Asia's Cardiovascular Markets: A Large Opportunity for Medical Companies

Originally Published MDDI July 2003

INTERNATIONAL AFFAIRS

The prevalence of heart disease is on the rise in Asia, prompting some medical firms to explore the region's growing markets.

Ames Gross and Caroline Tran

As Asian countries begin to adopt more-Western lifestyles and diets, the number of deaths caused by Western diseases is increasing in those nations. In the 1940s, the main causes of death in Japan were tuberculosis, pneumonia, and gastroenteritis. Beginning in 1958, however, heart disease became the third-leading cause of death in Japan. By 1985, it had climbed to number two. In China, diseases such as cholera, typhoid, and scarlet fever have been all but eliminated by Western medicines and preventive efforts, such as vaccination. Instead, cardiovascular disease and cancer are among the more widespread illnesses (see Tables I and II).

Economic transition, urbanization, and technological development have brought about lifestyle changes that have increased the chances for heart disease in Asia. Developing countries are adopting a more Westernized way of life. Many are struggling to free themselves, as some already have, of malnutrition and infectious diseases that stem from Third World living standards.

But at the same time, they are entering a world of new risk factors, such as increased tobacco use, lack of physical activity, and unhealthy diet.

Western diets contain more high-fat and high-salt processed foods compared with traditional Asian diets of fish or fresh vegetables.

Jiang He, associate professor in the department of epidemiology at the Tulane University School of Public Health and Tropical Medicine, says, "I visit China every year. There are traffic jams, a lot of people getting fat. Same problems as in the United States. A lot of McDonald's, Kentucky Fried Chicken, and Pizza Huts. The Chinese eat a lot of Westernized food."

People are also experiencing higher levels of stress caused by the quickened pace of life. As Asians adopt these Western living and eating habits, Western diseases such as cancer and heart disease have also become more prevalent in Asia. Three-fourths of all deaths by heart disease in Asia are caused by the known risk factors mentioned above.

Asia's more-developed countries have been endeavoring to find different means to battle heart disease through their own research. For example, Singapore announced on December 17, 2002, that it would be the first country in Asia to conduct clinical trials for a stent coated with an anticancer drug. The drug, Paclitaxel, is meant to prevent restenosis, the narrowing of the arterial walls after a stent is inserted to unblock an artery. Paclitaxel is the active ingredient in the cancer medication Taxol produced by Bristol-Myers Squibb (New York City). More than 150 patients have been implanted with the drug-coated stent at Singapore's National Heart Center, and at the National University Hospital.

In Korea, the Kwangju Institute of Science and Technology announced on August 12, 2002, that it has succeeded in uncovering the functional role of junctin, a protein believed to cause heart disorders. Kim Do-han, head of the research team at the department of life science, states that junctin has a significant effect on heart function. Junctin is an important membrane protein that can influence the contraction and relaxation of the heart muscles when it merges with calcium ions. It was discovered that expression of excessive junctin in mice hearts has caused heart enlargements, occurrence of bradycardia (abnormally slow heartbeat), and has also led to a calcium metabolism disorder. Kim comments that "The discovery of the functional role of junctin in the heart will help develop new drugs regarding human heart disease."

Foreign Medical Companies and Successes in Asia

The prevalence of cardiovascular disease in Asia has prompted some foreign medical companies to enter the Asian marketplaces to fill the growing demand for Western cardiovascular products. Western medical manufacturers are taking advantage of this opportunity in Asia by increasing medical product exports to the region in addition to local production.

To be successful in Asia, Western medical companies must determine an appropriate entry strategy that is compatible with the current economic conditions and regulations of a given Asian country's medical market. In the past decade, most medical technology companies have entered the Asian markets through some variation of the following methods: direct establishment of manufacturing facilities in the region, establishment of joint ventures with local manufacturers, and distribution agreements with local distributors.

Japan. Japan has a $23 billion medical device market—the second largest in the world. But the Japanese medical environment is vastly different from that of the United States. In Japan, patients rarely question a doctor's diagnosis or treatment. This is the opposite of the United States, where patients are encouraged to ask questions and understand the medical treatment they are undergoing.

Owing to the authority of medical doctors, the profits made on drug sales, and the acquiescence of patients, doctors prescribe three times more medication in Japan than in the United States. As shown in Figure 1, the average hospital stay in Japan is also considerably longer at 38 days, while in the United States, the average stay is 2.7 days.

The Japanese government covers the majority of medical costs for its people through a national health insurance program.

In Japan, almost all medical procedures (including drugs, medical devices, etc.) are reimbursed, including over-the-counter medications such as Tylenol. The Japanese government, however, is now in the process of restructuring its national health insurance to shift more medical costs to the Japanese people. Regardless, demands for Western medical products in Japan are rising significantly because of the effectiveness of these products, cost-saving reasons, and the willingness of Japanese consumers to spend money for these Western goods.

Owing to the strong demand for Western cardiology products, foreign medical companies have increased their presence in Japan. On September 17, 2002, St. Jude Medical (St. Paul, MN) announced that the company intends to acquire their Japanese medical product distribution company, Getz Bros. Company, Ltd. (Tokyo). The two parties signed a stock purchase agreement.

The Japanese public company is the largest distributor of St. Jude Medical's products and is also a distributor of several product lines from other medical device manufacturers. St. Jude Medical will pay $220 million by the second quarter of 2003 to obtain all of Getz Bros.' outstanding common stock. St. Jude Medical's mechanical heart valves and diagnostic electrophysiology catheter products are currently the top sellers in Japan. Their pacemaker products are in the number two market position.

In addition, St. Jude Medical launched its 4F Spyglass angiography catheters and Maximum introducer kits into the Japanese market on November 11, 2002. The 4F Spyglass provides excellent flow rates for angiographic images as a result of the firm's proprietary braiding technology. The Maximum introducer kit was designed for Japanese patients and is available in a variety of French sizes. St. Jude Medical is also waiting for approval from Japan's Ministry of Health, Labor and Welfare to market the Angio-Seal vascular closure device in Japan.

China. China, the world's most populous country with 1.3 billion people, has the second-largest medical device market in Asia—worth over $2.2 billion in 2001. The State Drug Administration (SDA) regulates healthcare in China. The scope and function of the SDA are very similar to that of FDA in the United States.

Though not nearly as large as the Japanese market, some predict that the size of China's healthcare market will surpass that of Japan in several decades. Yet China is still behind in its ability to produce advanced medical products. It also lags behind in research and development capabilities.

The Chinese government is attempting to encourage greater investment in the medical sector by providing incentives to foreign medical companies through tax breaks. Special economic zones and industrial parks have been established in many areas of China in order to attract foreign medical manufacturers.

A major player in the Asian market for cardiovascular devices is Cardiodynamics International Corp. (San Diego). Cardiodynamics is the world leader in impedance cardiography (ICG) technology and manufactures the BioZ noninvasive digital cardiac function monitoring systems.

On October 29, 2002, Cardiodynamics signed an amendment with Beijing Changsheng Medical Technology Company, Ltd. (Beijing; CardioDynamics' distributor since 1998). Beijing Changsheng has agreed to purchase a minimum of $2.25 million in BioZ Systems over the next three years.

"There is a serious need for the BioZ, with heart disease being responsible for over nine million deaths in China every year," says David An Wei, general manager of Beijing Changsheng Medical Technology Company, Ltd. "The BioZ provides our physicians with quick, noninvasive, and cost-effective access to vital data about the heart, and is needed in over 10,000 hospitals here in China."

Another company strengthening its presence in China is Siemens Medical Solutions (Erlangen, Germany). In 2002, Siemens Medical Solutions and Shenzhen Mindit Instruments Company, Ltd. (Shenzhen, China) established a joint venture called Siemens Mindit Magnetic Resonance Ltd. The joint venture was set up to produce 0.35-T permanent-magnet systems for magnetic resonance imaging (MRI) systems in China. Siemens Mindt Magnetic Resonance Ltd. will be one of the first Chinese companies to manufacture and sell the systems in China.

On October 7, 2002, Computer Motion Inc. (Goleta, CA) announced that the two leading cardiac centers in China have successfully performed cardiac procedures utilizing Endo-ACAB (endoscopic atraumatic coronary artery bypass). The procedure, developed by Computer Motion and the world's leading cardiac surgeons, is performed using the company's AESOP Robotic Endoscope Positioner and procedure kit. Qiang Zhao, MD, of the Zhong San Hospital (Shanghai) remarks, "I have found the procedure to be an excellent minimally invasive treatment for heart disease patients requiring a left internal mammary artery to left anterior descending coronary artery bypass graft. The addition of AESOP provides me with the image steadiness to perform the procedure safely and comfortably."

Taiwan. Taiwan's medical device market is considerably smaller than Japan's at about $800 million (2002). Nevertheless, it is important to foreign medical companies because more than 85% of medical devices in the country are imported.

The Taiwanese government also covers many of the medical expenses of its citizens. Costs for drugs and medical treatment are reimbursed according to government guidelines.

Like Japan and Korea, however, Taiwan is undergoing a restructuring process intended to decrease the government's responsibilities to shoulder medical cost burdens. Despite increases in healthcare prices—particularly for those products made by foreign medical manufacturers—the Taiwanese enjoy a high standard of living and continue to demand Western medical products that have proved to be more effective than local, generic products.

As in China, Cardiodynamics has also been performing well in Taiwan. Cardiodynamics has been selling in the Taiwanese market since August 2000. Despite Taiwan's poor economy in 2001, Cardiodynamics' Taiwanese distributor, Disney Distribution (Taipei), ordered 15 extra BioZ systems from the company to meet increasing demand. Cardiovascular disease is the third-leading cause of death in Taiwan.

Philippines. At the other end of the Asian medical markets spectrum is the Philippines. Unlike Japan or Taiwan, the Philippines does not have a large medical device market (only about $250 million in 2001). And per capita income is low at $1050, compared with Japan, at $28,000, and Taiwan, at $13,000. But as a result of its historical connections with the United States and its highly educated, English-speaking population, the country is also a prime location for investment by foreign medical manufacturers.

Johnson & Johnson Medical Philippines (Manila) recently introduced the much-publicized Cypher sirolimus-eluting stent into the local market. The stent is used to permanently prop open a coronary artery, preventing the need for repeated procedures to treat restenosis.

Johnson & Johnson's stent is coated with sirolimus, which acts as an immune-system suppressant. It is considered the first of its kind approved by the Filipino Bureau of Food and Drugs. Studies showed in a U.S. clinical trial that the use of the sirolimus-coated stent led to a 72% reduction in restenosis. This new technological breakthrough is of considerable value to the Philippines where heart disease, including coronary artery disease, is currently one of the leading causes of death.

Conclusion

As heart disease continues to be one of the leading causes of death in Asia, more Western medical companies will enter Asian medical markets (or expand their current operations) to respond to the growing demand for medical products. Foreign medical companies will assist in the fight against heart disease in Asia through their cooperative efforts with local companies, as well as through their own initiatives. At the same time, local Asian medical companies will continue to develop their abilities to find their own solutions to heart disease.

Ames Gross is president and Caroline Tran is senior associate of Pacific Bridge Inc. (Washington, DC).

Photo by GARETH JONES/GETTY IMAGES

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