Medical Device Sector,
VUCA & Comparison with Pharma
• VUCA denotes Volatility, Uncertainty, Complexity and
Ambiguity, a perfect cocktail prevailing in the medical
devices sector in India
• Entrepreneurs always thrive in such a testing time, and
the same is happening in India
• The entrepreneurial model of developing an imported
product indigenously with better quality and better price
is working well and is the answer to the overdependence of
India on imports for the medical device sector
The term VUCA was coined by the US defence in 1987. This
popular management term VUCA also has its connection with
military strategists. The term VUCA was used for Volatile,
Uncertain, Complex and Ambiguous situations arising from
the collapse of the USSR. The Cold War era meant a clearly
identifiable enemy, the USSR. However, once the Soviet
Union disintegrated, a situation was created where the
enemies were not clearly identifiable and could be
anybody, coming from anywhere. The US Army in this
situation may become disoriented, and the term VUCA was
used to highlight this multilateral world order. Bennett &
James in the Harward Business Review magazine explain the
VUCA situation as below-
• Volatility – characterized by a challenge which is
unexpected, unstable and of unknown duration. However,
knowledge about the situation is not difficult to obtain.
• Uncertainty – A large part of information is lacking but
the cause and effect of the change are known.
• Complexity – As the word means, the situation is not
simple. There are many variables and interconnected
components in a situation.
• Ambiguity – There are many “unknown unknowns”.
Cause–effect relationships are not clear, and are
ambiguous.
The situation in the medical devices sector has many of
these characteristics. Unexpected challenges, though known
to an extent, represent Volatility; missing information
pieces – typical of Uncertainty; a situation
not-so-straightforward – means Complexity, and; many
“unknowns”, driving Ambiguity.
A quick study of any definition given for medical devices
by any authority or researchers will indicate that the
function of a medical device is like that of a medicine.
However, a careful eye will immediately catch the
difference. That difference is that a device does not
achieve its primary intended action by pharmacological or
metabolic means, in or on the human body, but which “may
be assisted in its intended function by such means”. These
last words make the fundamental bases of a drug-device
combination. A medical device may very well be supported
by a pharmacological product (meaning medicines) in its
intended function. Not only this but in today’s VUCA
moment, medicines can even provide an answer to the puzzle
of medical devices for growth. How? Please read further.
Though very detailed information about the differences
between medical devices and pharmaceuticals is provided in
this issue of Medical Plastic Data Service by other
experts in many articles, a summary given in the table
here will not be out of place. More relevant points are
covered in detail below, even at the cost of repetition.
Budget constraint: The R&D budget of the top five device
companies in the world is more than double the medical
device sector size (11 b USD) in India! Competing on R&D
spend with such players is too big a call, especially when
95% of the Indian medical device companies have less than
12 mn USD (100 cr INR) turnover per year.
Constraint on Reward of research: Patent protection in
pharma is solid. An inventor company can milk its research
efforts for 15 years out of 20 years of patent protection
(since the remaining time may be lost in regulatory
approvals, etc). New research is thus rewarded in Pharma.
In the medical device sector, such protections are loose &
vulnerable and so, big research investment is not that
rewarding.
Brand value creation: Pharma is a branded business while
(almost) all the devices are generic, despite efforts of
branding (except Umbrella brands like BD). Individual
pharma brands have intrinsic value which generic devices
do not have. Today in India, there are 388 pharma brands
with more than 100 cr sales. 25 out of these have sales
above ₹500 crore and 79 fetch above ₹250 crore sale.
Remember, we are talking of individual brands, not
molecules. This is also a constraint for devices.
User training cost as a constraint: A user is important
for a new device. Training for a user is, therefore,
required. This training is a patient job and is costly
too. To calculate a budget and factor this training cost
for new product development is not always possible, which
ideally should be done.
The conservatism of users: There is a big inherent
difference between the switch-over to a new medicine and a
new medical device despite training investment. For
example, after Cimetidine, the next congener Ranitidine is
readily and quickly accepted, if slightly better. But for
the use of a device, conservatism always (maybe rightly)
prevails. The doctors stick to the old patterns of usage.
Assuming that a new device is developed by an Indian
player, its acceptance is not guaranteed, which again is a
constraint.
The answer to all these constraints is in the pharma R&D
model. Many smart entrepreneurs in the medical devices
sector have already “discovered” this model and have
already started implementing this model.
As the readers know, India is a net exporter of the Pharma
sector but is a net importer of medical devices. In pharma,
the success mantra was (and is) reverse engineering for
APIs. A research molecule invented by a foreign company
and which was under patent (having a high profit margin),
was synthesised in India through reverse engineering.
Often, the Indian companies were the first to launch a
generic version of these off-patent products in the USA
and EU. The US pharma market is the largest in the world,
as the readers know, making up close to 50 % of the
world's pharma market. Generic versions are often launched
with 70 to 80% lower prices in comparison to a leader
brand and even after this, an Indian player makes a good
profit. Dr. Reddy’s was the first to successfully use this
strategy. Now many companies have followed suit.
The safest, quickest and sure-shot R&D model in this VUCA
situation is to follow the footsteps of the pharma model,
and the mantra is reverse engineering -
- Select a large volume imported product
- Do reverse-engineering and develop the same in India at
a lower cost
- If required, import components and assemble them here
- Ensure the same/better quality
…and go ahead.
A survey was done recently with entrepreneurial medical
device manufacturers. This survey revealed that this
strategy is being implemented successfully by some players
and they have found it to be very effective for the Indian
market.
The proof of a pudding is in eating, isn’t it?
|
Medical Devices |
Pharmaceuticals |
|
Definition |
|
1 |
Effect without undergoing change
themselves |
A medicine gets metabolized while
acting |
2 |
Do not "act" inside a cell |
Effect inside a living cell |
New Product development |
1 |
Problem identification by users is the
starting point for development. |
New product development starts from
understanding biochemical pathways. |
2 |
New product development is much
complex, involving multiple technologies (a
"horizontal" process). |
Biochemistry and chemistry are the
bases for product development (a "vertical" process) |
3 |
Basic principle of a device is
patentable |
A molecule is patentable |
4 |
Patent protection very loose and vague |
Patent protection for a long time |
5 |
Copies can come to the market in 5
years |
Effective life "under patent" for 10-
15 years |
6 |
Life cycle is 2 to 3 years |
Life cycle is 12 to 18 years |
7 |
Product design/ Ergonomics is
important. |
Product design is not an important
factor. |
8 |
Professional training is needed for
new products |
Specialized training for use is not
needed. |
9 |
New product acceptance by doctors is
slow. |
Switch-over is very fast for a new
molecule. |
Regulatory and QA aspects |
1 |
Regulatory authorities may have less
knowledge |
Regulatory frameworks are very clear |
2 |
Regulatory classification is
risk-based. |
Regulatory classification is
form-based. |
3 |
Stability study is much less
critical/not needed. |
Stability is important due to internal
usage, and is part of the regulatory guidelines. |
4 |
Post-launch surveillance is not
critical. |
Post-launch pharmacovigilence is
necessary. |
5 |
The evaluation here is on performance
and engineering parameters. |
Evaluation of drugs is on the
parameters of efficacy and quality. |
6 |
Device QA tests are often complex,
needs special needs. |
Quality assurance tests are practicle |
7 |
Trials through bench studies, not
human studies. |
Large scale clinical trials are
possible |
8 |
Use depends on the user, and
comparisons are not always easy. |
Action and side effects are easy to
compare |
Market, Commercials and
distribution |
1 |
Market size is smaller comparatively. |
Market size is 3/4 times of that of
devices for a region. |
2 |
Most of the usage in a clinical
set-up. |
Maximum usage is by a patient himself. |
3 |
Distribution channels are shorter. |
Long distribution channels are
involved, going upto a retailer. |
4 |
Most of them are generic products. |
Branding practice is common and brands
have intrinsic value. |
5 |
Prices change (drop) very fast. |
Prices are steady for a long time. |
6 |
A user is important, and influences
the use. |
Method of "use" is generally very
simple. |
7 |
Cost-effectiveness evaluations are not
easy. |
Cost-effectiveness comparisons are
easy. |
8 |
Cost of training is difficult to
factor. |
Training cost is not an issue here. |
|