Succeeding In The Latin American Medtech Market: Three Tips, Five Trends

By Julio G. Martinez-Clark, CEO, bioaccess

Latin America is developing into a sizable, predictable part of the global medical device market, allowing foreign manufacturers to have sustainable commercial operations. The Latin American market for medical devices and equipment currently was valued at approximately US $29 billion in 2016.

That said, it always is difficult to enter a new market. Language barriers, cultural misunderstandings, excessive regulations, bureaucratic hurdles, and corruption all are contributing factors that can diminish success — or lead to defeat.

Still, the risk can be worth the reward. According to Global Health Intelligence (GHI), deep epidemiological, demographic, and market shifts are taking place in Latin America and the Caribbean (LAC), and demand grew sharply for certain types of equipment between 2016 and 2017.³

• 34 percent growth in electrocardiogram machines in Brazil
• 104 percent growth in hemodialysis machines in Panama
• 67 percent growth in infusion pumps in Guatemala
• 76 percent increase in X-ray machines in Costa Rica
• 24 percent growth in MRI machines in Mexico
• 41 percent growth in laparoscopic surgery equipment in Colombia
• 7 percent growth in CT scanners in Brazil
• 56 percent increase in ventilators in Guatemala
• 50 percent growth in linear accelerators in Argentina

This column examines strategies and trends to consider when breaking into the Latin American market. First, I’ll address some common mistakes, and how they can be overcome, and then I’ll look at trends shaping the Latin American market moving forward.

1 — Don't Start In Brazil Or Mexico

Most companies first enter the LAC region through its largest markets, Mexico or Brazil. However, these countries are costly and complicated pilot markets for a regional entry strategy.

Brazil is Latin America’s most complicated, bureaucratic business environment, with onerous local regulations, a myriad of taxes to report, costly labor regulations and social taxes, a high cost of capital, expensive real-estate, poor infrastructure, crippling traffic, and a conflictive legal environment. Most foreign entries take about three times longer to reach positive returns in Brazil versus any other Latin American market.

The Mexican market is far easier to enter than Brazil, but as a result, the competition is a lot fiercer. Mexico’s political class remains stuck in an age of bloated corruption. The smarter move may be to start in a mid-size or even small Latin American market — such as Colombia, Peru, Panama, Guatemala, or even Argentina — where the learning curve is less costly, and competition remains weak, but red tape is not too onerous.

2 — Be sensitive To The Language And The Culture

LAC has the third-largest economy in the world, by GDP, with a healthcare expenditure comparable to that of China or India.¹ The region is home to over 600 million residents in over 30 countries, and almost all speak either Spanish or Portuguese. These languages are closely related to the point of general mutual intelligibility, resulting in a high localization return on investment for the foreign manufacturer expanding through the region.

3 — Don't Award Market Exclusivity To A Single Distributor Or Agent

Most LAC markets are highly centralized, with anywhere from 60-90 percent of wholesale activity centered in the capital city. However, three countries are not structured as such: Brazil, Colombia, and Mexico. In those markets, it is almost impossible to find a distributor with true national coverage and reach — though they might insist otherwise when you meet them at a trade show.

You should consider engaging multiple distributors in a country, divided by region, sales channel, or client category. Exclusivity of any kind should be tied to minimal sales goals. It’s key to conduct due diligence when choosing a distributor in the LAC region. Many foreign manufacturers loosely choose their distributors at trade shows — relationships that usually end in disappointment when distributors don’t meet their sales quotas.

You can’t afford to wait three years to determine whether your distributor was poorly chosen, and nothing inspires performance like competition. If you have multiple distributors in a market, and they are aware of one another’s performance, then your likelihood of success is high. If you are at the mercy of one distributor, your probability of underperformance is worrisomely high. LAC markets represent 9 percent of the world’s GDP and 10 percent of the global population.² You should expect the region to capture no less than 9-10 percent of your company’s global sales. 

Distributor choice also affects your company’s regulatory strategy. Consider the case of Colombia; its national regulatory agency — INVIMA — requires foreign manufacturers to name one importer of record in their registration application. However, if you choose a distributor as your importer of record, you will be limited to having only one distributor in Colombia — as opposed to having several distributors, covering the whole country. Thus, it is advisable that foreign manufacturers with more than one distributor in Colombia, choose a third-party logistics company as their importer of record.

5 Trends Propelling Latin America’s Medtech Business

Along with 2016-2017 growth data, GHI identified the following healthcare sector trends in the LAC region.³

1. Obesity And NCDs Expand

The number of non-communicable diseases (NCDs) —also known as chronic diseases, and often linked to lifestyle and daily habits — such as cardiovascular disease, cancer, chronic respiratory disease, and diabetes, have dramatically increased in Latin American and Caribbean countries. Comparisons of the prevalence of risk factors across the six World Health Organization (WHO) regions highlight the worrying state of health in the LAC region.⁴

2. Aging Population

People in the LAC region are aging faster than the rest of the world. Some estimates say that, by 2060 about 30 countries in the LAC region will have a greater proportion of older people than children under 15.⁵ There are 71 million people over the age of 60 in the LAC region; that number is expected to double by 2035.

3. The Population Is Getting Connected

By 2020, more than a billion individuals across the LAC region will be connected to a mobile network; this is equivalent to about three-quarters of the region’s population. There’s been a regional surge in smartphone adoption in recent years. Today, smartphones account for about 60 percent of the 690 million connections on mobile networks in the LAC region.⁶ The expansion of smartphone usage in Latin America is driving the growth of health apps and other areas, such as cybersecurity at hospitals, remote care/telemedicine, and home care. This also will drive demand for EMR systems and their associated cybersecurity solutions throughout the region.³

4. Hospitals Beef Up To Keep Up

Latin American hospitals are implementing electronic medical records (EMRs), picture archiving and communication systems (PACS), and radiology information systems (RIS).³ Almost half of all the hospitals in the LAC region have implemented EMRs, and EMR adoption is expected to grow at about 7.15 percent per year.⁷ This is particularly important for EMR, PACS, and RIS manufacturers, since the adoption of EMRs usually drives the adoption or expansion of PACS and RIS technologies. 

5. Hospitals Need Tools To Track Costs And Increase Efficiencies

Hospitals have logistics operations that continuously move large volumes of material among labs, pharmacies, pantries, and administrative units. While this logistics function has cost, quality, and safety implications, it likely is not core to hospitals’ mission of providing patient care. Latin American hospitals face a challenge when it comes to creating cost efficiencies while running their logistics operations. Controlling costs requires the right tools and equipment, and that’s where hospital suppliers can prove their worth by supplying the right software and tools.³

Conclusion

The LAC region is made up of over 30 countries, which makes market penetration and regulatory compliance more complicated and labor-intensive. In the past, eager companies have struggled — and even failed — in this market due to their unfamiliarity with the local regulatory and cultural environment, which can prove to be a significant hindrance, and potentially waste precious time and resources.

Too many medtech leaders fail to see the light at the end of the tunnel. The four major non-communicable diseases (cardiovascular disease, most cancers, diabetes, and chronic respiratory diseases) will cause 81 percent of deaths in Latin America by 2030.⁸ Insufficient domestic medtech production across the region leaves an open market for U.S. and European exporters. Still, some LATAM countries have difficult-to-navigate processes that, despite a growing trend of foreign registrations, remain challenging for many foreign companies. However, the regulatory landscape is changing in an attempt to bring state-of-the-art technologies to the people, though some LATAM countries offer expedited approval routes for devices that already are FDA-approved or CE-marked.

About The Author

Julio G. Martinez-Clark is CEO of bioaccess, a U.S.-based contract research, regulatory, and market access consulting company focused on Latin America. Julio holds a bachelor’s degree in electrical engineering (B.S.E.E.), and a master’s degree in business administration (M.B.A.).

References

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2. How Marketing is Evolving in Latin America. (2015). Retrieved from https://hbr.org/2015/06/how-marketing-is-evolving-in-latin-america.
3. 5 Mega Trends in Latin American Healthcare: A look at major shifts in 2018 and for decades to come. (2018). Retrieved from http://globalhealthintelligence.com/ghi-analysis/the-top-2018-trends-in-latam-healthcare/.
4. Economic Dimensions of Noncommunicable Diseases in Latin America and the Caribbean. (2016). Retrieved from http://iris.paho.org/xmlui/bitstream/handle/123456789/28501/9789275119051_eng.pdf?sequence=1&isAllowed=y&ua=1&ua=1.
5. With an aging population, the U.S. and Latin America are ‘in a race against time’. (2017). Retrieved from http://nmpolitics.net/index/2017/08/with-an-aging-population-the-u-s-and-latin-america-are-in-a-race-against-time/.
6. A look at the mobile ecosystem in Latin America. (2018). Retrieved from https://www.idgconnect.com/blog-abstract/29307/a-look-mobile-ecosystem-latin-america.
7. Electronic Health Records (EHR) System Market in Latin America 2015-2019. (2015). Retrieved from https://www.businesswire.com/news/home/20150615006568/en/Research-Markets-Latin-America-EHR-Systems-Market.
8. Noncommunicable Diseases in Latin America and the Caribbean: Youth Are Key to Prevention. (2013). Retrieved from https://www.prb.org/noncommunicable-diseases-latinamerica-youth-datasheet/.