Pandemic changes the demand for medical products

Thomas Hundt

A LARGE MARKET WITH SOLID PROSPECTS

The Thai market for medical technology is considered the largest in Southeast Asia. The market researchers at Fitch Solutions last estimate of sales was around US$1.7 billion in 2019. They predict that it would grow by 5 per cent annually in the medium term. Demand will shift to higher-quality technology and more digital applications. These trends are now gaining momentum due to Covid-19.

HEALTH-CARE SERVICE HAS COVID-19 UNDER CONTROL

The Covid pandemic is the dominant topic. Public health authorities and health-care services have made strenuous efforts to contain the corona waves and provide sufficient care for Covid patients.

The World Health Organization (WHO) describes the public health system as strong to fight a pandemic. One million voluntary health workers who are also epidemiological qualified support the fight against the pandemic. Health services have tackled even the contagious delta variant successfully that had spread in the country from mid- to late-2021.

The health system quickly adapted to the emergency situation. Necessary devices and protective equipment were purchased worldwide. From January to October 2021, imports of medical technology rose by 17 per cent compared to the same period in 2020.

Imports of respirators and defibrillators even increased threefold during this period in2021. But imports of electromedicine and ophthalmological equipment, of which Germany supplied 11 per cent and 35 per cent of the devices, recorded only slight increases.

The vaccination campaign and booster vaccinations should ease the situation in 2022. However, due to the on-going control and precautionary measures, demand for medical protective equipment, thermometers and scanners as well as for equipment for cleaning and disinfection will remain high.

HEALTH-CARE SYSTEM PREPARES FOR LONG TERM CHALLENGES

According to the latest calculations, Thailand spent about US$ 21 billion on health care in 2019. Expenditure on health care is growing even faster than gross domestic product (GDP). The share of GDP rose from 3.1 per cent to 3.9 per cent from 2005 to 2019, but it is still far below the ratio in Western countries.

The citizens are on average already 40 years old. That is, the second oldest population in Southeast Asia. The leader is Singapore. The birth rate is low at only 1.5 births per woman, Therefore, World Bank estimates that the proportion of people over 65 in the population will double to 25 per cent by 2040.

The Thai health-care system is already adapting to different requirements and special diseases of the elderly. Hospitals and clinics are buying more geriatric medicine, and real estate companies are building special residential complexes and nursing homes for wealthy retirees.

Aging and different lifestyles of the wealthy generation also increase disease risks. Being overweight leads to more diabetes and lack of exercise leads to more cardiovascular diseases. Increasing air pollution and smoking are causing respiratory diseases.

TRAINING FOR DOCTORS AND TECHNICAL STAFF

Around 10,000 public health centres and 1,054 public hospitals take care of health especially of people with low and middle incomes. Thailand’s Ministry of Public Health is in charge of 948 hospitals, while 61 hospitals belong to the Ministry of Defence and 21 to the Ministry of Education. The rest belong to other ministries and government agencies.

The WHO estimates that there are about 64,000 doctors in Thailand. Although that number of doctors is about one-third above the average in Southeast Asia, it is lower than in Western countries. In particular, the availability of facilities in rural areas is not sufficient and needs to be expanded.

According to experts, there is also a need for further education and vocational training. The introduction of new equipment therefore requires easy-to-understand training materials and comprehensive training.

The coronavirus is also driving investment in digital health. The Ministry of Public Health is endeavouring to link public and private health facilities more closely as well as introduce central electronic health records and digitally analyse medical data.

A HUB FOR CUTTING-EDGE MEDICINE

Thai university hospitals train the majority of doctors and nursing staff. Some of their specialist departments are researching and developing cutting-edge medicine and require therefore state-of-the-art medical and laboratory equipment.

Dentist volunteer in Chiang Rai

Medical education has a long tradition. The Faculty of Medicine at Siriraj Hospital as well as Mahidol University exist since 1888. Siriraj Hospital is the largest in the country and has more than 2,100 beds.

Rajavithi Hospital in Bangkok has more than 1,200 beds as well as centres of excellence and training facilities that introduce new technologies. The King Chulalongkorn Memorial Hospital with about 1,400 beds and Ramathibodi Hospital with 1,300 beds are other general university hospitals. Maharaj Nakorn Hospital in Chiang Mai has 1,400 beds and Srinagarind Hospital in Khon Kaen has 1,500 beds.

Siriraj hospital, the oldest and largest hospital in Thailand, founded in 1888

BASIC HEALTH MUST BE AFFORDABLE

The Ministry of Public Health will receive a budget of approximately US$4 billion in 2022. A further US$5.9 billion will go to the National Health Security Office (NHSO), which pays for the mostly free public healthcare services.

NHSO manages the Universal Healthcare Coverage Scheme (UCS). Approximately 47 million people, two-thirds of the Thai population, use the accredited UCS facilities who settle their service expenses with the NHSO according to a fee regulation. There are upper limits and many treatments require supplementary payments by the patient.

However, the UCS budget accounts for 34 per cent of total health expenditure. Another 36 per cent is paid by citizens and foreign medical tourists out of their own pockets, while 12 per cent is allocated by social security payments for employees in private companies. Around 18 per cent of the expenditure is paid by the state for public sector employees.

PROFIT-ORIENTED HEALTH-CARE INDUSTRY

Private health-care facilities work profitoriented and their services are focused on wealthy self-paying patients as well as privately insured persons. They promote the use of latest examination methods and of the latest technology as part of their services. The 378 private hospitals and the approximately 25,000 private clinics therefore regularly renew their equipment.

Bangkok Dusit Medical Services (BDMS) is the largest health-care group in the country and number two in Southeast Asia after IHH Healthcare from Malaysia. The BDMS Group owns 49 hospitals, whose number of beds is to be increased from 9,000 to 9,500 by 2025. In the first nine months of 2021, however, BDMS recorded only a slight increase in its revenue to approximately US$1.6 billion. The lack of medical tourism, due mainly to Covid-19, put pressure on its income in 2020 and 2021.

Bangkok Chain Hospital (BCH), on the other hand, doubled its revenues from January to September 2021 compared to the same period in 2020 to around US$460 million. Taking care of Covid-19 infected people, co-operation with quarantine hotels and the opening of new hospitals increased sales, while private customer business was weaker.

For the first nine months of 2021, Ramkhamhaeng Hospital also reported a strong increase in revenue from acquisitions to around US$310 million and aims to implement new projects.

Bangkok Dusit Medical Services information booth for arriving passengers at Suvarnabhumi International Airport

According to the last industry census in 2016, local production of medical devices and instruments was around US$1.6 billion and has hardly increased since then.

Hospital company Bumrungrad International plans a US$380 million expansion of its health campus in Bangkok. The revenue of the company, which specializes in medical tourists, shrank by 9 per cent from January to September 2021 to the equivalent of approximately US$270 million.

Revenue from the Thonburi Healthcare Group grew by 45 per cent from January to September 2021, to approximately US$210 million. The admission of Covid-19 patients and the set-up of field hospitals supported the upswing. The group plans to invest approximately US$34 million in its Thonburi 1 and Thonburi 2 hospitals in Bangkok in 2022 and 2023.

AN IMPORTANT MANUFACTURER OF MEDICAL PRODUCTS

According to the last industry census in 2016, local production of medical devices and instruments was around US$1.6 billion and has hardly increased since then. The Thai Office of Industrial Economics has reported that the production volume from January to September 2021 was approximately the same level as of 2016.

The Medical Devices Intelligence Unit of the Statistics Department, Ministry of Commerce, estimates that there is a total of around 500 active industry companies. Around one-third of these are manufacturing companies. The others work as distributors or other service companies.

The factories produce rather simple products such as hospital beds, wheelchairs or dental chairs. The more sophisticated product range includes sets for infusion and transfusion (output in 2020, 1 billion pieces), ophthalmic lenses (262 million) as well as reagents, needles and orthopaedic aids. Foreign manufacturers, especially from Japan, have also established factories.

Medical products based on rubber are another stronghold. Thailand is the world's largest producer of natural rubber, so a large downstream medical rubber industry has developed, producing catheters, medical latex gloves as well as condoms. The production of medical gloves increased even before Covid-19 and it has been growing exorbitantly since the pandemic.

Rubber gloves production line

INVESTMENTS INCREASE

Sri Trang Gloves is considered the world's fifth-largest manufacturer of rubber gloves and doubles its capacity from 37 billion to 80 billion pieces by 2024. The companies Mercator Medical (from Poland), ZouPure Glove (Thailand), Sri Chon Glove (Thailand) and Dr. Boo (Thailand) are also currently building new plants. Other large manufacturers are Top Glove from Malaysia as well as Thailand M.R.I., Siam Sempermed, Shun Thai Rubber Gloves and W.A. Rubbermate.

The Thailand Board of Investment (BOI) has also reported a sharp increase in investment applications from medical material manufacturers. Depending on the technical level of production, the BOI grants manufacturers of medical technology exemptions from corporation tax of three to eight years, allows duty-free import of machinery and intermediate products, and helps with the acquisition of land and work permits for foreigners.

The Medical Devices Control Division of the Thai Food and Drug Administration (Thai FDA) monitors the import, sale and manufacture of medical devices. It registers new products according to the four international risk classes.

Approvals and notifications take 200 to 300 days, depending on the class and are limited to four or five years, according to the U.S. Department of Commerce. The Thai FDA is currently adjusting the approval process. Many products therefore have to be reregistered. The authority provides guidelines and forms on its website.

SMART MARKETING

Most internationally known suppliers have set up sales offices and co-operate with local distributors. Around 120 major retailers and manufacturers have joined in the Thai Medical Device Technology Industry Association. The association helps newcomers with the approval of their medical products.

The finances of public health institutions are strained, so they tend to buy less expensive products. Public tenders are available on the central Thai Government procurement portal. The health-care facilities also accept agreements, including training and maintenance as well as guaranteed availability.

In public procurement, preference is given to national products that are classified as innovative. Companies that are majorityowned by Thais can have their products and services tested for innovation by the National Science and Technology Development Agency (NSTDA). In October 2021, 39 national medical devices were listed.

The medical doctors are also involved in procurement and recommend medical equipment that is trusted. Therefore, medical device suppliers try to place their devices in training centres and university hospitals.

Contact details: Thomas Hundt Director Thailand, Cambodia, Myanmar, Laos GERMANY TRADE & INVEST www.gtai.com