In trying to serve emerging markets, IVD manufacturers face challenges in ensuring that their products are equipped to meet the unique demands of such markets.
Most IVD companies have recognized developing countries such as India and China as growth markets. The challenge for manufacturers is to ensure that their product portfolios are adequately equipped to serve such countries, with each presenting their own particular market challenges.
In trying to serve emerging markets, IVD manufacturers face unique challenges in defining their product pipelines, considering that the demands of developing countries are likely to evolve faster than more established markets. Manufacturers may also need to develop new strategies when making critical decisions about the following: whether to build new equipment or adapt existing instruments, where to produce their equipment, and what level of functionality and specifications are required for success.
This article provides an overview of topics related to emerging markets that IVD manufacturers should consider. This article aims to help manufacturers find a path forward into such markets that offer new opportunities but also significant challenges.
Developing Countries and Emerging Markets
The emerging markets have a burgeoning middle class that is increasingly demanding improved healthcare and, with that, improved IVDs. A report published by Research and Markets (Dublin) revealed that the IVD market represents one of the most lucrative segments in the global healthcare industry.1 In 2007, the global IVD market generated revenues worth an estimated $38 billion and has been forecasted to grow at a compound annual growth rate of 6.72% through 2012.
Together, North America, Europe, and Japan accounted for 90% of the global IVD market in 2007. In the future, however, the IVD markets in developing countries such as India, China, and Brazil are expected to witness stronger growth than the developed nations. While annual growth of IVD sales in the established markets is forecasted between 4% in Europe and 7% in the United States, growth forecasts for IVDs in the emerging markets are projected to exceed the 10% mark.
To capitalize on the expected growth in emerging markets, large IVD companies have developed marketing and sales strategies focussed specifically on such countries. For example, Roche has increased its sales force in the emerging markets in Europe and Asia. In particular, cancer portfolio sales and other key pharmaceutical and IVD products have been the main contributors to their strong performance.2 IVD manufacturers are discovering that to be successful in such markets, their existing products need to gain acceptance only by fulfilling the markets' specific demands.
Key Success Factors
IVD companies looking to enter and do business in emerging markets should closely consider several key factors, including education, buying power, and regulatory constraints. While such constraints are currently lower than the standards in more developed countries, they are likely to increase much faster than before.
Figure 1. Mindray's new BS-380 Clinical Chemistry Analyzer. This instrument is optimized for low cost of manufacture and makes significant use of large injection-molded parts to minimize component cost.
However, as established IVD manufacturers seek ways to gain new market share in developing countries, they are encountering competitors from such countries that not only are active in their own markets but also are successfully exporting to western nations. IVD companies such as Mindray Medical International Ltd. (Shenzhen, China) are developing and launching products for worldwide distribution at a remarkable rate (see Figure 1).
Product Specification Considerations
As with any market, understanding the target emerging market in detail is essential. If IVD manufacturers do not have a corresponding presence in or any in-house knowledge of the target market, they should confer with organizations that can assist them with market intelligence and insight.
IVD product specifications are only as good as the underlying marketing or user specifications. But assuming a user specification that works in Europe or the United States would also work in China, India, or Brazil could be very wrong. Before trying to develop new equipment or modify existing systems in order to meet specific market demands, IVD manufacturers should conduct thorough market research in the target regions. The sections below discuss areas that manufacturers may need to make adjustments for in their products.
Moreover, IVD product specifications for a particular country will not be appropriate for all use settings within that country, and probably will not translate well to other nations. The product specifications must consider the target market segments, use cases, and use scenarios, and hence require a market-needs assessment first. By taking this approach, IVD manufacturers will be able to define the target emerging markets and find commonalities among the countries. Manufacturers may also need to consider the differences between public and private healthcare settings.
Equipment Purchase Price
The IVD equipment purchase price is important because of cost performance. Local IVD companies in emerging markets can manufacture at lower costs due to inexpensive labor, etc. But manufacturers outside of these markets must compete with the local companies while still providing high-quality products.
The IVD product price is likely to be a strong, if not the strongest, discriminating factor for minimally funded labs in emerging markets. The challenge for manufacturers is achieving low costs. One way is to implement a large number of injection-molded components at the expense of a high capital investment. Mindray has pursued this approach, presumably leveraging its fast and high-quality toolmakers and molders. Alternatively, IVD manufacturers may choose more rudimentary designs, perhaps by using sheet metal covers and accepting the corresponding limitations in appearance.
The key task for every IVD manufacturer is balancing product performance and specification with product cost. Manufacturers should understand and consciously make the necessary trade-offs.
User Skills and Education
The training and skill levels of laboratory technicians will vary from country to country. In emerging markets, human-factors engineering should be a strong component of the IVD design to ensure foolproof use and minimize user intervention. Whether the designs should be achieved using complex consumables is an important question. On one hand, such designs can greatly simplify user actions. But on the other hand, they would come at the expense of having higher costs per test and creating a hazardous-waste stream that may not be safely managed due to the lack of infrastructure.
Figure 2. Analyzing design options.
A detailed analysis of design options must consider the trade-offs between consumable complexity, cost, reliability, and quality (see Figure 2). IVD devices that have already obtained a CLIA waiver in the U.S. market could be ideal candidates since their operation needs to be inherently simple and have an “insignificant risk of an erroneous result.”3 But IVD manufacturers that cannot make use of such resources will need to spend considerable effort on defining the user requirements well.
A good, solid method for assessing, capturing, and prioritizing user requirements is the use case analysis. While originally used predominantly for developing software applications, this technique can also be extended to cover use cases that reach into the more mechanical interactions of the various users (e.g., routine users, lab managers, in-house technicians when refilling reagents or removing biohazardous waste from IVD instruments). Thorough use of this technique helps to achieve a superior instrument definition and design, since it provides developers with a solid understanding of the most important use cases. Prioritizing the use cases focuses the emphasis on those use cases that are predominantly required, while access to less important functions can be implemented in ways that require more effort (e.g., in-menu structures of the software).
When defining use cases, involving representatives of the target user groups in the analysis is critical in order to best capture the fundamental requirements. When developing equipment for emerging markets, such analysis requires involving staff from the target countries.
The use case analysis is also beneficial when an existing IVD instrument will be used as the basis for another instrument with potentially reduced specification, complexity, or functionality. In this scenario, the use case analysis helps to confirm that the existing equipment can indeed fulfil the potentially new requirements.
Degree of Automation
Figure 3. The level of automation required in an IVD instrument is determined by examining the capabilities and skills of users.
Understanding the degree and overlap of user skills in the clinical labs should help IVD developers determine the level or lack of automation that will be acceptable (see Figure 3). Since labor in emerging markets is still inexpensive, the high levels of automation required in North America and Europe are not such a major requirement in developing countries. Simple sample-handling tasks with a low risk of influencing the test results may be off-loaded to the lab technicians. For the same reasons, walk-away time is not as much of a concern in laboratories in China or India, so IVD manufacturers can implement systems that require more user attention, and therefore reduce product cost and complexity.
Quality, Regulatory Issues, and Constraints
No matter what the target emerging market is, an IVD instrument's safety and reliability and the corresponding test results must not be compromised. As de facto standards, most developing countries have imposed compliance with FDA's quality systems regulations (QSR) and/or the EU's IVD Directive.4,5 QSR requires that domestic and foreign manufacturers have a quality system for the design and production of medical devices intended for commercial distribution in the United States. The aim is to ensure that medical devices are safe and effective for their intended use. In addition, FDA considers major IVD components to be finished devices because they are accessories to the devices. A manufacturer of such components is subject to QSR when the accessory is labelled and sold separately from the primary device.
The IVD Directive establishes the essential requirements regarding the reliability, safety, quality, and performance of IVDs in terms of their intended purpose and the protection of users. The rule also harmonizes the conformity assessment procedures that IVD manufacturers should apply before they place their devices on the European market. The aim is to ensure that only safe and effective products are sold in Europe.
Lower instrument costs cannot be obtained at the expense of meeting these fundamental regulatory requirements. An IVD manufacturer whose equipment already fulfills such regulations has an advantage. Alternatively, manufacturers may choose to down-spec their equipment, simplify it where appropriate, and claim substantial equivalence to obtain market approvals.
Instruments destined for developing countries must be even more robust than systems used in developed nations. They will be operating in harsher conditions with poorer technical support and possibly limited availability of replacement parts or knowledgeable service technicians.
While the operating conditions in established markets may have temperature ranges between 18 and 30° C, this range could be extended in particularly hot regions where temperatures of 40° C are not uncommon. Similarly, high humidity is another important factor that IVD manufacturers should consider regarding operation, transport, and storage.
Remote IVD instrument monitoring capabilities (where such methods can be used) may help to identify error sources and mitigate situations in which long distances and poor support infrastructure need to be overcome. Likewise, modular approaches for components with known high failure rates or sensitivity are recommended, which allows replacement by technicians with minimum training (assuming a network and infrastructure are in place).
Figure 4. Where medium to high throughput is required, IVD instruments are designed to accommodate specific conditions.
Since most emerging markets are countries with large populations, the IVD instruments used in such markets will most likely have to handle medium to high throughputs (i.e., hundreds of samples per day). The instruments must be designed for high up-time under these conditions or in remote locations where the systems are being used for long periods without easy access to maintenance and technical support (see Figure 4).
Strategic Considerations Assay Panel
Based on the needs assessment in the emerging markets, optimized assay panels can reduce development costs and time. The more assays, the more complex the IVD instrument and the more tests it can run. However, the instrument's development costs will be high, and it will be more expensive to operate.
Where to Manufacture
Clinical laboratories in emerging markets may be required to purchase IVD instruments that are fully or partly manufactured in their home countries. Modular assemblies that fit with geometrically toleranced chassis could support this requirement with reduced risk of compromised functionality. Intellectual property may still be embodied and protected in electronics, software coding, and specialized detection components that are produced elsewhere under better controlled manufacturing conditions.
The key issues in emerging markets that IVD manufacturers should consider are the trade-offs between cost and quality, intellectual property protection (which is important but no longer a major issue), and cultural influences. One way to avoid cost pressures while ensuring quality is to build specialized components in a manufacturing facility where a company has the proven infrastructure, materials, standards, etc., and then ship the components to lower cost locations for assembly (e.g., precision optics).
In emerging markets, IVD manufacturers will need to decide carefully their approach to open versus closed systems. When choosing an open system approach, manufacturers must ensure that the consumables used on their equipment are accessible in the target region. But such accessibility may prove quite difficult.
In the case of custom consumables, insufficiently protected closed-system consumables can be copied by other companies in low-cost regions, hence undermining or harming the primary revenue source for the manufacturers of the original equipment. In some emerging markets, it is even more likely that local suppliers of standard reagents will be able to provide alternative reagents to the laboratories, usually at a significantly lower cost.
Many IVD manufacturers have explored various protection models to ensure that important, long-term revenue from reagent and consumable sales can be secured, which should be reflected in both the marketing and pricing. Results show that radio frequency identification (RFID) offers the best protection and versatility. The costs of RFID labelling are also decreasing, making it more affordable for a wider range of applications.
Other technologies worth considering include simple barcode-based labelling for simple consumables, more-complex solutions such as passive or active (read/write) RFID-labelled consumables, and embedded memory chips with direct electrical connection to systems using codes available via the Internet. Such codes can be requested after purchase, and require the identification number of an IVD instrument and a batch-specific number for the consumables. The Internet-based system creates a unique code for the consumable that needs to be entered into the instrument. However, this approach requires support by local sales organizations or representatives and complex protection algorithms while being inconvenient for users. For complex, higher cost consumables, active RFIDs with read/write access currently seem to be the most cost-efficient and secure approach.
Bottom Up or Top Down?
Countries like China and India offer fantastic opportunities for IVD manufacturers that manage to make the right decisions for the specifications of their instruments for such markets. For companies with an existing product range, the question is whether to develop a new IVD system specifically for the target emerging market, or generate a derivative of an existing product. While there is no one answer to this question, adapting an existing instrument has the following benefits: lower development investment, proven technology and reliability, cost benefits from increased production volumes of common components, and faster time to market and profit.
However, such an approach may come with trade-offs. Cost reduction opportunities are minimized because existing IVD designs may not have been conceptualized for modular approaches and hence will carry higher costs from the original equipment if changed to meet this objective. Ease of use may also be compromised or require a significant redesign to specifically suit the new market demands. In addition, there is a high risk to manufacturers by taking too many short cuts to achieve cost targets.
An alternative to the in-house approach is utilizing existing OEM equipment, which is often available from manufacturers in the target countries.
Around the world, markets are under pressure. During such difficult economic times, leading IVD companies must act to innovate and to maintain or extend their competitive positions. Once markets recover, the impact on revenue from emerging markets may even exceed revenues from established markets. Holding back on pursuing developments in the emerging markets could be a costly cost saving.
Andreas Knaack is director of the Biomedical Instruments and Devices division at Invetech Pty. Ltd. (Mount Waverley, Victoria, Australia). He can be reached at andreas.knaack
No one-size-fits-all answer to developing IVD instrumentation for emerging markets exists. IVD manufacturers will need to consider various factors when defining their product strategies and pipelines. But as with any other market, success is unlikely without doing any comprehensive homework through market studies.
Emerging markets are offering great opportunities for those IVD manufacturers that get their strategies and tactics right. At the same time, established manufacturers must be aware that exporting companies from the same emerging markets are closing the gap at a remarkable speed. The challenge will be to stay ahead through innovation and quality, while offering solutions that work in even rugged and remote locations.
Emerging markets are no place for naïve approaches. A couple of key things that IVD manufacturers should consider are the following: define the company's goals, know the target market by listening to the voice of the customer to make the right trade-off decisions, engage with specialists to fill the knowledge gaps, do not compromise reliability and safety, and assume that what has worked in other existing markets may not be true for all markets.
1. “Global In Vitro Diagnostic Market Analysis,” Research and Markets Web site (Dublin, June 2009 [cited 17 July 2009]); available from Internet: www.researchandmarkets.com/reports/604967.
2. “Roche Posts Very Good Results: Strong Market Outperformance – Guidance Confirmed,” Roche Web site (Basel, Switzerland, 21 July 2008 [cited 17 July 2009]); available from Internet: www.roche.com/investors/ir_update/inv-update-2008-07-21.htm.
3. “Guidance for Industry and FDA Staff: Recommendations for Clinical Laboratory Improvement Amendments of 1988 (CLIA) Waiver Applications for Manufacturers of In Vitro Diagnostic Devices,” FDA Web site (Rockville, MD, 30 January 2008 [cited 17 July 2009]); available from Internet: www.fda.gov/OHRMS/DOCKETS/98fr/E8-1557.htm.
4. “Medical Device Quality Systems Manual,” FDA Web site (Rockville, MD [cited 17 July 2009]); available from Internet: www.fda.gov/cdrh/qsr/01qsreg.html.
5. “Directive 98/79 EC of the European Parliament and of the Council of October 1998 on In Vitro Diagnostic Medical Devices,” Official Journal of the European Communities L 331 (1998): 1–37.
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