President & CEO Generic Medical Devices Inc. USA.
Over the last two decades, technical improvements in the development of medical devices have helped create a thriving US$ 100 billion-a-year global industry.1 The expansion of innovative and original medical device manufacturing techniques has yielded remarkable biotechnological progress that has prolonged the life expectancy for patients and provided access to new life-saving procedures; but throughout this growth, standard-of-care devices have largely been ignored given their maturity in the product life cycle. As a result, the price of these devices has risen on pace with the rest of the healthcare industry, but without acquiring any new features or improvements. Now, with the application of the generic pharmaceutical model to off-patent devices, the availability of generic alternatives to branded medical devices presents an opportunity for a drastic reduction in healthcare costs in Asia and internationally.
For years, consumers have widely used generic drugs offered by the pharmaceutical industry. The idea is simple: once the patent on a brand name drug expires (usually after approximately 17 years), competitors are allowed to develop, market and sell generic alternatives as long as they offer the same safety and efficacy as their branded counterparts. By introducing these lower cost alternatives, drug manufacturers gravitate towards innovation in healthcare for newer, cutting edge pharmaceuticals.
Surprisingly, and despite the success of generic pharmaceuticals across the globe, the generic pharmaceuticals model has never been applied to the burgeoning medical device market, where large manufacturers continue to benefit from price increases on patent-protected surgical devices. These patents create barriers to entry for new competitors, enabling prices to continue to rise with little regulatory control and often with few, if any, additional innovations or improvements on those devices. This, in turn, creates financial problems for hospitals, ambulatory surgical centers and independent physicians seeking to provide their patients with the best in medical care; rising costs for devices mean either a direct rise in costs to healthcare systems, insurance providers and patients in a privatised system, or else a reduction in the number of patients who can gain access to care in socialized systems.
However, as patents expire, competitors are allowed to enter markets originally dominated by brand names. Generic Medical Devices (GMD), Inc. is the first such company to capitalize on these allowances by developing generic versions of standard-of-care surgical products no longer under patent protection. The first generic medical devices are already available: the GMD Universal Surgical Mesh, a Class II, non-active implantable medical device intended to support tissue growth in open or laparoscopic procedures (common for hernia repair), which has received 510(k) clearance for use in the United States and been submitted for CE-Marketing in Europe; and the GMD Universal Circumcision Clamp, which has been granted both FDA 510(k) clearance and CE Marking. Several additional generic devices focused on pelvic health are in the product pipeline. Each generic medical device will be offered at approximately two-thirds the cost of brand name devices, providing enormous cost savings to purchasers—which can translate into direct savings for patients and healthcare systems.
To be clear, GMD is not setting its sights on devices that are considered life-critical, highly complex from a technology stand point, consistently being improved upon or regularly replaced by new iterations. New medical devices that require years of engineering and development are not products for which generics should be manufactured. Instead, GMD is focused on devices considered standard-of-care in their respective categories, devices that have undergone little, if any, innovation since first being introduced to the market, and devices which are easily replicated and for which the company can dramatically reduce costs. By some estimates, the first GMD products could save the healthcare system in excess of US$ 360 million per year in the United States alone.
As more generic alternatives become available in 2007, the impact on Original Equipment Manufacturers (OEMs)—and consequently, the healthcare system—is likely to be immediate and encompassing. By offering efficacious products costing significantly less than brand name counterparts, the market for generic surgical devices is likely to grow quickly and steadily. Hospitals, surgical centres, and third-party payers are limited in procurement based on strict fiscal budgets. However, with generic device prices estimated at approximately two-thirds of the current market price, these organisations will now have access to high-quality, lower cost alternatives and benefit from an escalation in purchasing power, allowing them greater access to devices and the ability to provide services to a wider number of patients—whether through lowered direct costs or, in a socialized environment, through the ability to purchase more devices within the same fixed budget.
As a result of the increased purchasing power of hospitals, surgical centres, and third-party payers, it is predicted that OEMs will experience greater demand for surgical devices and increasing production quantity—in short, opening the door to a new “generic” revenue stream influenced and created by the demand from the healthcare system itself. Brand name companies will face the greatest challenge in choosing how to contend with this new competition. To protect their market share, brand name, manufacturers will need to respond by introducing lower cost alternatives of their own or adjusting to the new market prices. Either way, the healthcare industry will win as brand name companies compete to match their generic counterparts and overall prices on expensive, standard-of-care surgical devices drop.
Ideally, this will benefit Asian countries in several ways; Asian countries are already emerging as prime arenas for manufacturing low-cost medical devices, so, not only will hospitals and patients gain access to quality devices at lowered costs, but OEMs and materials manufacturers based in China, Singapore, Korea and elsewhere will experience a rise in the ability to partner with American and international companies to produce the devices.
A 2001 United Nations population study predicted that Asia’s over-65 population will increase by 314% by 2050.2 With one quarter of Asia’s population now over the age of 55,3 the demand for lower cost medical devices is ever-increasing. The increase in elderly patients will necessarily create a higher burden on the various healthcare systems—many of which have already ceased to provide sufficient governmental support for the general population. As a result of such conditions as widespread deregulation in the healthcare sector in Japan and the fact that much of the cost for healthcare falls to the individual in privatised environments like China and Taiwan, generic pharmaceuticals have been widely accepted in Asia.
According to The Asia Generic Pharmaceuticals Forecast Report published in 2006, Japan will be Asia's biggest branded generics market by the end of the decade as the government continues to cut drug costs and make hospitals and consumers more price-aware, and China's generics market will continue to expand strongly, although success will depend on brand strength as the population remains reliant on basic drugs 4. This trend demonstrates a willingness among consumers and the healthcare industry to accept products that do not carry a brand name—it is expected that generic medical devices will follow suit.
This prediction is further supported by the fact that many Asian countries, including Taiwan, South Korea and Singapore, import more than twice as much in medical devices as they export—in many cases, Asian countries are importing more than US$ 0.5 Billion in foreign medical devices each year in order to serve their ageing and expanding populations 5. With governmental programmes in place urging reduction in healthcare costs in several Southeast Asian countries and a program directed at raising the standards of medical devices and equipment used in government-owned hospitals in Malaysia 6, there is clearly a place for high-quality generic medical devices in the Asian market.
Currently, GMD occupies an industry of one, but with thousands of surgical devices in production for which generic models could be developed, there is considerable room for emerging generic manufacturers that could similarly benefit Asia and the world. Ideally, each company would focus on a unique device segment in order to best meet increasing demand and maintain the highest levels of safety and efficacy. Supported by deregulation programs in countries such as Japan intended to increased focus on innovation and thus on partnerships with foreign companies, GMD is beginning to establish partnerships with manufacturers and hospital customers throughout Asia; the potential for widespread systemic change and savings is immense.
Generic products will drive down the cost of standard-of-care devices, make room in a burdened global healthcare system for innovation, and, most importantly, give more patients access to cutting-edge treatments by correcting decades of unregulated price inflation worldwide. GMD’s entry into the device industry has opened the doors to a whole new market opportunity for OEMs and new generic device manufactures—and the potential impact on the market is just now being defined. Ultimately, hospitals, third-party payers and patients will drive the industry shift by choosing brand name quality at generic prices.
4 The Asia Generic Pharmaceuticals Forecast Report, July 2006,