You've heard about the rise of the emerging markets in the medical device industry, but this time, there's a new twist on the trend.

The promise and rapid growth of healthcare in the emerging markets is old news by now. The potential of the medical device industry in emerging markets is often touted by large multinational companies that have meaningful presences in both developed and developing countries.

That dynamic is starting to change, according to the findings of a new report from The Boston Consulting Group (BCG). Now, the authors of "Medtech May Be Emerging Markets' Next New Thing," project that local medtech companies in emerging markets like China and India may grow quickly to meet increasing demand for healthcare. In doing so, these local companies may become well-known names in their own right and provide competition to multinationals operating in these emerging markets.

"The multinationals' advantage could change quickly . . . Local medtech companies understand these markets and know how to adapt product and business models to the needs of customers," the BCG authors wrote. "They are also increasing their R&D spending and expanding their footprint through M&A."

While acknowledging that there are few medtech firms among those emerging-market companies that are growing at the most impressive pace, the authors wrote that "the emerging-market medtech companies certainly have the potential to grow rapidly from a small base . . . the emerging-market medtech industry is showing signs that it, too, is on the early, steep slope of the S curve." They note that Chinese companies are growing at a higher rate than medtech companies based in the West.

Some companies that have already had success winning major slices of market share in certain areas of the medtech industry include Biosensors International, Lepu Medical, and MicroPort in the Chinese drug-eluting stent market, and Transasia in the Indian in vitro diagnostic equipment and reagents market, according to the report.  

Home-grown medtech talent has several key advantages in the emerging markets, the authors note. These include lower costs, products optimized for the local market, novel commercialization strategies, and support from government.  

Lower costs, for instance, can be the result of reduced spending on branding and optional features without sacrificing function, the authors explain. Since these companies usually don't have sales channels and business strategies already in place, they have the ability to quickly adopt new, flexible methods for selling products, too.

Flipping the script on the usual trend of multinationals entering emerging markets, these emerging-market companies are starting to enter developed markets, acquire companies based in developed countries, and invest in R&D in order to increase their sales and their size, the report notes.

Still, it's not all rosy for these emerging-market medtech companies. There are clear obstacles. "For emerging markets, challenges come from smaller players who have an even lower cost structure," Ying Luo, a report author and BCG partner based in Beijing, told Qmed via email. "Those smaller players are competing with challengers for mid-low end market segments."

Luo added, "For developed markets, the challenge is that many MNC [multinational] players still dominate those markets as a result of better technology, brand, and channel. It's challenging to steal market share from the incumbent players."

The report also includes several bits of advice for multinationals in the medtech industry. This includes doing work to understand what emerging-market customers need and changing products to respond to those needs, cutting costs, adapting sales strategies for the local market, and possibly buying emerging-market companies to gain these advantages.

"Multinational companies looking to compete with those in emerging markets should maintain technology leadership as well as maintain share in their premium segment," said Luo. "At the same time, they must capture the value segment opportunities and achieve cost leadership."

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