PEST-LE Analysis – Ultrasound Market

Updated: April 10, 2015 1:59 PM

Vijayshankar R Andani, Independent Management Consultant & Health Economics Analyst, focuses on the current healthcare situation, macro/ socio economic factors influencing ultrasound market, technology trends, competition, and customer behaviour. Excerpts from the report

Vijayshankar R Andani, Independent Management Consultant & Health Economics Analyst, focuses on the current healthcare situation, macro/ socio economic factors influencing ultrasound market, technology trends, competition, and customer behaviour. Excerpts from the report

201504ehm29Over the last four decades, ultrasonography has emerged as one of the most important imaging techniques in modern medicine.

The bettered and newer applications, declining costs, in this modality have resulted in the proliferation of the ultrasound machines, especially in developing countries. India alone boasts 35000 clinics, whose business is built around using ultrasound sonography.

However, the knowledge of administering ultrasound studies has not caught up its pace. The lack of international guidelines and diversity (applications) in its utilisation has led to poor usage, sometimes misdiagnosis. Developing countries such as China, India where the usage of ultrasound is questionable have been taking series of steps to improve the diagnosis knowledge. In India multiple teaching centres have been setup in governmental and private sector. The Indian Federation of Ultrasound is very active and well-disciplined; it organises many courses/seminars and workshops are arranged on district and national levels. China has both general and advanced ultrasound training programmes, and can he attended at various stages of the medical career. Thus in order to ensure the successful uptake of ultrasound, the device manufacturers should work with governments to deliver training programmes, issue license and accreditations and impart continuous education demonstrating improved/new applications usage.

Ultrasound has been associated with the skewed demographics landscape in many nations, mostly infamously. The ill-use of ultrasound modality to determine the sex of an unborn child has been one of the main reasons for skewed demographics, as experts proclaim. Most of the governments have been ostensibly condemning such unethical acts by authoring many laws, rules and regulations. These include the stricter implementation of the Prenatal Diagnostic Tests Act (PNDT) in India, to prevent the deliberate abortion of female foetuses.

Central schemes such as Janani Suraksha Yojna, ASHA (Accredited Social Health Activist) have been launched to promote antenatal checkups and institutional deliveries for pregnant women living below the poverty line in India where infant mortality is high. Chinese law to make sure the sex of the foetus is ‘not revealed’ mandates two doctors to be present and the exam to be recorded on closed-circuit TV while performing ultrasound study on pregnant women. Although these actions certainly help improve demographic balance, however, restrain the potential growth of ultrasound market.

Import duties on medical devices and equipment have a significant importance in Indian medical diagnostic industry. On one side it is argued that higher import duties may stymie the growth of diagnostic market and transfer of sophisticated technology in India. On other side, lower import duties may reduce competitiveness and growth potential of the local medical technology industry. Recent report argued that the current duty structure in India for medical devices and equipment favours imports, Unlike China, which encourages manufacturing of medical devices and equipment, Indian laws indirectly reward trading by charging higher duties on raw materials than on finished goods. For instance, titanium sheet/rod imported for making implantable pacemakers attracts a total import duty of 23.89 per cent, while import of the pacemaker itself attracts a duty of little more than nine per cent. As a result, in many cases, cost of a finished product manufactured within the country remains higher than an imported product. Imports of about 75 per cent in the Indian medical technology market profess this fact.

The strong policy support from union government has been crucial in development of healthcare sector, which subsequently has had a significant influence on diagnostic market:

Encouraging the private sector

  • The benefit of section 10 (23 G) of the IT-Act has been extended to financial institutions that provide long-term capital to hospitals with 100 beds or more
  • Government is encouraging the PPP model to improve availability of healthcare services and provide healthcare financing

Encouraging investments in rural areas

  • The benefit of section 80-IB has been extended to new hospitals with 100 beds or more that are set up in rural areas; such hospitals are entitled to a 100 per cent deduction on profits for five years

Tax incentives

  • Custom duty on life-saving equipment has been reduced to five per cent from 25 per cent and exempted from countervailing duty
  • Import duty on medical equipment has been reduced to 7.5 per cent

Incentives in the medical travel industry

  • Incentives and tax holidays are being offered to hospitals and dispensaries providing health travel facilities

Economic

Despite the slowdown in the economy across the world, there has been no significant reining in the healthcare expenditure in emerging economies such as India and China. In contrast there has been a spur in public healthcare spending. As part of its 12th Five-Year Plan (2012-17), Planning Commission of India aims to increase spending in healthcare sector to 2.5 per cent of the GDP from around one per cent at present via programmes such as NRHM and NUHM. For instance to curb infant mortality and morbidity, central government spent more than $200 million under the scheme JSY by sponsoring 100 per cent maternal expenditure of women under certain conditions. More ultrasound machines have been instrumental in ensuring good maternal health in such programmes, although the utilisation has been a meager 20 per cent in public hospitals.

Burgeoning middle class incomes, active participation of insurance companies (which grew at CAGR of 39 per cent between FY06-1024), and favourable FDI norms (100 per cent) have catapulted the private healthcare sector in countries like India. Quality healthcare, better facilities have encouraged upcoming middle class to opt for private hospitals. In India, private healthcare accounts for almost 68 per cent of the country’s total healthcare expenditure. When it comes to ultrasound the utilisation has been around 90 per cent to 120 per cent in private hospitals; maternal, pregnancy packages have been a boon to private hospitals including nursing homes sometimes exceeding demands for such services. OB/ GYN scans for as low as $10 compared to around $100 in developed countries vindicates the proliferation of ultrasound equipment leading to economies of scale thereby lowering the usage cost.

The steady influx of low-cost ultrasound machines from due to reduced import duties, increased local production due to surge in demand and easily available technology has heightened competition pushing down the procurement cost in India thus forcing major players to reduce their margins.

The goodness of ultrasound technology has been overshadowed by its misuse. As a result, there has been a conscious/ controlled growth of this modality, especially in developing countries such as India and China, where illegal sex determination is rampant. However, the use of ultrasound in other areas such as Emergency Medicine (EM), cardiology, anaesthesiology, radiology, and musculoskeletal applications apart from OB/ GYN has shown the importance of this modality. This variety of applications of ultrasound may significantly influence the market growth in future.


POLITICAL

  • Government’s commitment to NRHM/ NUHM
  • Stable/ declining import duties
  • Streamlining ultrasound education by the govt.
  • Strong policy support

ECONOMIC

  • Public/ private investments in healthcare
  • Increased competition in mass ultrasound market
  • Investments in pecialty/ preventive healthcare

SOCIAL

  • Insurmountable foetal sex selection
  • Increase in chronic diseases
  • Women’s health most impacted

LEGAL

  • Review of PNDT policy apparatus
  • IPR protection framework for medical devices
  • Device compliance with health-IT standards
  • No guidelines for usage of ultrasound tech

TECHNOLOGY

  • Technology advancements for treatments
  • Miniaturization influencing market
  • Frugal innovations for mass market
  • Automation for increasing diagnosis accuracy

ENVIRONMENTAL

  • Localization of ultrasound equipment
  • Equipment readiness for all-weather, rural usage
  • Tele-sonography due to lack of experts

Social

Usage of ultrasound for maternal care in the developing countries represents a double-edged sword; on one hand ultrasound technology is beneficial in identifying potential anomalies pertaining to maternity leading to curtailment of maternal, infant mortality and morbidity.

On the other hand ultrasound equips the community with technology that can be misused to determine sex of a fetus that may lead to female feticide. In the male dominant societies such as India and China, where a girl child is looked upon as a social stigma, the unscrupulous act of aborting girl child has skewed the gender equity in population.

Earlier, studies had mentioned about five to seven lakh girls a year, or 2,000 girls a day go missing in India due to female foeticide. The 2011 census figures showed that India’s child sex ratio has dipped to 914 girls as against 927 per 1,000 boys recorded in the 2001 census — the worst dip since 1947. Latest census in China shows on an average 120 boys are born for every 100 girls.

While the spread of ultrasound technology certainly is not the root cause of the increase in reports of female foeticide, the compact, portable and relatively low-cost nature of this technology does increase the complexity of administratively overseeing and prosecuting medical practitioners, companies or other individuals who transgress the legal boundaries and misuse the technology to assist in sex-selective abortions.


COMMON CAUSES FOR MISDIAGNOSIS

  • Do not commit the time required
  • Allow the presence of outsiders review
  • Lack of training
  • Lack of knowledge
  • Lack of medical data
  • First ultrasound is late
  • Team obsolete or inadequate
  • Lack of illustrative prints
  • Lack of professionalism
  • No assistant
  • Improper technique
  • Wrong study ordered

The ultrasound modality market has to surmount such social curse in order to accelerate its growth in developing countries. Hence, there is a need for OEMs and the importers to go beyond the dynamics of technology and taking required legal actions to address this repress together with the governments. Participating or commencing campaigns, programmes that promote rights of girl child pertaining to survival and development would positively influence the society. GE Healthcare’s drive in opposing this misuse of technology and pro-girl child campaign in last decade has saved its brand delusion and resuscitated its ultrasound sales in both India and China.

When considering women’s health, the top five concerns in India are breast cancer, stroke, polycystic ovarian disease (PCOD), FSAD, and weight gain. Experts believe fascination towards alcohol-smoking-drugs, lesser body resistance, late marriage, and delay in having the first child and hypertension are few among many causes of these concerns. Demographic trend of decreasing fertility rate — 2.71 at present vis-à-vis 5.5 in 1970 (India), 1.6 (China) — and increasing emotional stress, changing lifestyle are becoming leading factors in expanding maternal phase. Due to the economic trend of increased participation at work, women especially in urban areas are able to spend less time taking care of their maternal health. However, these increasing disease patterns in women, especially in emerging economies due to macroeconomic changes, could be staved off via preventive actions.

Ultrasound as a modality plays an important role in women’s health wellness. From the reproductive years to menopause to post-menopause, ultrasound could be dubbed the singular imaging modality that is ‘a girl’s best friend.’ Today, ultrasound is being utilised effectively and safely for a host of health challenges across the entire scope of female anatomy — breast, vaginal, abdominal — and at every stage of a woman’s life. OEMs with the consensus from healthcare providers may consider the following that would fortify ultrasound as girl’s best friend: creating or accelerating women health wellness programmes that address potential maladies — such as PCOD, FSAD breast cancer — and, focusing on innovations that can eliminate or improve women problems such as infertility treatments.

Technology

Ultrasound technology images muscle, soft tissue and bone surfaces very well and is particularly useful for delineating the interfaces between solid and fluid-filled spaces with no known long-term side effects and rarely causes any discomfort to the patient. However, the method is operator-dependent. A high level of skill and experience is needed to acquire good-quality images and make accurate diagnoses. Due to its small size, flexibility, easy operability, and relatively inexpensive exams that can be performed at anyone’s bedside, the ultrasound has been widely adopted, used by many doctors, practioners sometimes to serve remorseless section of society that prefer only male child. There are about 44,000 registered ultrasound machines and around 9000 registered, equal number of unregistered radiologists in India at present.

WHO and several countries such as India and China have been relentlessly trying to assure the required knowledge for successfully diagnosing using ultrasound technology by offering trainings, accreditations and making available manuals. OEMs can contribute to improve the knowledge of using ultrasound technology by deploying learning software on the machines and/or by automatingresults, in plausible examinations, for instance number and volume of hypoechoic structures, such as ovarian follicles, in a volume sweep, thereby reducing the room for manual interpretations.

The growing trend of miniaturisation and increasing trust in portable systems has led to a significant increase in the market of hand-carried ultrasound systems in the recent years. Although the western countries were the first ones to adopt this technology, yet other regions of the world such as Eastern Europe, Latin America and parts of the Asia Pacific including India, are now beginning to show significant interest in this equipment. In the traditional ultrasound systems market, colour doppler equipment with 3D /4D capabilities accounts for a major chunk, while black and white scanners are now beginning to slowly fade out. When it comes to ultrasound technology advancement in India, “The Indian ultrasound science is at par with the global standards. The manufacturers have responded in a very positive way and growth is evident in all segments,” says veteran Dr Kishor Taori, President, Indian Radiological & Imaging Association (2010). Apart from economic viability of ultrasound technology, it is the excellent diagnosis, patient awareness and local support services have been the key growth drivers.

The major technological trends in recent times include advent of fusion imaging (wherein real-time ultrasound images are fused with the high resolution), contrast-enhancing images produced by modalities like computerised tomography scans, and magnetic resonance imaging. Another recent medical innovation is the use of intravascular ultrasounds to assess vascular diseases like stenotic blood vessels, by placing an ultrasound probe on the tip of a tiny catheter that is inserted into the lumen of the vessel. This produces cross-sectional images and yields information about the composition of plaques that may have formed on the vessel walls. Applications where higher intensities are warranted, the safety (heat/ cavitation) is being questioned often.

Artifacts are commonplace in ultrasound. Often, these errors in image display are unavoidable and occur secondary to intrinsic physical properties of the ultrasound beam and its echo and to limitations of the display equipment. Recognition of these unavoidable artifacts is important because they may be clues to tissue composition and aid in diagnosis. The ability to recognise and remedy potentially correctable artifacts is important for image quality improvement and optimal patient care. These artifacts can be understood with a basic appreciation of the physical properties of the ultrasound beam, the propagation of sound in matter, and the assumptions of image processing. Hence training the users on continuous basis to improve diagnosis (becomes challenging when half of the radiologists are not registered in India) and signaling obvious mistakes of usage (automatic triggers) becomes the important part of ultrasound modality.

Legal

The use of sex-selective abortion was banned in India in 1994 and in China in 1995. But since it is almost impossible to prove that an abortion has been carried out for reasons of sex selection, the practice remains widespread. An ultrasound scan costs about $10, which is within the scope of many— perhaps most— Chinese and Indian families. United Nations recently laid the blame for an overwhelming majority of the 117 million ‘missing’ girls in Asia are from India and China, squarely on the ultrasonography machine.

The Indian legislation enacted in 1994 – the Pre-Conception and Pre-Natal Diagnostic Techniques Act – seems to have failed to act as a deterrent to potential parents and doctors. Ultrasound machines that were meant to be sold only to registered clinics are probably being sold to unauthorised entities. OEMs of ultrasound machines have been criticised for producing the compact, portable and relatively low-cost nature of this technology, which is believed to have contributed to sex-selective abortions. Addressing these allegations has required companies such as GE take a proactive approach to working with stakeholders to prevent misuse, and implement a long-term, multi-faceted approach to help encourage societal changes in support of human rights.

To rein the dwindling sex ratio, India may bring more amendments to strengthen the PNDT Act, which currently allows anybody with a six-month training or one-year experience in sonography or image scanning to use ultrasound machine. If the latest amendments go through, the act will allow ‘gynecologist and obstetricians possessing medical qualifications recognized under the Indian Medical Council Act and medical practitioners with Diplomat of National Board (DNB)’ to use ultrasound machines. CSB (Central Supervisory Board) is also expected to make it mandatory for all mobile ‘genetic clinics’ — under Section 2 (d) of the Act — to be registered. A ‘genetic clinic’ refers to a clinic, institute, hospital, nursing home or any place — by whatever name it is called — that is used for conducting pre-natal diagnostic procedures. Government drive on ensuring minimum standards at hospitals, laboratories via accreditations such as NABH, NABL would also help in curbing the misuse of ultrasound technology.

The diffusion of ultrasound in India may correspond to a sex-selection story. However, a recent study by IZA (Institute for the Study of Labor), Germany, finds consistent evidence that the rapid rise in ultrasound use in India in the 2000s cannot have caused a rise in sex-selection. Rather, the findings suggest that the states of India with a faster growth in ultrasound use are the states with a relative decline in sex-selection. Therefore the report argues that ultrasound has been increasingly used for health care rather than sex selection.

Ambivalence due to such contrasting observations and further strengthening, strict implementation of PNDT Act may slow the market growth. The manufactures hence shall be conscious and careful while dealing with the customers of ultrasound machines; initiatives that promote saving girl child, continuous auditing of the dealers/users, and frequent trainings about technology would help become mainstay in the ultrasound market.

Regulation

Currently there is no separate regulatory status in India for medical devices, and CDSCO (Central Drugs Standard Control Organization) is principally responsible for its regulation. A concrete regulatory framework for the Indian medical devices industry is under development. Ministry of Health and Family Welfare (MoHFW), has taken the initiative to include a separate chapter on medical devices which is considered as a proposed amendment in the Drugs & Cosmetics Act, and may include a clear definition for medical devices. Medical devices are high on innovation and hence appropriate framework for IPR protection is required to promote innovation and R&D. Once such regulations are rolled out, imitations leading to substandard medical device would be subdued; cheap imitations of ultrasound technology may have been partly responsible for unwarranted proliferation promoting illegal sex-selection.

Compliance

Driven by the change in the healthcare sector globally and the need for operational transparency in order to achieve higher performance efficiency, India is witnessing an increased need for harmonised sets of compliance control measures pertaining to healthcare. There is little use of IT in clinical healthcare – for instance, keeping electronic medical records remains a guideline and it is not mandatory. However, increasing competition, government intervention, and hospitals growth has been warranting for integration of dissimilar systems. Device compliance with all health-IT standards such as HL7, HIPPA and DICOM would soon become a norm in Indian subcontinent.

Safety

The safety issue is made more complicated by the problem of exposure conditions. Clearly, any bio-effects that might occur as a result of ultrasound would depend on the dose of ultrasound received by the foetus or woman. But there are no national or international standards for the output characteristics of ultrasound equipment. The result is the shocking situation described in a commentary in the British Journal of Obstetrics and Gynecology, in which ultrasound machines in use on pregnant women range in output power from extremely high to extremely low, all with equal effect. Indian authorities currently formulating regulatory, compliance policies for medical devices, may also include these types of safety regulations; with ultrasound modality creating so much furore in India, ultrasound safety may become next issue.

Environmental

With more than 72 per cent of total country’s population spread across 638,000 villages, rural India is still deprived of basic health facilities. The delivery of healthcare services in rural areas is hampered by a dire lack of infrastructure. To take one basic example: around 20 per cent of the 600,000 inhabited villages in India still have no electricity at all. And this official estimate understates the extent of the problem, as it defines an electrified village—very generously—as one in which at least 10 per cent of households have electricity; two km is the average distance to roads in rural places. Mobile hospitals, make-shift camps, although the exact size cannot be ascertained, have been instrumental in reaching out healthcare deprived areas across India, be it urban or rural areas.

The product adaptability to such environments becomes important. Manufacturers would have to adapt medical devices to be effectively used in local context; for example, designing devices which can withstand hot and dusty climate and operate effectively in areas with insufficient electricity supplies. Ultrasound being one of the modalities used in almost all health centres, mobile hospitals, and medical camps the machine requires to be robust-all weather/ terrain, reliable and consistent in providing diagnosis. In summary, PEST-LE analysis reveals that following are the factors that influence the growth of ultrasound market.

  • Healthcare expenditure in India is expected to increase by 12 per cent per annum from 2011 -15. Rising incomes, greater health awareness, lifestyle diseases and increasing insurance penetration will contribute to growth. There has been a wide array of policy support in the form of reduction in exercise duties and higher budget allocation for the healthcare sector. Greater investment in healthcare infrastructure is needed to increase the number of doctors and hospital beds to meet the demand gap.
  • Government’s increased expenditure on public healthcare would ensure more accessible maternal care. Education on using ultrasound has also been on prime radar for governmental agencies. OEMs focusing on these two aspects would benefit from opportunities. Import duties would drive the direction of the medical diagnostic market in India although 2012 budget left duties unchanged for medical equipment, but reduced duties on raw materials (8.5 per cent).
  • Ultrasound has become one of the victims of foetal sex selection. The goodness of ultrasound technology has been overshadowed by its misuse. More applications addressing more number of diseases would encourage the usage of ultrasound. Featuring it as primary modality would attract attention from smaller hospitals especially in Tier-II and Tier III cities.
  • Insurmountable foetus gender selection has only made government to relook at the policy apparatus to subdue such acts. The usage of ultrasound would come under microscopic scanner, which means slowdown in procurements of such machines. Ultrasound manufacturer’s commitment to policy and generating awareness would be litmus-tested by NGO and activists.
  • Rising incomes, increasing awareness about chronic diseases has spurred demand for preventive checkups. Factors such as increased participation at work, lesser body resistance, late marriage, and delay in having first child, have significantly influenced women’s health. Women programmes for pre-screening of diseases are gathering steam in urban areas. Ultrasound is perceived as important modality for such preventive check-ups.
  • Equipment makers who are able to customise or develop systems that suit local conditions are winning more contracts from healthcare providers. Miniaturisation, low-cost, portability, power backups, robustness are the features influencing the market most. Mass market comprises of primary, secondary hospitals that prefer value-for-money systems. Technology advancements are helping incumbents to retain loyal premium customers.

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