Chinese, Japanese, and Indian companies are undercutting their American and European competitors to win business in the region.
Originally published in Medical Device and Diagnostic Industry, Orthopedics
The large and small joint reconstruction device markets in Japan, India, and China are together worth billions of dollars—and they continue to grow. Although patients in these countries are more inclined to undergo a procedure related to large joint reconstruction and this segment has a significantly larger market size, the small joint market is also expected to see growth.
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Domestic manufacturers capitalizing on government support and their ability to keep production costs comparatively low are gaining market share over their European and American competitors.
Large Joint Products are Crucial for Daily Life
In Japan, India, and China, large joint replacement products, such as hip and knee implants as well as bone cement, reign supreme over small joint products, which include shoulder, elbow, hand and wrist, and foot and ankle reconstruction and fixation devices. Paramount among the many reasons for this is that patients demand treatment for hip, knee, or large-bone damage. With these injuries, impairment can result in near complete loss of mobility. Consequently, inability to function in complex and even day-to-day activities may prove detrimental to patients’ capacity to provide for their families.
Patients are less likely to feel it is necessary to repair an injury to an extremity (normally smaller bones and joints), especially if they do not have the resources readily available. Low-income patients, for example, may not be able to afford a finger replacement and will instead endure daily life without reconstruction. Although all orthopedic devices are intended to provide relief from pain, discomfort, and physical impairment to patients with mild to severe injuries, large joint reconstruction devices are simply more crucial for basic functionality than small joint products. Large joint products, therefore, command a greater market share.
In the past, there have been far fewer doctors trained to perform small joint-related operations, but an influx of young, newly-trained, and capable doctors is emerging in Asia. This should result in significant growth of the small joint reconstruction market. Despite less demand for small joint procedures, this segment is growing in all three countries. In 2012 the large joint market in Japan exceeded $1.3 billion, as compared with Japan’s much smaller $69.5-million small joint market. The market in India is expected to grow by double digits next year.In addition, China had significantly higher market value, upwards of $673 million, of which knee products alone accounted for $364 million.
Strongest Competitors in Asia
The majority of competitors in the large joint reconstruction markets in Japan, India, and China are major manufacturers from the U.S. and Europe. Companies such as DePuy Synthes, Zimmer, and Stryker have solidified themselves worldwide by producing high-quality large joint implant products and dedicating a multitude of resources toward research and development in emerging markets. The Asian large joint reconstruction market is no exception.
Zimmer, Stryker, and DePuy Synthes are, respectively, the top three competitors in both the Japanese and Indian large joint markets, but Smith & Nephew holds the second-largest share in the Chinese large joint market, leaving Stryker with only the fourth-largest share. Though the DePuy Synthes merger has not been finalized in India, the companies of Johnson & Johnson (DePuy) dominate the Indian large joint market, commanding nearly half of the market share.
In the small joint market, DePuy Synthes leads in the Japanese and Chinese markets, with a little less than one-third of the market share. Acumed held the second position in the Japanese small joint market, with almost 20% share. Stryker leads the Indian small joint market and is also a strong player in the Japanese and Chinese markets.
Asian Companies Gain Ground
Governmental regulations enforcing greater domestic presence and reduced product pricing have allowed domestic companies to gain an edge in Asian device markets for both small and large joints. This trend will continue, especially in China, where centralized tendering should lead to the government favoring resource and property allocation toward domestic manufacturers.
In India and China, there are a large number of small, domestic plants which, due to relatively lenient regulations, have begun manufacturing cheap screws as well as metal, ceramic, and plastic bearings, and metallic plates. Though the products are of lower quality than those manufactured by larger U.S., European, and even larger Asian corporations, they offer much lower prices and, consequently, have been able to capture a great deal of market share. The large number of citizens unable to afford procedures due to low annual incomes and little to no healthcare access will keep these small manufacturers alive and thriving until government regulations impose stricter guidelines for improved product quality.
In addition, there are many products with few components (plates and screws), particularly those used for arthrodesis of the foot, ankle, and wrist in the small joint market. Small manufacturers can produce these plates and screws at a high volume with low operation costs. U.S. and European companies can’t provide such a low price point, adding to the barrier for domination of the Indian and Chinese markets. Some examples of the Asian domestic players are Weigao and Trauson in China, Nakashima Medical and Kyocera in Japan, and Sancheti in India.
The market landscape is somewhat different in Japan, where it closely resembles that of the United States. Both markets encourage the highest quality products and the majority of the population can afford mandatory procedures, due to high government reimbursement rates and initiatives to reduce product prices.
One way the Japanese market differs from the U.S. market is in its high stringency of the regulations surrounding new and innovative products. These regulations pose difficulties for American and European companies trying to build a stronger presence in Japan because they cannot market their newest and more expensive products.
The large and small joint reconstruction device markets will continue to grow at very high rates in Japan, India, and China. Large joint products will continue to thrive as patients demand repair for hips, knees, and large bones. As elective procedures become more affordable, the small joint reconstruction device market will benefit the most. Domestic players in Asia are taking advantage of government support and lower production costs. Although currently the majority of the companies selling products in Japan, India, and China are from the United States and Europe, these smaller domestic players will continue to gain momentum.
Kamran Zamanian is president, CEO, and a founding partner of iData Research Inc. (Vancouver, BC). He holds a bachelor’s degree in engineering from the University of Dundee and earned master’s and doctorate degrees in market research and technology from the University of Manchester. Reach him at [email protected].
Dylan Freeze is a medical market research analyst at iData Research. He studied biology at the University of Victoria, focusing on genetic, molecular, and organismal biology. Contact him at [email protected]