing the customer to adopt some of thedevices.


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As the confidence to use these devices would come only after having used it once orhaving experienced it; there is a definite need for potential customers to try out suchproducts. A health camp with the local health centre or a Non Government Organization(NGOs) would be the most effective way to entice customers to use these medical

devices. Communication of the ease of using the device as well as some level ofmarketing would be needed.

Community Medical Devices:The end users in this segment would be doctors or medical technicians and purchasedecision would be made by a medical expert. Technical aspects would be betterappreciated and received. However, there would be great probing on the longevity of theproduct, ability to handle volumes (or in certain cases lack of regular customers) and costeffectiveness of the device. In such a situation presence of a good Medical Representativewho is well aware of the product and can make a strong case would prove to bebeneficial.

Telecom partnerships involving mobile network providers can be undertaken to generateawareness regarding the newly developed products or available up gradations in additionto providing services like health notifications, reminders amongst others

A tie-up with a government medical institute or a center of a national excellence could bea shining example of the effectiveness of this product. Creation of such a showpiecewould definitely add greater muscle to sales pitch. Strategic equipment donations can beundertaken to drive acceptance and penetration.

People:

People would play an important role in pre-sales, sales and post-sales operation of thisbusiness.

Pre-sales would involve ensuring that the product is available either at a pharmacist or anappropriate location with easy access. It would also involve the role of tying up withNGOs. The Area Manager would have to initiate a few health camps and events withlocal health officials. The stockists would be the other key person in this part of theoperations; he would have to agree to manage inventory of these devices which could beslow moving in nature.

Sales process would primarily involve the Medical Rep who would have to establishgood relationship with the Pharmacist, Stockist as well as the Health official. He shouldbe able to connect with them and communicate the nuances and benefits of using theproducts. During the process of buying the equipment there would also be a need of aperson to install as well as train the operators. This would help in enabling the operator tolearn the ropes as well as ensure no problems in start up. This person could also later playthe role of the mechanic/technician.


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In a market for medical devices where certain elements would be consumed like X-Rayfilms or ECG papers it is very critical that such material be easily available. In post- salesthis would be very essential. Stockist should be willing to stock pile these material anddistribute it efficiently and seamlessly.

Another important cog in the smooth functioning would be the person providing aftersales maintenance. Considering that the person operating could be illiterate and couldresult in frequent breakdowns. As well as the dusty nature of India could result infrequent repairs in the Indian sub-continent. Hence, the technician/mechanic should bewell trained as well as diligent. He should be present at the earliest at the site and ensuresthat he enjoys the trust of the customer. Ultimately, he would be the face of theorganization for the life of the equipment.

Placement:

The nature of the product is such that prevalence of such products in a given region

would be quite low unlike FMCG products. In spite of this the product would certainlyhave a strong co-relation with the population density and hence the mainstockist/showroom for a given district should be at the hub of the city. Private medicaldevices would have to penetrate even some of the slightly more remote villages.

However, availability of consumables is going to be the key in this business. A personmay be willing to travel once to make an investment. A medical centre may pay for thetransport of the equipment once but would look at another vendor if the consumables arenot easily available. Thus, penetration of consumables would be essential and could playthe role of market differentiator.

For community devices the product would general be procured by the purchasedepartment either via negotiations or a tender and hence physical presence of the entitywould not be required. In the case of private devices it would happen over the counterand hence presence in prominent chemists/pharmacists would be crucial.

Medical devices, companies can enter into partnerships with private hospital chainswhich have a good network in semi urban to rural areas. High value, niche devicemanufacturers can also tie up with healthcare entrepreneurs to begin a chain of clinics.For eg, KIMS has made an investment of Rs 200 cr to start 'see and treat cancer' centersin alliance with GE and Varian medical Systems.


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Case Studies:

1. Nokia 1100Made for India phone[2]

Innovations:

First time a phone in India that had Hindi as a language of operation Long battery life and time for recharging significantly lower Phone designed for extra grip and can sustain the dusty condition prevalent in

certain parts of India Nokia service centers had presence in most district Provided a flashlighta feature that created a huge craze in rural India All this without compromising on quality of calls or ease of messaging Introduced the hand set at sub INR 3,000 ($60)

Outcome:Nokia 1100 went on to become the most widely used and sold phone in thecountry and enabled Nokia emerge as a market leader not only in rural India but alsoamongst the urban poor. It was introduced in other price sensitive markets.

Levers used: Product, Price

2. The GE initiative: MAC i ECG machines[3]

Innovations:

Priced at Rs 25,000, MAC i reduces the cost of taking an ECG to Rs 9

The system can complete 500 3-channel ECGs or 250 single-channel ECGs on asingle three-hour battery charge, equivalent to about one months worth ofoperation in remote areas where availability can be a major constraint

Light, portable, size smaller than a laptop. Adapted a printer used in bus terminal kiosks in India and is easily available and

dust resistant. GE partnered with Indian company Wipro and sources all its parts locally The financing partner for this venture was State Bank of India. SBI has over

16000 branches making it the largest branch network in India. No-interest loansfor rural doctors and clinics are part of the equation.

Other innovations by GE for the rural market include Ultrasound machines, infantwarmers, GE anesthesia system

Outcome:GE captured a great share in the rural market and estimates put the totalturnover from this product to contribute an additional $20 Million. GE is looking atattaining a turnover of $1 Billion by 2013 and a large share of this is expected to comefrom products in the value-segment product line

Levers Used: Product, Price, Placement, and Promotion


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3. The Hutch Success Story[4][5]

Innovations:

Initiated entry into the market using population density as a deciding factor.

Customized recharge offers to fit the pockets of the consumer through theintroduction of chota recharge for Rs 10. Made a conscious effort to simplifytariff plans.

Developed an exceptional hub and spoke distribution system through theappointment of exclusive distributors, associate distributors and non exclusiveretailers.

Training and information dissemination was done at 2 levels. Firstly through thedistributors and second to the general masses. They were executed throughemployees or external agencies.

To drive penetration of affordable mobile handsets, they launched their own lineof phones. The Vodafone Magic handset prices at Rs.1,000 came with 2 year

warranty and a brand name and customer service, a concept novel to the ruralpopulation.

Outcomes:Vodafone was able to gain a toehold in the rural market of India byunderstanding the needs of the rural customer. Till then it was seen as a premium urbanplayer. These initiatives helped it achieve customers in a segment that was underpenetrated, This was used by Hutch (now Vodafone) in the state of Uttar Pradesh and itnow enjoys a user base of 7Million (in 2007)

Levers used: Price, Promotion, Product

Conclusion:

There is immense scope of innovation in Price, Promotion, Product, Placement andPeople for a Medical Device Manufacturer in India. Emergence of lifestyle diseases inIndia coupled with greater Government spending on Healthcare promises increaseddemand for Medical Devices. Any organization which is ready to invest time, talent andmoney in this market to come out with product that is easy to use, available, accessibleand has good customer service is sure to emerge as a leading player not only in India butalso in other Emerging Markets. It could be the start of the race to the Fortune at theBottom of Pyramid.


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Bibliography

1. Patil, Ashok, R.C. Goyal, and K.V. Somasundaram. " Current Health Scenario In RuralIndia." Aust. J. Rural Health. 10. (2002): 129-35.(http://www.sas.upenn.edu/~dludden/WaterborneDisease3.pdf

2.The Marketers, "Nokia 1100The first Made for Indiamobile."http://www.themarketers.in/nokia-1100-the-first-made-for-india-mobile-phone/.

3. Musselwhite, Nancy. Geostrategy partners, "Getting It Right at the Bottom of thePyramid." Accessed October 12, 2011 (http://www.geostrategypartners.com/GEHeathcare BOP Article.pdf.)

4. Anderson, Jamie. " Developing a Route to Market Strategy for MobileCommunications in Rural India." International Journal of Emerging Market. 3. no. 2(2007): 339-47.

5. Adya, Rohit. "Interview: Rohit Adya of Vodafone Essar." Global Telecoms Business,08 28, 2008. October 25, 2011.(http://www.globaltelecomsbusiness.com/Article/2199346/Interview-Rohit-Adya-of-Vodafone-Essar.html?ArticleID=2199346)

6. Technopak, "Accessible Healthcare A Reality Check." Accessed October 21, 2011.(http://www.indianhealthcare.in/TLF Whiet Paper.pdf)

7. Hospital Infrastructure India 2011, "Krishna Institute of Medical Sciences (KIMS),GEHealthcare and Varian Medical Systems join forces to increase cancer care access."Accessed October 16, 2011. (http://www.hospitalinfra-india.com/page.cfm/link=135)

8. Patil, Ashok, R.C. Goyal, and K.V. Somasundaram. " Current Health Scenario In RuralIndia." Aust. J. Rural Health. 10. (2002): 129-35.(http://www.sas.upenn.edu/~dludden/WaterborneDisease3.pdf

9. Wikipedia, "Medical Device."http://en.wikipedia.org/wiki/Medical_devices

10.Bakshi, Ajay, Sathya Prathipati, Sriram Sathya, and Mandar Vaidya. McKinsey,"Gearing for Healthcare 3.0."

11. Deloitte, "Medical Technology Industry In India: Riding the growth curve." Lastmodified 07,2010. Accessed October 26, 2011. (http://www.deloitte.com/assets/Dcom-India/LocalAssets/Documents/Medical_technology_Industry_in_India.pdf)
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