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IVD Technology > March/April 2012, Volume 18, No. 2 > China and India: Comparing Two Fast-Growing IVD Markets > China and India: Comparing Two Fast-Growing IVD Markets
Published: April 25, 2012 Find more content on: Feature Articles [2] Business Strategy [3] Find Qualified IVD Industry Suppliers at Qmed: IVD [5] China and India: Comparing Two Fast-Growing IVD Markets
Both countries are inspiring success stories and are positioning themselves to play major roles in the global IVD market in the future. By: Carl McEvoy The late Angus Maddison, an economist from the University of Groningen, compiled data that suggests China and India were the biggest economies in the world for almost all of the past 2000 years. They only lost this position during the Industrial Revolution. It now appears that China will regain its place as the worlds largest economy, overtaking the United States, sometime during the next decade.1 The IVD markets of China and India, two countries that account for approximately one-third of the worlds population, have demonstrated remarkable growth during the past 15 years. The IVD markets in what is coming to be known as Chindia have seen steady growth rates of 1020% per year during most of that time, although the growth in India is starting from a substantially lower point. Recently, the pace of growth for both countries has increased, with China at around 25% and India at about 18%. This article will examine the similarities and differences in these two markets, the fastest growing large IVD markets in the world.
China
According to official figures, Chinas economy has grown at an average rate of 9.1% during the last decade, but the real growth could be even greater. The Chinese economy has also been remarkably steady, and the increasing prosperity is one of the main drivers of IVD market growth in China. The other main driver is urbanization. Factory workers and office employees are more likely to be customers for diagnostic products than farmers in the countryside.
India
Indias economy has grown at an average annual rate of 6.1% during the last decade. Twenty years ago, faced with a financial crisis, India went to the International Monetary Fund (IMF) for help, and as part of the assistance package, India agreed to open its economy, lower tariffs, reduce licensing requirements, and allow more foreign ownership of companies in India. The result has been a remarkable increase in labor productivity and prosperity. Even though progress in economic reform has slowed down, it does continue, and Goldman Sachs has predicted that India will be the worlds third largest economy by 2050. During the last 15 years, Indias IVD market has, like Chinas, grown continuously. While the annual growth rate was around 10% a decade ago, it has increased and is currently at approximately 18%. The same two key drivers (increasing prosperity and urbanization) that are propelling Chinas market have also contributed to Indias impressive growth in IVD spending.
Population
With 1.33 billion people, China currently has the worlds largest population. However, sometime between 2025 and 2030, Chinas population will be surpassed by Indias, which currently has 1.14 billion people. This is because Indias population growth rate is 1.27% while Chinas, which is constrained by their single-child policy, is 0.61%. This difference in growth rates has resulted in Indias having a much younger population. Only 20% of Chinas population is under 15 years old, while 31% of Indians are under that age. It has often been said that China will be the first country to grow old before it grows rich because its working-age population (15-60 years old) will decline during the next twenty years. On the other hand, Indias younger population will result in an increase in workers throughout that period. Both countries, albeit China to a much greater extent, will start to see increases in health problems from chronic diseases (e.g., diabetes, heart disease, and cancer), which are common in developed countries. This will be the result of an aging population, changes in lifestyle and diet, and increased economic prosperity.
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The global economic crisis of 2008-2009 had much less impact on China or India than on the worlds developed economies. Both China and India saw a temporary drop in growth followed by a rapid recovery, and neither country has the continuing problems still seen in the United States and Europe. Chinas current GDP growth rate is 8.2%, and Indias is 7.8%.2 Both China and India are members of the World Trade Organization (WTO). India joined in 1995; China in 2001. Therefore, both nations
Figure 1. Revenue figures for China's IVD market, 1995-2011, in billions of U.S. dollars.
Economy
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are parties to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. While difficulties in enforcing and protecting intellectual property (IP) rights exist in both countries, China and India are now developers of intellectual property and will increasingly view IP rights as important to their growth. Continued, gradual improvements in IP enforcement are expected to be seen.
IVD Instrumentation
While both countries are buying and using large numbers of automated IVD systems, China is a better market for instrumentation, particularly automated chemistry systems. While the total IVD market in China is roughly four times [8] as large as Indias, its total number of automated chemistry systems is more than six times as high. There is also a difference in the semi-automated chemiluminescence immunoassay (CLIA) market. These systems Figure 2. Revenue are converting low- and medium-volume labs from enzyme immunoassay (EIA) testing to CLIA testing and are figures for India's IVD keeping some of the market growth from going to imported closed immunochemistry systems. China has a vibrant market, 1996-2011, in domestic CLIA sector, with more than 13 local manufacturers that have supplied the market with roughly 8,000 hundreds of millions of instruments and the reagents they require. Of these systems, about 98% are semi-automated, but at least three U.S. dollars. local IVD companies have developed automated CLIA systems and are selling them aggressively. In India, the CLIA sector is smaller, with about 2,300 semi-automated instruments. A single company, Lilac Medicare, is responsible for most of this market. There may be some local assembly of these systems, but for the most part, they are imported.
Molecular Testing
China and India have substantial differences in their molecular testing markets. At $112 million, Chinas molecular market is more than ten times the size of Indias. This is due to the large volume of PCR testing for infectious diseases done in China using domestically produced kits. These tests account for about three-fourths of Chinas molecular market, which sell at prices that no foreign IVD company is willing to match. As a result, the multinational companies are mostly selling instruments. However, emerging disease areas such as oncology will start to give international firms a greater presence in the molecular reagent market since there is no significant local competition. Qiagen is the one exception to the local dominance of Chinas molecular market. The company is active in two very different ways. First, Qiagens purchase of Digene gave it almost 100% market share of the domestic HPV market, and even though that share has been slipping due to increased competition, it is still the leader in this segment. Second, Qiagen acquired local PCR manufacturer PG Biotech of Shenzhen, the number-two supplier of PCR kits in China. A lot of research and development activity in the area of microarrays and gene chips is taking place in China, but they are not yet a significant part of the molecular market. Such activity started in October 8, 2001, when Chinas English language newspaper, the Peoples Daily, reported that the countrys first Gene Chip Research Center had been established in Tianjin. Five government-funded national chip centers in China are now located in Beijing, Shanghai, Tianjin, Chengdu, and Xian. A proliferation of about 100 private companies has also been pursuing chip-based technologies. Indias molecular market is the opposite of Chinas with foreign products accounting for approximately 80% of the market, including both instruments and reagents, and about 20% coming from domestic production and homebrews. While Indias total molecular market is onetenth the size of Chinas, the international portion is only about one-third the size.
Clinical Labs
The structure of clinical laboratories in each country is quite different. Chinas healthcare system continues to demonstrate uniformity that originates from its communist past. Historically, IVD testing has been done at hospitals where the labs served both inpatients and outpatients. The laboratory was the hospitals second most important profit center, behind drugs and ahead of medical services, so the hospitals were unwilling to send tests out. All hospitals were owned by government bodies at various levels, state-owned enterprises, or the military. Doctors were not allowed to set up private practices, but instead worked for the hospitals. While this is still the general structure of the healthcare system and IVD testing in China, there have been some changes. Private hospitals now exist, but they are mostly small specialty centers that account for less than 5% of the total beds in the country. Private medical practices appear to be on the upswing, but they are still a very small component of Chinas healthcare system. The total number of clinical laboratories in China is estimated to be around 20,000, which corresponds to the number of hospitals in the country. Almost all of these labs have automated chemistry systems. Many other healthcare facilities in the country, including clinics in small towns and the Chinese Center for Disease Control labs, also do some IVD testing. China continues to build new hospitals, adding about 500 per year. Private labs also now exist in China, and they are becoming more important in the market. In most countries, private lab chains have emerged when a regional leader buys many smaller labs in the area and then continues to purchase other similar labs in other parts of the country. However, since there were no small private labs in China, new private companies are setting up their own labs around the country. Four major groups are building national laboratory chains in China. Kingmed (Guangzhou, China) is the leader with 19 labs. Adicon (Hangzhou, China) is second with 15 labs. They are followed by Da An (Guangzhou, China), the leading supplier of locally made PCR kits with five labs, and Lawke (Beijing). While private laboratories have been slow to enter the marketplace and they still do only a modest proportion of Chinas IVD testing, they will grow in importance in the coming years. Indias laboratory structure is more complex, due to the long history of diverse institutions. There are hospitals that are run by the government, charities, and non-profit organizations as well as a group of world-class private hospitals. In addition, there is a rapidly growing number of private lab chains. India is estimated to have more than 30,000 active clinical laboratories (other sources estimate as high as 40,000). The number of laboratories continues to grow, which is true for not only automated labs but all types of labs as new laboratories of all sizes continue to open. For example, the number of automated chemistry laboratories in India has grown from approximately 700 in 2004 to about 2,700 today. At some point, the private-sector portion of the lab market is expected to change with smaller laboratories coming under pressure from the rapidly expanding national lab chains. Super Religare Laboratories (SRL) is Indias largest chain with 57 labs. Second is Dr. Lal PathLabs with 56 laboratories. Thyrocare is following a different path for expansion by implementing the Federal Express business model. It consolidates all of its testing in Mumbai, with specimens flown in from 20,000 local collection points during the day and testing done at night. But unlike the other labs, they are not
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growing via acquisition. Thyrocare is the largest processor of thyroid tests in the country and has added ToRCH to its specialties. Quest Diagnostics has established a 70,000-square-foot laboratory at the edge of New Delhi, but it is not known how well it is doing in the local market.
Conclusion
Both China and India are inspiring success stories, lifting millions of their citizens out of poverty, providing better healthcare, and positioning themselves to play major roles in the global IVD market in the future. The growth rates of the IVD markets in each country have been very impressive during the last 15 years. It is sometimes asked if this growth will slow down in the future. As long as the two main market driversincreasing prosperity and urbanizationcontinue, strong growth in the Chinese and Indian IVD markets is expected for many years. Even after 15 years of growth, the two countries combined are spending only about one dollar per person per year on diagnostics. Compared to the $25-30 per person per year spent on diagnostics in developed countries, it is clear that the IVD markets in Chindia are nowhere near market saturation.
References
1. Becoming Number One: Chinas Economy Could Overtake Americas Within a Decade, The Economist, September 24, 2011. 2. The World in 2012, The Economist. Available online at http://www.economist.com/theworldin/2012 [9].
Carl McEvoy is a partner at McEvoy & Farmer (Seattle). He can be reached at carl@mcevoyandfarmer.com [10].
Published in IVD Technology [11], March/April 2012, Volume 18, No. 2 [12]
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Feature Articles
Source URL: http://www.ivdtechnology.com/article/china-and-india-comparing-two-fast-growing-ivd-markets Links: [1] http://www.ivdtechnology.com/ [2] http://www.ivdtechnology.com/department/feature-articles [3] http://www.ivdtechnology.com/categories/business-strategy [4] http://www.ivdtechnology.com/categories/global-diagnostics [5] http://www.qmed.com/suppliers/4/2774 [6] http://www.facebook.com/sharer.php [7] http://www.ivdtechnology.com/sites/www.ivdtechnology.com/files/image/1203/mcevoy_fig1-huge.jpg [8] http://www.ivdtechnology.com/sites/www.ivdtechnology.com/files/image/1203/mcevoy_fig2%20huge.jpg [9] http://www.economist.com/theworldin/2012 [10] mailto:carl@mcevoyandfarmer.com [11] http://www.ivdtechnology.com/epublish/3 [12] http://www.ivdtechnology.com/epublish/3/17 [13] http://www.ivdtechnology.com/article/nonclinical-diagnostics-biodefense-and-beyond
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