International and Domestic Manufacturers Compete to Serve Growing Asian Population

Why Orthopaedics Will Grow in Asia

Orthopaedics remains an attractive and growing market, especially in Asia. Multiple factors contribute to the growth of the orthopaedic market in this region.  

First, the quickly-growing elderly population increases the prevalence of orthopaedic disorders and thus, has driven the demand for products and procedures.

Second, per capita income and national wealth is rising in Asian countries. For example, the per capita income in Singapore is $15,000 higher than in the U.S. This has improved the capability for the general population to afford more orthopaedic procedures and has boosted government investments in healthcare infrastructure.

Third, common health conditions such as diabetes and obesity are rising, further heightening the risks of disorders like osteoarthritis.

Finally, increased vehicle sales have led to a rise in the number of car accidents and injuries that require orthopaedic treatment.  

Market Opportunity: Japan, China and India

The global orthopaedic device market is anticipated to reach about $50 billion by 2017, according to ORTHOWORLD®’s ORTHOPAEDIC INDUSTRY ANNUAL REPORT®. Asia accounts for 60 percent of the world’s population, but the region currently holds about 16 percent of the global orthopaedic device market. Thus, there is significant room for growth in the region, specifically in Japan, Korea, Taiwan and China, which all have rapidly-aging populations.  

Japan has the largest share of the Asian orthopaedic market. In 2014, 45 percent of the Asian orthopaedic products market was claimed by Japan. Moderate growth is estimated in the large joint reconstruction device market (which includes hip and knee implants), but in the spine area, growth is still strong. The Japanese orthopaedic market faces some challenges, however, such as a cultural aversion to invasive surgical procedures and the reluctance of doctors to adopt some new Western technologies.  

China’s orthopaedic market is also experiencing high growth, at about 15 to 20 percent per year. More than 200 million Chinese citizens are over the age of 60, and about 10 million people are added to this group every year.

With this growing elderly population, urbanization of the country and other factors discussed above, orthopaedic growth is expected to continue in China. Analysts have estimated different values of the Chinese market. Frost and Sullivan estimates that the Chinese orthopaedic implant market will surpass Japan in 2015. According to an estimate by the Boston Consulting Group, the Chinese orthopaedic implant market will grow from $1.3 billion in 2013 to $4.1 billion in 2020.  

India’s orthopaedic market also sees strong growth at about 15 percent per year. The Indian orthopaedic market will continue to grow in coming years due to the country’s demographics, increased health awareness and growing public and private insurance market. India’s population is expected to surpass China by 2040. With a fast-growing population, the incidence of spinal, joint and general bone-related conditions is increasing dramatically.

Furthermore, as India’s middle class continues to expand, demand for better healthcare services and orthopaedic devices will also rise. Finally, India has the highest number of diabetic patients in the world; this further heightens the risks of disorders like osteoarthritis.

Western Orthopaedic Companies Succeed in Asia

Major medical device manufacturers from the U.S. and Europe occupy a large portion of the orthopaedic markets in Japan, China, India and other Asian markets. DePuy Synthes, Medtronic, Stryker, Zimmer, and others all compete with local domestic manufacturers.

In China’s orthopaedic market, multinational corporations (MNCs) have a greater share of the market for joint and spine products (65 percent and 60 percent, respectively), whereas local companies have the majority share of the market for trauma products (60 percent local and 40 percent MNCs, respectively).  

In recent years, Western companies have increased their presence in Asia through mergers and acquisitions. China Kanghui was acquired by Medtronic in 2012 and Trauson was acquired by Stryker in 2013; both were top domestic Chinese manufacturers.

Western companies have also utilized other methods to increase their presence in Asia and to address the difficulties in navigating local regulations and approval processes. These methods include establishing excellent relationships with local key-opinion leading orthopaedic doctors, setting up more local offices, building primary medical device research labs and working more closely with local distributors for higher reimbursement.  

Asian Orthopaedic Companies Offer Competition

Although Western orthopaedic companies have a strong presence in Asian markets, they face competition from strong domestic orthopaedic device manufacturers. While the quality of domestic products is generally not as good, improvements are being made and these locally–manufactured products come with very competitive prices.  

Government support is a key factor in the growth of domestic Chinese companies, as the  Chinese government provides financial incentives for local device manufacturing companies. The government also encourages Chinese hospitals to buy domestic versus foreign devices.

Furthermore, similar to Western companies, Chinese companies have been acquiring Western device companies to command a bigger presence in the market. For example, in 2013 MicroPort acquired Wright Medical’s OrthoRecon business.

The growth and success of local Asian orthopaedic manufacturers should be of concern to Western orthopaedic device companies seeking to expand their business into the Asian markets.