MEDICAL DEVICES AND MEDICAL DISPOSABLES

Transcription

1 EU MARKET SURVEY 2002 MEDICAL DEVICES AND MEDICAL DISPOSABLES VOLUME II CENTRE FOR THE PROMOTION OF IMPORTS FROM DEVELOPING COUNTRIES

2 EU MARKET SURVEY 2002 MEDICAL DEVICES AND MEDICAL DISPOSABLES Compiled for CBI by: Netherlands Economic Institute in collaboration with Mr. W.K. Hoppe June 2002

3 DISCLAIMER The information provided in this survey is believed to be accurate at the time of writing. It is, however, passed on to the reader without any responsibility on the part of CBI or the authors and it does not release the reader from the obligation to comply with all applicable legislation. Neither CBI nor the authors of this publication make any warranty, expressed or implied, concerning the accuracy of the information presented, and will not be liable for injury or claims pertaining to the use of this publication or the information contained therein. No obligation is assumed for updating or amending this publication for any reason, be it new or contrary information or changes in legislation, regulations or jurisdiction.

4 Update of CBI market survey Medical Devices and Medical Disposables (March 2001).

5 Photo courtesy: Medeco / The Netherlands Sherwood Medical / The Netherlands

6 CONTENTS REPORT SUMMARY 6 1 PRODUCT CHARACTERISTICS Product groups Customs/statistical product classification 8 2 INTRODUCTION TO THE EU MARKET 11 3 CONSUMPTION Market size Market segmentation Consumption patterns and trends 16 4 PRODUCTION 20 5 IMPORTS Total imports Imports by product group The role of the developing countries 30 6 EXPORTS Total exports 33 7 TRADE STRUCTURE EU trade channels Distribution channels for developing country exporters 36 8 PRICES AND MARGINS Prices and margins Sources of price information 38 9 OPPORTUNITIES FOR EXPORTERS 40 APPENDICES 41 1 Detailed import/export statistics 41 2 Standards organisations 50 3 Sources of price information 51 4 Trade associations 52 5 Trade fair organisers 57 6 Trade press 60 7 Business support organisations 62 8 Other useful addresses 63 9 List of developing countries List of Netherlands importers and most important EU importers Useful Internet sites 74 5

7 REPORT SUMMARY This survey profiles the EU market for Medical Devices and Medical Disposables. The emphasis of the survey lies on those products, which are of importance to developing country suppliers. The major national markets within the EU for those products are highlighted. The survey includes contact details of importers, trade associations, and other relevant organisations. Furthermore statistical market information on consumption, production and trade, and information on trade structure and prices and margins is provided. As an exporter you need this information to formulate your own market and product strategies. In order to assist you with this, CBI has developed a matching EU Strategic Marketing Guide Medical Devices and Medical Disposables. It aims to offer a practical handbook for exporters engaged, or wishing to engage in exporting Medical Devices and Medical Disposables to the European Union. It aims to facilitate exporters in formulating their own markets and product strategies through the provision of practical information and a methodology of analysis and ready-to-fill-in frameworks. As mentioned above, statistical market information on consumption, production and trade, and information on trade structure and prices and margins, which is required for the ready-to-fill-in frameworks, can be found in this EU Market Survey. The medical devices and medical disposables studied in this Market Survey include: Medical disposables: Wadding, gauze and bandages; Latex medical disposables; Syringes, needles and catheters; Wound closure products; Nappies and similar hygiene products; Medical devices: Preparation for x-ray examinations; Surgical instruments and appliances; Electro-diagnostic apparatus; Dental instruments. Consumption Based on CBS Datashop information and estimated per capita health care expenses, total value of EU consumption in 1999 of medical devices and medical disposables amounted to US$ 11,578 million ( 12,585 million). Medical disposables are the largest market segment, accounting for 61 percent of this figure, while medical devices account for the remaining 39 percent of total consumption. The main markets for medical devices and medical disposables in the EU are Germany, Italy, France and the UK, followed at a distance by Spain, the Netherlands and Ireland. The products with the highest consumption levels are Nappies and similar hygiene products and Syringes, needles and catheters, both accounting for approximately 20 percent of consumption, and Wadding, gauze and bandages, Electro-diagnostic apparatus, Preparations for x-ray examinations and Surgical instruments and appliances, with shares of between 10 and 14 percent. Together these six groups account for 88 percent of consumption of medical devices and medical disposables. Production Within the EU, the medical devices and medical disposables industry is characterised by high market concentration, i.e. a few large enterprises control the market. At the same time the EU is facing greater competition from non-eu countries. The size of the medical devices and medical disposables production industry reflects the size of individual country markets. Hence, the main producing countries are Germany, Italy, France and UK. Imports In 2000, total EU imports of medical devices and medical disposables amounted to a volume of 1,040,978 tonnes, with a total value of US$ 10,169 million or 11,053 million. Between 1998 and 2000 total EU imports of medical devices and medical disposables increased by 3 percent in value and 24 percent in volume, marking a decline in average US$ prices. Leading importers of medical devices and medical disposables in 2000 include, in order of import volumes, Germany, France, the Netherlands, United Kingdom and Belgium. In 2000 EU imports of medical devices and medical disposables from developing countries amounted to approximately 133,000 tonnes, with a value of US$ 714 million ( 776 million). Overall this represents 7 percent of the value and 13 percent of the volume of the total EU imports of medical devices and medical disposables. In the period , imports of medical devices and medical disposables from developing countries increased 15 percent in volume (from 116,000 to 133,000 tonnes). Nevertheless, the share of developing countries in the total volume of imports experienced a small decline compared to EU imports of medical 6

8 devices and medical disposables from developing countries decreased in value (from US$ 728 to US$ 714 million), reflected by a 0.4 percent decline in their share in total imports. The EU imports of medical devices and medical disposables from developing countries were particularly high for Latex medical disposables (63 percent of total EU import value), and to a lesser extent for Wadding, gauze and bandages and Surgical instruments and appliances (both 8.0 percent), and Syringes, needles and catheters (3 percent). Exports In 2000 the EU exported 1,006 thousand tonnes of medical devices and medical disposables, with a value of US$ 11,116 million ( million). Since 1998, the total value of exports has increased by 7 percent, while the volume increase was even bigger: 13 percent. Medical disposables accounted for 63 percent of exports, and medical devices for 37 percent. The most important export products in value included Syringes, needles and catheters (29 percent), Nappies and similar hygiene products (16 percent), Electro-diagnostic apparatus (12 percent) and Wadding, gauze and bandages (10 percent). The leading EU exporters of medical devices and medical disposables in 1999 were Germany (26 percent of total EU export value), the Netherlands (13 percent), United Kingdom and Belgium (both 11 percent) and France (10 percent). A few large companies manufacturing medical devices and medical disposables in the EU are Lohmann (Germany), Smiths & Nephew (UK), Brunswick (Belgium) and Philips Medical (the Netherlands). Market research This EU Market Survey and the EU Strategic Marketing Guide serve as a basis for further market research: after you have read this survey and filled in the frameworks in the strategic marketing guide it is important to further research your target markets, sales channels and potential customers. Market research depends on secondary data (data that have been compiled and published earlier) and primary data (information that you collect yourself). An example of secondary data is this EU Market Survey. Primary data are needed when secondary data are falling short of your needs, for example when researching your specific type of consumer about the acceptance of your specific product. Sources of information are among others (statistical) databanks, newspapers and magazines, market reports, (annual) reports from branch associations, but also shops in target countries, products or catalogues from your competitors, and conversations with suppliers, specialists, colleagues and even competitors. In order to judge the attractiveness of the market, sales channel or customer it is advised to use/develop a classification or score system. For more detailed information on market research reference is made to CBI s Export Planner (2000). Opportunities for exporters Due to the increasing importance of time saving products and extramural health care, the EU demand for medical devices and medical disposables is expected to exhibit modest growth in the near future. There are opportunities for these products since it is too costly for producers to produce low profile bulk goods within the EU. Moreover, some developing countries have important natural resources, like cotton, available at hand. In 2000, products from developing countries that were imported into the EU in relatively large amounts, and which have therefore good opportunities for exporters, were: Latex medical disposables; Wadding, gauze, and bandages; Surgical instruments and appliances; and Syringes, needles and catheters. The trade channel offering the best chances for developing countries is the importer/manufacturer or the agent because of their knowledge of the EU market. 7

9 1 PRODUCT CHARACTERISTICS 1.1 Product Groups This chapter focuses on the product characteristics of medical devices and medical disposables. The medical devices and medical disposables discussed in this survey can be classified in the following groups: Medical disposables: Wadding, gauze and bandages Latex medical disposables Syringes, needles and catheters Wound closure products Nappies and similar hygiene products Medical devices: Preparations for x-ray examinations Surgical instruments and appliances Electro-diagnostic apparatus Dental instruments Strictly speaking according to the HS code classification syringes, needles and catheters are classified as surgical instruments. In this survey, however, these products are classified as medical disposables as they are, in most cases, only used once. Furthermore, the product group called preparations for x-ray examinations is sometimes referred to as a pharmaceutical. Both classifications are possible. 1.2 Customs/Statistical Product Classification On January 1, 1988 a unified coding system was introduced to harmonise the trading classification systems used world-wide and to allow for improved international comparability of foreign trade statistics. This system, the Harmonised System (HS), is based on a ten digit product classification. Table 1.1 gives a list of the HS codes relevant for this survey. Table 1.1 HS code classification of medical devices and medical disposables 1. Wadding, gauze, bandages HS 3005 Wadding, gauze, bandages and the like, e.g. dressings, adhesive plasters clean non sterile, poultices, impregnated or covered with pharmaceutical substances or put up for retail sale for medical, surgical, dental or veterinary purposes 2. Wound closure products HS Sterile surgical catgut, similar sterile suture materials and sterile tissue adhesives for surgical wound closure; sterile laminaria and sterile laminaria tents; sterile absorbable surgical or dental haemostatics 3. Preparations for x-ray examinations HS HS Reagents for determining blood groups or blood factors Opacifying preparations for x-ray examinations; diagnostic reagents for administration to patients 4. Latex medical disposables HS Surgical gloves, of vulcanised rubber other than hard rubber (excl. fingerstalls) HS Gloves, of vulcanised rubber other than hard rubber (excl. household and surgical gloves) 5. Nappies and similar hygiene products HS Nappies and similar hygiene products, of paper pulp, paper, cellulose wadding or webs of cellulose fibres (excl. those put up for retail sale) HS Nappies and similar hygiene products, of paper pulp, paper, cellulose wadding or webs of cellulose fibres, put up for retail sale Continued 8

10 Table 1.1 Continue 6. Syringes, needles and catheters HS HS HS Syringes, whether or not with needles, used in medical, surgical, dental or veterinary sciences Tubular metal needles and needles for sutures, used in medical, surgical, dental or veterinary sciences Catheters metal needles, plastic cannulae and the like, used in medical, surgical, dental or veterinary sciences (excl. syringes, tubular metal needles and needles for sutures) 7. Surgical instruments and appliances HS Instruments and apparatus for measuring blood-pressure HS Endoscopes used in medical, surgical, dental or veterinary sciences HS Transfusion apparatus used in medical, surgical, dental or veterinary sciences HS Anaesthetic apparatus and instruments 8. Electro-diagnostic apparatus HS HS Electro-cardiographs Electro-diagnostic apparatus, incl. apparatus for functional exploratory examination or for checking physiological parameters (excl. electro-cardiographs) 9. Dental instruments HS HS Dental drill engines, whether or not combined on a single base with other dental equipment Dental Instruments and appliances n.e.s. Note: For a full description of the Harmonised Commodity Description and Coding System please refer to the RAMON Eurostat Classifications Server at Compared to the previous edition of this EU Market Survey the product group of Gloves, of vulcanised rubber other than hard rubber was added to the list. Typical products registered in this product group are examination gloves, characterised by less stringent quality standards (e.g. sterility) than surgical gloves. Since numerous developing countries have access to rubber resources, examination gloves are considered to be a product of high interest. Together with Surgical gloves, this product is grouped under a new heading referred to as Latex medical disposables. Note that the list of medical devices and medical disposables does not cover all products in a particular product group. Other products interesting for exporters in developing countries may include sheath contraceptives, ophthalmic instruments and hospital furniture. Given the negligible export from developing countries the relevant HS codes are mentioned in Table 1.2, but these groups are not discussed in this survey. Table 1.2 HS-code Other relevant HS codes of medical devices and medical disposables Description Sheath contraceptives of vulcanised rubber (i.e. condoms) Ophthalmic instruments and appliances not elsewhere specified (n.e.s.) Ophthalmic instruments, non-optical Ophthalmic instruments, optical Instruments and appliances used in medical, surgical or veterinary sciences, n.e.s Operating and examination tables; other medical, dental, surgical or veterinary furniture 9

11 The pictures hereunder give some examples of the medical devices and medical disposables, which are addressed in this survey. 4. Sterile syringes 1. Single patient use stethoscope 2. Filter needle 5. Latex surgical gloves 3. Adhesive wound closure 6. Sterile latex examination glove 10

12 2 INTRODUCTION TO THE EU MARKET The European Union (EU) is the current name for the former European Community. Since 1 January 1995 the EU has consisted of 15 Member States. Negotiations are in progress with a number of candidate Member States, many of whom already have extensive trade and co-operation agreements with the EU. It is envisaged that a number of these countries will become EU Member States in In 2000, the size of the EU population totalled million. Total GDP in 2001 equalled US$ 7,894.5 billion at current prices, while the average GDP per capita (at current exchange rates) amounted to US$ 20,742 in 2000 (OECD, 2002). The most important aspect of the process of market unification of the former EC countries which affects trade is the harmonisation of rules in the EU countries. As market unification allows free movement of capital, goods, services and people, the internal borders have been removed. Goods produced or imported into one Member State can be moved around between the other Member States without restrictions. A precondition for this free movement is uniformity in the rules and regulations concerning locally produced or imported products. Although the European Union is already a fact, not all regulations have yet been harmonised. Work is in progress on uniform regulations in the fields of environmental pollution, health, safety, quality and education. On 1 January 2002, the national currencies of twelve EU Member States were replaced by one transnational currency: the Euro ( ). Austria, Belgium, Finland, France, Germany, Greece, Italy, Ireland, Luxembourg, The Netherlands, Spain, and Portugal currently gradually replace their national currency notes and coins by the Euro. By the 1st of July 2002, the Euro will be the only legal tender throughout the Eurozone. The most recent Eurostat trade statistics quoted in this survey are from the year On 1 January 1999, statistical and contractual values in ECU were converted into Euro s on a 1:1 exchange rate. The / US$ exchange rate currently (March 2002) stands at US$ 0.88 for one Euro. In this market survey, the US$ is the basic currency unit used to indicate value. Values for dates after 1 January 1999 are also expressed in Euro s. Trade figures quoted in this survey must be interpreted and used with extreme caution. The collection of data regarding trade flows has become more difficult since the establishment of the Single Market on 1 January Until that date, trade was registered by means of compulsory customs procedures at border crossings, but, since the removal of the intra-eu borders, this is no longer the case. Statistical bodies like Eurostat can no longer depend on the automatic generation of trade figures. In the case of intra-eu trade, statistical reporting is only compulsory for exporting and Exchange rates of EU currencies in US$ Country Currency March 2002 European Union ECU Austria Ash Belgium/Luxembourg Bfr Denmark Dkr France Ffr Finland FM Germany DM Greece GRD Ireland I Italy L Netherlands NLG Portugal Esc Spain Ptas Sweden Skr United Kingdom GB Source: CBS Statline (March 2002) 11

13 importing firms whose trade exceeds a certain annual value. The threshold varies considerably from country to country, but it is typically about 100,000. As a consequence, although figures for trade between the EU and the rest of the world are accurately represented, trade within the EU is generally underestimated. Moreover, given the time lag between obtaining and presenting statistical information by the various national statistical bureaus and Eurostat, the figures for 1998 and 1999 in this EU Market Survey may differ from the figures for the same years as presented in the previous edition. This survey provides more detail on six specific EU Member States. These countries are Belgium, France, Germany, Italy, the Netherlands, and the United Kingdom. The reason for selecting these countries is that they have high production and/or (per capita) consumption figures, accompanied by the highest figures for import and export of medical devices and medical disposables. These countries are therefore potentially very interesting markets for exporters from developing countries. 12

14 3 CONSUMPTION 3.1 Market size Together with the United States, the European Union is the world s leading market for medical devices and medical disposables. Both the total size of population and the strong economy are major causes for this predominance. With a population of 364 million people, the EU has an abundant availability of potential end-users and their strong economies stimulate high per capita consumption of medical devices and medical disposables. A third factor determining the market size, and which makes the EU an attractive market for exporters from developing countries, is the sophisticated state of the market. For example, stringent monitoring of sterility procedures and preventive inoculation of whole sectors of population are common practice in the EU and lead to high figures for consumption of medical disposables. The intensity of medical procedures and products being paid for by either the government or insurance companies varies between the EU Member States, but the essential medical facilities are covered in all 15 countries. The variation between the Member States is caused by a different assessment as to whether certain procedures are medically essential or mere luxury procedures. A good example in which different interpretation apply is female breast size adjustments with plastic surgery. Whilst this is included in the compulsory healthcare insurance in the Netherlands, this is taken to be a luxury product in, for example, Spain. Figure 3.1 below presents the consumption of medical devices and medical disposables valued in US$ millions. The European Union is one of the leading markets for medical devices and medical disposables in the world, with consumption amounting to US$ 11,578 million in 1999 ( 12,585 million). Germany is by far the largest market for medical devices and medical disposables within the European Union, with over 30 percent of total EU consumption of medical devices and medical disposables. Italy is the second largest market with a 17 percent share, followed by France (14 percent) and the United Kingdom (12 percent). Please note that the consumption data presented in this survey are derived from data on production, imports and exports. The data are, therefore, indicative and may be distorted for various reasons. Figure 3.1 Consumption of medical devices and medical disposables in EU markets, 1999 Value in US$ million United kingdom Sweden Finland Portugal Austria Netherlands Italy Ireland France Spain Greece Germany Denmark Belgium , , , ,000 1,500 2,000 2,500 3,000 3,500 4,000 Source: CBS Datashop (2002) Note: Due to incompleteness of data, available CBS Datashop data have been modified on the basis of per capita consumption estimates. Data for Luxembourg are not available. 13

15 First, an indirect methodology of estimating consumption figures is used, introducing inaccuracy of import and export figures (due to the threshold value for statistical reporting as indicated in Section 2) into the estimate of consumption. Second, the indirect method is distorted by time differences between, or varying valuation methods applied to the part of imports which is (re-) exported (so-called transition trade). Third, the disaggregated production data (CBS Datashop) used are incomplete because some figures are not reported for various reasons, please see Section 4 for further explanation on this. Concerning the individual EU markets, the production (and consequently consumption) data on Germany, France, Italy, UK, Denmark and Finland are fairly complete since only a few product groups are unreported by the national statistical offices. For Spain, Portugal and the Netherlands several product groups are not reported, while most reported production data show zero production. Also the data for Belgium, Ireland and Sweden are rather incomplete. Production and consumption figures have therefore been calculated on the basis of estimated per capita figures for These per capita figures have, in turn, been estimated on World Bank figures for total per capita expenditure on health care in Table 3.1 Country Total per capita expenditure on health care, 1998, US$ Health expenditure per capita, US$ Germany 2,769 France 2,377 Belgium 2,184 Austria 2,162 Sweden 2,146 The Netherlands 2,140 Finland 1,722 Italy 1,701 United Kingdom 1,597 Ireland 1,428 Spain 1,043 Greece 957 Portugal 803 Denmark n.a. Luxemburg n.a. Source: World Development Indicators 2001 n.a. = not available Differences of consumption levels between countries are caused by two main factors: the welfare level of the country and the government s concern with health care in general. A higher welfare level leads to more spending on medical devices and medical disposables. For example consumption of medical products per head is higher in the Netherlands, Germany, Belgium, France and Italy than in EU countries where welfare levels are lower. The role of the government is important for health care, since governments generally play a major role in financing the health system, including health insurance, targeted subsidies and the ownership of real estate in the sector. Germany, in particular, is known for its well-organised health system and high per capita consumption of medical devices and medical disposables. By contrast, both Greece and especially Ireland recently started to recover from the backlog traditionally existing in their health care system. In addition, the market for various products in the EU used to be differentiated on the basis of local labour costs. For example, countries like France, Spain and Italy traditionally consumed relatively large amounts of classical style re-usable syringes and needles, since cleaning, re-packing and sterilisation was done by abundant and relatively cheap labour. At present, however, with tight labour markets and increasing costs of labour, disposable alternatives for syringes and needles have become standard practice throughout the EU. The serious lack of trained medical staff in countries like the Netherlands, Belgium, Germany and the United Kingdom also causes an increase in the use of special labour-saving medical devices. Medical devices like disposable balloon catheters and urine bags for post-operative patients save time in the after-care of the patient. The price of a balloon catheter plus a urine bag is far lower than the cost of nursing time that would otherwise be necessary. Finally, an important factor in the EU market is the discrepancy in demand for health care between immigrants and native inhabitants. While the number of treatments of native patients continuously declines to reduce the serious burden on society of long waiting lists in health care, immigrants increasingly find their way to health care, resulting in an overall growth of health care demand. The relative importance of the nine major product groups as distinguished in Section 1.1, is shown in Figure 3.2 on the next page. The Figure presents the share of each particular product group in the total consumption of medical devices and medical disposables in The statistics show that the consumption of the medical disposables, i.e. 61 percent, is larger than the consumption of medical devices, i.e. 39 percent. The largest product groups within the medical disposables are Nappies and similar hygiene products (20 percent), Syringes, needles and catheters (20 percent), and Wadding, gauze and bandages 14

16 Figure 3.2 EU consumption of medical devices and medical disposables by product group, Share of total value (%) Electro-diagnostic apparatus 12% Dental Instruments 5% Wadding, gauze, bandages 14% Surgical instruments and appliances 10% Preparations for x-ray examinations 12% Nappies and similar hygiene products 20% Wound closure products 4% Latex medical disposables 3% Syringes, needles and catheters 20% Source: CBS Datashop (2002) (14 percent). This could be explained, among other things, by the trend in EU member state policies towards a reduction in public expenditure since the mid-nineties. This reduction decreases hospital treatment and increases home nursing. This leads to an increase in the market for user-friendly products such as Wadding, gauze and bandages and Nappies and similar hygiene products. Another large product group, accounting for the main part of the medical devices consumption, is Electro-diagnostic apparatus (12 percent). The share of demand for Electro-diagnostic apparatus has increased from 1 percent in 1998 (see Appendix 1). This might among others be explained by the average wage increase of nurses, making the costly electronic monitoring apparatus attractive substitutes for hospital management. The sales of disposable products generally show a stable pattern. Delivery arrangements can be made on annual contracts with regular monthly shipments. Note that numbers of examination gloves, disposable syringes and needles used in hospitals are huge since the products are discarded after each examination. Therefore, the products need an efficient warehousing and distribution system to ensure continuous supply to the end-user. The sales of medical devices require more profound knowledge of the product and its applications. Although some stock is useful, a delivery time of 6 to 8 weeks is usually acceptable. Warehousing and logistics play a somewhat less important role for medical devices. 3.2 Market segmentation The market for medical devices and medical disposables can broadly be divided into two major and two minor segments: Intramural market, which consists of: Hospitals; Nursing homes; Psychiatric institutions. Extramural market, which consists of: General practitioner s (GP s); Specialist doctor practices. Private dental practices and jaw and dental surgery departments of hospitals. Private veterinary practices and veterinary departments of university hospitals. The latter market segments are much smaller in size. Due to the similarity in the manufacturing process and design, the trade figures are usually included in import and export figures of the first two groups. In general, both segments use the same or similar distribution arrangements as the two major market segments. Note that there is a small consumer market segment for example for gloves, wadding and gauze as well, but this segment is estimated to be very small (around 2 3 percent of the consumption of medical devices and medical disposables) and will be neglected in the rest of this survey. 15

17 Intramural market In most EU Member States a tendency can be observed towards a decrease in the number of hospital and psychiatric beds. This can partly be explained by government measures taken to cut down on public expenditures. Table 3.1 shows a decrease in the number of beds between 1998 and 2000 for the Netherlands and for Germany. Presently, the intramural market exceeds the extramural market in size with respect to the consumption of medical devices and medical disposables. The majority of the hospitals, approximately 80 percent, purchase their medical products through a buying co-operative. These co-operatives are regionally oriented and represent hospitals within a certain geographic coverage. The major benefit of joining a co-operative is the reduction of prices (discounts) that result from increased bargaining power with potential suppliers. Extramural market The same problems with respect to data gathering appear in the extramural market. Table 3.2 gives an indication of the size of the extramural market in 1999 and 2000 and suggests that the number of practices is increasing. Overall the consumption of medical devices and medical disposables in the extramural market is increasing. 3.3 Consumption patterns and trends This section will highlight various factors that influence the consumption of medical devices and medical disposables. It will be indicated how these factors will create opportunities for providers from developing countries. Reference is also made to Section 3.1, in which a country s socio-political background was described as an important determinant of health care expenditure. Demography The first and most important factor that influences the consumption of medical devices is the demographic structure of the market. The life span of the EU population has increased considerably over the last decades. The consequence is an ageing population, which causes an ever-increasing need for medical care. The table on the next page shows that Italy, Greece and Germany have the highest share of people older than 60 years. For Germany this implies a high level of consumption of medical devices and medical disposables, in fact Table 3.1 showed it is the highest in the EU. Table 3.1 Size of the intramural market by the absolute number of beds in hospitals ( ) and psychiatric institutions ( ) Country Number of hospital beds Number of psychiatric beds The Netherlands 78,340 75,409 26,657 26,013 France 492, ,803 n.a. 67,458 Germany 754,865 n.a. 62,185 60,808 Source: CBS Datashop (2002) n.a. = not available Table 3.2 Size of the extramural market by the absolute number of practices Country Number of physicans Number of dentists Number of or doctors physiotherapists The Netherlands 48,987 50,856 8,501 8,819 29,188 30,337 Belgium 41,331 42,036 n.a. n.a. 26,050 n.a. France 193, ,000 40,088 40,539 50,474 52,056 Germany 291, ,676 62,564 63,120 23,519 n.a. The United Kingdom n.a. n.a. 26,424 n.a. n.a. n.a. Source: CBS Datashop (2002) n.a. = not available 16

18 Table 3.3 Demographic structure within the European Union (1999) Country < 20 years years years > 60 years Total Germany % Austria % Belgium % Denmark % Spain % Finland % France % Greece % Ireland % Italy % Luxembourg % The Netherlands % Portugal % The United Kingdom % Sweden % EU average % Source: Eurostat (2000) Table 3.1 also showed high levels of consumption of medical devices and medical disposables for Italy. However, for Greece, though having a large share of older people, the consumption level of medical devices and medical disposables is not very high. Since health care standards in Greece are relatively low, and despite the high percentage of older people, the consumption lags behind. Socio-economics The generally tight labour market in the EU countries has a considerable influence on the consumption of medical devices and, especially, on the consumption of medical disposables. The tight labour market has made hospital personnel increasingly expensive and has forced hospital management to find substitutes for labour intensive practices. For example, heart monitors allow one nurse to care of a number of patients simultaneously; disposable catheters avoid regular changing of diapers and bed sheets, etc. Other disposables that are increasingly popular include syringes and needles, disposable apparel and accessories. Environment Care for the environment is an important issue in the European Union. Over the last decade awareness of environmental issues has grown among governments, industries and consumers alike. The consumer is increasingly taking environmental aspects into account in his or her buying decision. The EU as well as the national governments have taken initiatives towards more stringent environmental legislation. Manufacturers nowadays must adhere to all local environmental regulations and EU-wide regulations. Medical devices and medical disposables, often composed of different materials such as rubber, metals and textiles, are subject to a number of environmental regulations. Through setting standards for the allowable environmental impact, these regulations affect the production process itself. For example if nickel and chromium plating is used for the manufacture of surgical instruments, then the production process should comply with all relevant local and international regulations and standards. Also the packaging material should comply with EU standards aiming at a recovery quota and at controlling the presence of mercury, lead, cadmium and hexavalent chromium in the packaging. In Appendix 8 addresses are given where you can find specific information on the operational regulations. See also the CBI publication Strategic Marketing Guide Medical Devices and Medical Disposables It is essential that the products offered on the EU market adhere to the respective standards in the field of environment. Product Quality and Design Changing the product quality or design in any appreciable manner is a sometimes long and difficult process, since the market regulations could require that the Annex 10 of the Council Directive be applied. This would imply an official evaluation to assess whether the material is clinically suitable for the purpose for which the product is intended. Short run changes in quality or design are therefore generally limited to the material inputs used for certain products. 17

19 Examples of innovations that create new market opportunities, include: Traditional latex may be replaced by so called low protein latex, medical grade plastics or silicone rubber; P.V.C. products, catheters, infusion- transfusion systems, connecting tubes etc. may be replaced by other plastic materials for more patient comfort and better biological suitability. Price sensitivity and brands The usefulness of brands in the Medical Devices market is very limited. Since manufacturers are obliged to register their name and address with the health authorities and all products must bear the CE mark, the producer of an unknown brand is directly traceable. In most cases the name and brand of the European importer will be printed on the labels, as well as the manufacturer s name and country. trade fairs. Two major annual trade fairs in Europe are Medica in Düsseldorf and Interhospital in Nürnberg, Germany. Both trade fairs are regarded as the premier medical industry events in Europe and are visited by potential customers from all over the world. When visiting a trade fair, it is useful for the manufacturer or exporter to have a full colour product catalogue available. This catalogue should provide a systematic overview of the product range available in all medical disciplines, as to allow the customer to identify his needs easily. For more information with respect to trade fair organisers, places and dates see Appendix 5 and the CBI publication EU Strategic Marketing Guide 2001 Medical Devices and Medical Disposables. In general, prices for medical devices and medical disposables are fairly stable, although a growing number of developing countries increasingly succeed in placing a downward pressure on prices. Especially with regard to labour intensive products, exporters in developing countries deploy their abundant resources of cheap labour and sell their products directly to EU manufacturers. The EU manufacturer then adds a final polish or inspection to the product and subsequently sells the product under its own label. This way of organising production enables exporters to sell products that they could not sell under their own brand name, whilst it allows EU manufacturer to reduce operational costs and, hence, the market price. A genuine example of a developing country putting downward pressure on market prices is China, especially with regard to the production of surgical instruments and latex medical disposables. Yet another factor in the determination of prices are successful price negotiations. These negotiations may result in a considerable decline of the margin for the distributors and offer the exporter additional opportunities with respect to market entry and customer relations (for more information see the CBI publication EU Strategic Marketing Guide Medical Devices and Medical Disposables 2001 ). Factors that determine the discount include: The size of the order; The duration of the contract; The degree of competition with respect to the product in question. Promotion Due to the establishment of a single market and free movement of goods within the EU, the degree of competition has increased. An important way for a manufacturer or trader to promote products is visiting 18

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21 4 PRODUCTION The total EU production of medical devices and medical disposables in 1999 amounted to US$ 10,486 million ( 11,398 million). The main players in the industry are Germany (over 40 percent of production), Italy (14 percent), the United Kingdom and France (both 11 percent) and Ireland (7 percent). Figure 4.1 presents the production figures for the EU Member States for Note that production data, as collected through the national statistical offices, are not complete at the level of disaggregation applied in this study. Important reasons for reporting incomplete data include the reluctance of producers to make their production figures available and the fact that statistical offices are often not allowed to publish data. The latter generally applies if there are less than three producers of a specific type of product, or if one producer controls more than 70 percent of total production. Notably, the European market for medical devices and medical disposables consists of a small number of large producers. As can be seen from Figure 4.2 the production of medical disposables, accounting for 53 percent of the total, exceeds the production of medical devices (47 percent). Syringes, needles and catheters (19 percent) are the largest product group produced within the EU. Nappies and similar hygiene products (18 percent) and Electric-diagnostic apparatus (14 percent) follow this product group. Table 4.1 shows the six most important European manufacturers of medical devices and medical disposables. Generally, these manufacturers do not produce their products in the country of origin. Because of high labour costs in Europe, a lot of the production of parts and components takes place in foreign affiliates, often established in developing countries. These parts and components are then being imported to the EU, where the final product will be assembled. Germany is the largest manufacturer, as well as the largest importer, which demonstrates the trans-national character of the manufacturing process. The leading manufacturers presented in Table 4.1 have developed strategies to obtain strong world market positions. Strategically they are looking for three elements: low wages, low local taxes, and short distribution routes. How they develop this strategy in practice depends on the type of product and the market. For example, the largest surgical instrument manufacturer in the world, a German company called Aesculap, has manufacturing sites all over the world. These manufacturing sites provide the mother company with bulk instruments produced to Aesculap standards Figure 4.1 Production of medical devices and medical disposables in EU countries 1999 Value in US$ million United kingdom Finland Portugal Austria Netherlands Italy Ireland France Spain Greece Germany Denmark Belgium 1, , , Source: CBS Datashop (2002) Note: due to incompleteness of data the estimates for Belgium, Greece, Austria, Portugal, and the Netherlands are corrected on the basis of opinions of experts. Data for Sweden and Luxembourg are not available. 20

22 Figure 4.2 EU production of medical devices and medical disposables by product group, Share of total value (%) Electro-diagnostic apparatus 14% Dental instruments 8% Wadding, gauze, bandages 11% Latex medical disposables 0% Syringes, needles and catheters 19% Surgical instruments and appliances 11% Wound closure products 4% Source: CBS Datashop (2002) Preparations for x-ray examinations 15% Nappies and similar hygiene products 18% Table 4.1 Top 6 largest manufacturers medical devices and medical disposables in the EU Manufacturer Country Products Philips Medical Systems The Netherlands Electro-diagnostic apparatus Lohmann Germany Wadding, gauze and bandages B. Braun Germany Catheters, wound closure products and other special products Smiths & Nephew The United Kingdom Wadding, gauze and bandages Becton & Dickinson Spain Syringes and needles Brunswick Belgium Syringes and needles and specifications, and simultaneously organise the local distribution of the medical devices and medical disposables. More technically complex and advanced products are still designed and manufactured in Germany. Yet another organisation of production is applied in the syringe and needle industry. Since producing these products involves a lot of research and technology, the availability of sufficient capital and human resources is a prerequisite for success. It also requires a well-organised marketing, guaranteeing that once the product is ready for the market it can be sold on a sufficiently large scale to warrant the original investment. Three mayor players dominate the syringe and needle industry, i.e. Becton & Dickinson USA, Terumo Japan and Braun medical in Germany. They all operate in their own geographical area, characterised by the availability of skilled human resources and capital and infrastructure that limits the costs for transportation and distribution. Next to these three dominant market players, a number of manufacturers in the USA purchase products in developing countries and put them up for re-sale in the EU under their own brand. This applies particularly to latex medical disposables and diagnostic devices such as stethoscopes, blood pressure meters and revalidation equipment. The role of developing countries in such processes is generally limited to supplying intermediary inputs to the EU manufacturer, and usually only develops after the brand name has already been well established in the international market. Smith & Nephew UK, for example, buys bandages, gauze and similar products in developing countries because of the low wages. The quantities required are usually very large (bulk), allowing cheap container transportation, and profits are marginal. Other companies buy their intermediary inputs in developing countries to benefit from the local availability of, for example, cotton and rubber. A part from buying the intermediaries, in some cases the EU company buys the complete company in the developing country, in order to ensure continuous supply and to be able to monitor the quality of the products more closely. 21

23 5 IMPORTS The statistics presented in this chapter are official trade figures provided by Eurostat. After unification of the European Union in 1992, customs authorities stopped recording the intra-eu trade. Since then, import and export figures have been based on reports given by the companies themselves. In the case of intra-eu trade, statistical reporting is only compulsory for EU exporting and importing firms, whose trade exceeds 100,000. Companies, whose trade does not exceed this threshold value of 100,000, are not obliged to report and are therefore excluded from the statistics provided by Eurostat. Imports from non-eu sources, however, are still registered by customs authorities. Moreover, CBS, which provides the Dutch trade figures to Eurostat, is not allowed to publish figures with respect to certain medical products for similar reasons as discussed in chapter 4. These figures are considered to be too sensitive, as in the case of dominant market participant they might lead to conclusions with regard to its specific performance. For these reasons, all statistics must be regarded with caution. The data are not complete, and are intended to give an indication of trends in the respective product groups and of the relative importance of European sub-markets. The statistics specify total imports, imports from non- EU countries (extra-eu) and imports from developing countries, both in volumes as well as in value. Developing countries, as defined by the OECD, are listed in Appendix 9. Appendix 1 lists import statistics of the EU and the selected markets within the EU and gives detailed breakdowns of the statistics by product group and supplying country. 5.1 Total imports In 2000, the EU imported 1,040,978 tonnes of medical devices and disposables, which represented a value of US$ 10,169 million or 11,053 million. Germany is the largest EU importer of medical devices and medical disposables, as presented in Figure 5.1. Germany s imports amount to US$ 2,132 million ( 2,317 million) for almost 185 thousand tonnes in 2000, accounting for 21 percent of total EU imports of medical devices and medical disposables in France is the second largest importer of medical devices and medical disposables (14 percent of EU imports in 2000), followed by the United Kingdom and the Netherlands (both 11 percent), Belgium (10 percent), Italy (9 percent), Spain (6 percent), Ireland (4 percent), and Austria and Sweden (both 3 percent). Table 5.1 presents the imports of medical devices and medical disposables by EU country for From the table it appears that the EU Member States registered an average increase in import volume of 24 percent. Sweden was the only country to register a decline in import volume. Imports in value in the year Figure 5.1 EU imports of medical devices and medical disposables by major EU country, 2000, as percent of total value Sweden 3% Austria 3% Ireland 4% Spain 6% Other 8% Germany 21% Italy 9% 10,169 France 14% Belgium 10% Netherlands 11% UK 11% Source: Eurostat (2002) 22