Industry Engagement Program

Transcription

1 Industry Engagement Prgram Large Medical Diagnstic Imaging Equipment Market Review and Actin Plan Nvember 2017

2 Published Nvember, 2017 Cpyright 2017 The Wrld Bank 1818 H Street NW Washingtn DC Telephne: Internet: Disclaimer This wrk is a prduct f the staff f The Wrld Bank. The findings, interpretatins, and cnclusins expressed in this wrk d nt necessarily reflect the views f The Wrld Bank, its Bard f Executive Directrs, r the gvernments they represent. The Wrld Bank des nt guarantee the accuracy f the data included in this wrk. Rights and Permissins The material in this wrk is subject t cpyright. Because the Wrld Bank encurages disseminatin f its knwledge, this wrk may be reprduced, in whle r in part, fr nncmmercial purpses as lng as full attributin t this wrk is given. Any queries n rights and licenses, including subsidiary rights, shuld be addressed t: Office f the Publisher The Wrld Bank 1818 H Street NW Washingtn, DC USA Fax: pubrights@wrldbank.rg.

3 Industry Engagement Prgram: Large Medical Diagnstic Imaging Equipment Summary Market Review Findings 1.1 Intrductin The Wrld Bank Bard apprved a new Prcurement Framewrk in July 2015 t supprt Bankfinanced activities under its Investment Prject Financing instrument. As part f its apprval, the Bard agreed that the Bank shuld initiate an Industry Engagement Prgram (IEP) t target industry sectrs where there are recurring prcurement challenges. The IEP prgram began in December 2016, and initially targets imprving prcurements in the Medical Diagnstic Imaging (MDI) sectr, and separately in the High Vltage Direct Current Pwer Distributin sectr. The IEP has been designed t wrk clsely with industry sectr experts (bth client and supply side) t identify and address recurring prcurement challenges in Bank financed prjects t achieve imprved prcurement and develpment utcmes. Prgram bjectives are t: Mtivate the right cmpanies t bid; Speed up prcurements; Imprve readiness fr prject implementatin; Reduce cmplaints; Reduce csts f bidding (clients and suppliers); Achieve Value fr Mney (VfM) t deliver better utcmes and results; Bring greater transparency t the bidding prcess. The Large Medical Diagnstic Equipment industry actively participated in the cnsultatins n the Bank s new Prcurement Framewrk prviding written cmment n prpsed changes t the Bank s Prcurement Regulatins fr Brrwers. This included identificatin f specific prcurement issues and initial prpsed slutins relating t Large Medical Diagnstic Equipment. In additin t feedback frm industry, the IEP team launched a thrugh investigatin int the MDI market and sught industry feedback, these inputs infrm ptential actins and interventins that may be taken by the Bank t imprve prcurement results. The market review brings tgether a range f research frm varius bdies, and seeks t crrelate issues t prvide a cherent view f the MDI sectr. The Bank acknwledges and expresses its thanks t these technical rganizatins, trade bdies and industry assciatins fr their cntributins. 1.2 Market Analysis Findings Recurring prcurement prblems in Bank prcurement f Large Medical Diagnstic Equipment include bidder challenges t the bid evaluatin prcess and award decisins (53% f cmplaints), and cncerns n biases/weaknesses in specificatins and bid dcuments (25% f cmplaints); The Bank has 45 active prjects in its HNP prtfli, 50% f prjects are in Eurpe and Central Asia (ECA) and Africa, in ttal $470M f medical equipment prcurement is 3

4 Industry Engagement Prgram: Large Medical Diagnstic Imaging Equipment Summary identifiable. The Bank s MDI financing is relatively lw t the ttal value f all MDI prcurement glbally. Hwever, the Banks expenditure data is likely under reprted 1 as MDI can be cmbined int a brader civil engineering prject e.g. hspital cnstructin r refurbishment; Due t the cmplexity f the prcurement, Bank financed prjects usually hire an external cnsultant t supprt prcurements, the availability f technical MDI cnsultants is limited, and they can ften be accused f biases by the MDI sectr; The average ttal cst (purchase, peratin and maintenance) ver the life f an MRI scanner is circa US$3.08M, an X-Ray is US$344k, and an ultrasund is US$65k; The rati f initial purchase price t O&M is 1:1 fr MRI, 1.5:1 fr X-Ray and 2:1 fr Ultrasund; Typically, MDI equipment has a 10-year life span (lnger r shrter depending n O&M), the ptimal age prfile fr a set f MDI equipment is that 60% shuld be less than 5 years ld, 30% between 6 t 10 years, and less than 10% ver 10 years ld. Due t fiscal cnstraints, the life f equipment is generally being extended, this prgressive aging f equipment may lead t a surge in demand fllwing ecnmic grwth; The MDI market is segmented between Original Equipment Manufacturers (OEM), distributrs and sellers f refurbished equipment (latter, with sme OEM apprved, thers nt); GE (Nrth America), Siemens (Germany), Philips (Netherlands) and Tshiba (Japan) hld between 65% t 90% f MDI OEM market share (MRI, X-Ray, Ultrasund and Nuclear Imaging). Fllwing these, Hitachi (Japan) hlds under 10% market share, acrss multiple prduct categries, with Shimadzu (China) hlding <10% market share in a single prduct categry (X-Ray) 2 ; GE hlds 23% f ttal MDI market share, with Siemens at 21%, Philips at 18% and Tshiba at 13% 3 ; The market appears t perate as an ligply, substitutins are nt evident, but the develpment f lwer cst MDI equipment is being driven by develping markets and the need t penetrate, secure and grw market share. Buyer pwer is generally lw, due t fragmentatin. Prfitability remains generally high fr established OEMs, althugh high R&D csts impact the bttm line due t this there are limited pprtunities fr new entrants; The typical business strategy f OEMs is t develp custmer relatinships thrugh the sale f equipment, then grw the relatinship and revenue thrugh O&M, and ther services. Sme may als seek t lck-in clients by ffering integrated services, sftware, 1 At the time f finalizing this reprt the Bank financed a majr MDI prgram in Rmania, which is nt included in the data shwn. 2 Surce: Diagnstic Imaging Market: Glbal Frecast t 2020, Markets and Markets; Cmpany annual reprts 3 Surce: Diagnstic Imaging Market: Glbal Frecast t 2020, Markets and Markets; Cmpany annual reprts 4

5 Industry Engagement Prgram: Large Medical Diagnstic Imaging Equipment Summary r ther equipment that interfaces fr increased benefits. This can be summarized, much like ther technlgy cmpanies as a capture, secure, grw, reap and prtect market strategy; Mst Bank financed MDI equipment is prcured thrugh distributrs (usually OEM certified), and is mainly fcused n X-Ray equipment prcurement. The largest distributrs wh have been awarded Bank financed prcurements are based (rank rder) in the Russian Federatin, Switzerland, Vietnam, China and Bangladesh; The MDI sectr is represented by Industry Assciatins, mst ntably DITTA and ECRI, bth f whm are nt-fr prfit bdies that amng ther things gather gd practice, give sample specificatins, analyze and publish market data, and represent the sectr. Hwever, cmpared t ther Industry Assciatins such as FIDIC they have nt set any harmnized legal cnditins; Refurbished MDI equipment varies between 16% t 25% 4 f market share fr individual prduct lines. Prcurement f refurbished equipment is mst prevalent in Nrth America, hwever regulatry framewrks in many cuntries prevent the use f refurbished MDI equipment; MDI sectr is mving frm a supplier f equipment, t a prvider f medical care slutins with a service delivery mdel being preferred. Fr example, General Electric reprted in 2014/15 that 44% 5 f its Healthcare divisin revenue came frm service delivery it is lgical t assume that ther manufacturers have a similar revenue distributin mdel; The MDI industry is therefre cncerned that the Bank s tendency t nt finance r supprt prcurement f O&M services is a critical prblem that needs reslutin; The Wrld Health Organizatin (WHO) bserves that 70% f MDI acquired by develping cuntries will never be used due t a lack f technical capacity and insufficient O&M; The glbal MDI market is valued at US$24,733M, with annual grwth expected t be at least 6% till The highest levels f grwth are frecast in EAP at 7.2%, with X-Ray frecast t grw the highest at 50%. Grwth is impacted by increasing patient numbers, aging ppulatins and increased detectin f chrnic diseases such as cancer, Alzheimer s, cardivascular disease etc. 6 ; Licensing f MDI equipment and regulatry standards at a cuntry level is a critical barrier t entry and can limit cmpetitin. Regulatry cnvergence is prgressing thrugh the Internatinal Medical Devices Regulatry Frum, but appears smeway ff cmpletin; Due t the relatively lw expenditure n MDI (as a percentage f the Bank s IPF instrument), cupled with the high levels f cmplexity, difficulty t specify and criticality fr medical utcmes the prcurement is psitined as Strategic Security n the supply 4 Surce: Diagnstic Imaging Market: Glbal Frecast t 2020, Markets and Markets 5 GE Annual reprt Surce: Diagnstic Imaging Market: Glbal Frecast t 2020, Markets and Markets 5

6 Industry Engagement Prgram: Large Medical Diagnstic Imaging Equipment Summary psitining matrix (lwer value, but high risk) meaning that the Bank needs t secure effective supply, while nt necessarily being able t utilize cntract size/value as an incentive lever; Reflecting the relatively lw value f Bank financed prcurement cmpared t the ttal MDI market, and the industry feedback that Bank financed prcurements can be with unattractive clients in their view (such as lw capacity, lack f O&M, lwest purchase price decisin-making, pr payment track recrds etc.) the supplier preferencing is categrized as nuisance (lwer value, and unattractive); and The misalignment between the Bank s supply psitining f Strategic Security (high risk prcurements that need t succeed), with the markets view f the prcurements as a Nuisance is f great cncern. The Bank therefre needs t wrk t increase the attractiveness f its financed MDI prcurement t raise the attractiveness t a level where the market treats the prcurements as a business develpment pprtunity meaning they will be mre psitively engaged and likely t bid. Reflecting the market analysis, the attractiveness f Bank financed MDI prcurements will aim t be increased thrugh interventins as part f the nging Industry Engagement Prgram. See annex 1 fr separate actin plan. 6

7 Industry Engagement Prgram: Large Medical Diagnstic Imaging Equipment Summary Annex 1 - Actin Plan t end June 2018 Detailed belw are the key actins prpsed t begin t address the Bank s prcurement challenges in the MDI sectr: Establish Expert Panels n specificatins: Develp terms f reference Establish framewrk panel f experts Establish Framewrk t supprt MDI prject/prcurement implementatin: Develp terms f reference Establish implementatin supprt framewrk Publish Brrwer guidance n Hw t Buy Large Diagnstic Medical Equipment phased delivery f inputs belw Prject design (reflecting utcmes needed) Financing mdels t supprt better life cycle decisin-making Buy capital, r capital and maintenance, and/r training, r prcuring a service slutin (clinical need) Risk matrix and pssible risk mitigatins Mdel cntract risk allcatin matrix Different prcurement techniques and methds Market dynamics Pre-market engagement and reverse marketing Develp requirements decisin making mdel Prject segmentatin Lt strategy Specificatin develpment Setting evaluatin criteria Settings weightings and technical assessment mdels Hw t cnstruct a price schedule Determining the best value bidder Establish best practice fr warranty, peratinal, technical, training etc. Prduce mre detailed guidance n setting apprpriate terms and cnditins - phase 1 Engagement, webinars, cmmunicatins and wrkshps 7