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Executive Summary Medical Devices SA
Definition of Medical Devices and Diagnostics
The WHO defines a medical device as “an article, instrument, apparatus or machine that is used
in the prevention, diagnosis or treatment of illness or disease, or for detecting, measuring,
restoring, correcting or modifying the structure or function of the body for some health purpose.”
The medical device Industry is the most complex, segmented and diverse of all industries, ranging
from simple devices such as thermometers and tongue depressors, to state-of-the-art
implantable, combination and nuclear imaging, diagnostic and therapeutic technologies. This
complexity has also increased over the last decade because of the introduction of new hybrid
devices such as drug-eluting stents and other implantable devices that incorporate a
pharmaceutical component. In addition, new drug delivery mechanisms as well as Information
technology has contributed to this increasing complexity, as monitoring and imaging systems
incorporate telecommunications and data processing capabilities.
The Global and Local Landscape
Global
Currently the global market for medical devices is valued at between $320B- $400B up from
$160B in 2010 and projected to reach $440b by 2018. It is growing at approximately 4.4%
compound annual growth rate per year.
The USA medical device industry is the global leader with sales of around $136B p.a. This
represents approximately 38% of the global market and is projected to grow at a compound
annual growth rate of 6.1% in the next 5 years. There are approximately 7 000 medical device
companies in the US with the world’s 3 largest medical device companies being Johnson and
Johnson, GE and Medtronic.
Western Europe represents more than a quarter of the global medical device market, led by
Germany, France, the UK and Italy. This sector has become increasingly important for the
healthcare of EU citizens and an influencer on expenditure. With sales of €100B, the sector
represents some 25 000 companies, of which 95% are Small and Medium-sized Enterprises
(SMEs).
China has recently become the third largest medical device manufacturer with a market valued
at at about $50B and growing at an average of 20% annually since 2009. China has several
thousand local manufacturers of medical devices, of which 90% are focused on the production
of low-technology products like syringes and thermometers.
The African market for medical devices is expected to be to exceed $10B (R130B) by 2020. A
number the countries in Africa are emerging as both users and manufacturers of medical devices.
Egypt and South Africa lead the group with a combined market value of US$8B (in 2016).
Private industry
KPMG has reported that the revenues generated by Medical Device technologies as a global
industry has grown from R9 Billion in 2009 to R 12.1 billion in 2014, with over 20 000 jobs
supported as a result (KPMG, 2014). The global market forecast indicates a Compound Annual
Growth Rate (CAGR) for 2015-2020 of 8.6%, which will raise the market to ZAR 20.0 Billion by
2020. This means that aggressive growth is expected from this sector, which will deliver long-
term dividends to shareholders.
Job Creation
Aggressive growth in Medical Device industries has resulted in healthy demands for new inter-
disciplinary Engineers, Clinicians and Scientists. Employment for such people is projected to
grow around 23% from 2014 to 2024, which is greater than the average for all other
occupations. The acceleration in technology and its application to medical devices is one of the
main drivers of this growth. This is especially noticeable in for example, smartphone technology,
3D printing/manufacture and advances in computer science (software, hardware and
methodologies).
Recently there has been progressive uptake of BME applications at blue chip technology
companies who have not historically been active in the medical technology market. For example,
Apple now has a BME dept. that focusses on developing sensors to track blood sugar levels.
Google are also developing glucose sensors that will aim to track blood sugar through contact
with the eye. Rapid advances in technology will continue to alter the BME domain creating new
areas to work in on an ongoing basis. This translates into very favourable job prospects.
Global uptake in Education
BME is an established pre-graduate degree in the United States with at least 124 programmes,
including the Ivy-league schools supporting them. There is a similar pattern across the rest of the
world, such degrees are commonplace at most top universities.
The Local Environment
The South African medical devices market (consumption, production and trade) was estimated
at US$1.2 billion in 2013 and was forecast to grow at a compound annual growth rate (CAGR)
of 7.74% between 2013 and 2018. This places the current 2017 value at close to US$1.6B or
R20B. Current per capita expenditure on medical devices stands at US$ 24 and is at a similar level
to other developing countries such as Brazil (US$ 30 per capita), but considerably lower than in
developed countries such as Germany (US$313) and the United States (US$ 399) per capita
(Deloitte, 2014).
This suggests that there is ample room for growth. The reasons underlying such growth include
population growth, increased life expectancy, growing quadruple disease burden and increased
domestic healthcare spend due to the introduction of the NHI.
A growing private sector is one of the key features of the South African medical device market.
Close to 70% of the medical practitioners in the country work for the private sector. Nevertheless,
local players are likely to take a growing share of the South African market as they move into
more high-tech areas, claiming much of the extra value from the predicted market growth.
In recent times, a number of landscaping reports have been compiled regarding the Medical
Devices landscape in South Africa, including:
• BMI-Research SA Medical Devices report (2016) – A comprehensive evaluation of and
projections of the financial performance for local industry until 2020.
• The South African Medical Device Industry – Facts (SAMED, 2015) – list of members,
definition of a medical device, size and details of SA industry, regulatory requirements,
limited SWOT analysis, incentives available to the industry, details on public and private
health facilities and the procurement process, and codes of practice
• Medical Devices Sector Report (Wesgro, 2015) - key trade and investment related
statistics for the medical devices sector, specifically, global trade and investment flows
including an analysis of top markets and products for South Africa and the Western Cape
highlighting the largest and fastest growing products and sub-sectors – includes same
(plus additional) data as the SAMED report from the Business Monitor International, 2014
Report, foreign direct investment in the sector, and incentives
• Developing an Ecosystem to support the local Medical Device & Diagnostics Industry in
South Africa: Recommendations from an International Perspective (MRC-PATH
Medtronic, March 2014) – purpose was to identify the strengths, opportunities, gaps and
barriers to growing the industry and make recommendations on how to strengthen the
local medical device and diagnostics industry in South Africa – covers the medical devices
industry in general, regulatory, funding, procurement process, skills and competencies
• Research to Guide the Development of Strategy for the Medical Devices Sector of South
Africa (Deloitte, commissioned by IDC/DTI, 2014) – details on SA medical devices industry,
trade, classification, regulatory, manufacturing, incentives, R&D, procurement, and
recommendations for development of the sector
• Situational Analysis of the RSA Medical Device Innovations Landscape (Acorn
Technologies, 2008) – overview of the industry, gaps, challenges and the centers of
competence model
All projections from all reports predict a rapidly growing Medical Device Industry sector. To
summarise the latest BMI (2016) report, ‘There will be positive growth for the healthcare sector
as the SA economy begins to pick up and health spending continues to grow, primarily to support
the introduction of the national health insurance scheme. This will boost demand for medical
devices with the market seeing high single-digit growth in local currency terms. Domestic
production will continue to grow in sophistication, but the majority of the market will remain
dependent on imports.’
Financial projections (BMI 2016) for the SA sector are as follows:
Currently approximately 95% of medical devices are imported into South Africa due to a lack
of competitive local options. This represents an extremely attractive financial opportunity. As
a result:
• In 2016, Wesgro was instrumental in forming a Western Cape Medical Devices Cluster. Its
objective is to spur growth in the local Medical devices Industry, along with procurement
from the healthcare sector. Wesgro has also completed a feasibility study for a Cape Health
Technology Park (CHTP). This awaits final approval from government. If successful, and a
large piece of land has already been appropriated for the purpose, this will drive dramatic
growth in this sector in the Western Cape (WC).
• The DTI and IDC have made several recent investments in Medical Device technology
applications in the WC.
• In a related effort to spur local growth, in April 2017 government approved new industry
regulations which enables preferential competitive terms for local Biomedical technologies
companies versus their international rivals
• Funding has become available from TIA, SHIP, GHIA and others funding bodies to boost local
Medical Device R&D.
However, South Africa’s domestic medical device industry remains underdeveloped, with
imports catering for 90% of the market by value. As such, the 90/10 ratio of imports to exports
creates a large balance of trade deficit currently estimated at R 15 B p/a.
Together with pharmaceuticals, medical devices are the 5th largest contributor to South Africa’s
trade deficit. Most imports are from Europe, the United States of America (USA), China, Japan
and increasingly from India. Importers are able to offer products at lower prices because of the
economies of scale enjoyed by large huge multinational manufacturers and the fact that import
tariffs are only levied on a few medical devices.
Cheaper products, often of a lower quality, are also imported from China and because of the
lack of regulation many of these products are of questionable quality which may impact on
patient health. Although these low-quality products often come with little or no after-sales
support, local distributors and agents mentioned that the importers of these products are often
awarded tenders to supply the local healthcare market.
South Africa has a two-tiered healthcare system (private and public sector) that continues to
provide significantly divergent standards of healthcare, with the public sector lagging in its ability
to provide sufficient quality care to the broader population. Private health care patients (~20%)
are predominantly covered by medical insurance while the remaining 80% are required to attend
under-resourced and over-crowded public health facilities. To counter this inequity in the hope
of providing better healthcare, a proposed National Health Insurance (NHI) for all citizens has
been initiated by the National Department of Health.
From an infectious and non-communicable disease burden perspective, the South African
public health market provides a wealth of commercial opportunities for locally produced
medical and diagnostic devices. However, the Department of Health currently relies heavily on
imported devices and test kits in its service delivery due to the perceived lower cost of these
imports. Furthermore, there are no incentives, as yet, to procure locally manufactured medical
devices and diagnostics tests, even though they are manufactured to global standards and, in
most cases, exceed the quality of imported products that have open access to the South African
market, with no reciprocal customs or other tariff barriers.
The Department of Health, Department of Science and Technology, Department of Trade and
Industry and Department of Economic Development all have direct and overlapping vested
interests in the growth of a vibrant local innovation and manufacturing medical device sector and
all have a role to play in its development.
Local Trends, Constraints and Drivers
Growth drivers for the South African medical devices industry can broadly be split into two
groupings: (1) Demographic and epidemiological changes that are driving demand; (2)
Healthcare provider response to the increased demand.
Population growth, longer life expectancy, recognition that disease burden must be reduced and
the demand for private sector healthcare can be considered to be part of grouping 1; whilst
increasing per capita spend on healthcare, introduction of the NHI and growing numbers of per
capita healthcare professionals reflect government and private sector responses in group 2.
We are also witnessing an increase in the global focus on health innovation development in South
Africa, coming from international foundations and global health organisations. This trend is in
line with the significant commitment we see locally within the South African national government
to invest in the development of the sector. Similarly, South Africa's academic institutions
continue to grow their biomedical engineering programs and are becoming increasingly focused
on how to commercialize on their technologies.
In South Africa we are constrained by a lack of widespread commercialization expertise, however,
and need to draw on the experience within the local medical devices industry as well as from
international organizations in order to facilitate skills transfer. We also need to deal with the lack
of access to capital, and unlock the bottlenecks in information sharing and collaboration that are
hindering the medical devices value chain at present.
SA Industry Players
The South African medical equipment industry consists of multinational manufacturers whose
products are imported by satellite branches, agents or distributors, local manufacturers,
wholesalers and retailers. Multinational companies present in South Africa often operate in a
joint venture capacity with local firms. Each of the leading multinational companies has at least
one representative office for the purpose of sales, distribution and service, but there is little
manufacturing activity, with only Fresenius doing so in Port Elizabeth.
End users vary from healthcare providers such as private hospital groups and the public health
care sector to individual health professionals such as general practitioners. The end users of some
products are the patients themselves. Some local manufacturers export their products.
Local firms tend to be small or medium sized businesses with less than 50 employees and often
combine distribution activity with manufacturing. The South African medical device industry
association (SAMED) represents approximately 160 manufacturers and suppliers of an estimated
300 000 different medical devices. Of the more than 700 local industry players, the association
estimates that fewer than 5% actually manufacture the devices. The industry employs
approximately 4000 people.
SAMED reported that on average two new companies join the association monthly. Association
members include: The South African Laboratory and Diagnostic Association (SALDA), The Medical
Imaging Systems Association (MISA) and MDMSA (Medical Device Manufacturers of South
Africa).
Most South African manufacturers focus on producing basic medical equipment & supplies.
Output by the domestic medical manufacturing industry is in the region of USD200m-USD300m,
of which more than half is exported. Production is focussed on fairly low technology items.
The SA medical device manufacturing sector has a small base of well-established companies that
have developed and manufacture their own products, are exporting, and continue to innovate
around new products and/or processes. However, this sector, displays the following
weaknesses:
• The companies are diverse in terms of their product ranges, which means the opportunity for
products and technology collaboration and clustering are poor.
• The level of industry-university or industry-science council collaboration is poor. This is
characterized by the extremely low proportion of university-based medical technology
innovations that are either initiated by industry or that managed to get taken up by industry
and commercialized.
• Many of the companies operate in ‘boot-strap’ mode with all the concomitant restrictions
imposed by being under-financed.
• The lack of clusters of medical technology firms is more to do with the relatively small size
(number of companies) of the sector, and the product diversity and hence the lack of common
value chains.
Job Creation
A large number of national and international companies are active in the Medical Device market
in South Africa. A few of these include, HealthQ, Litha Medical, Lodox, Medi-Safe Surgicals,
Southern Implants, Southern Medical, Southern ENT, BSN Medical, Fresenius, Becton
Dickinson, Boston Scientific, Elekta, General Electric, Johnson & Johnson, Medtronic, Philips,
Siemens, Smith & Nephew, Stryker.
The Western Cape (WC) region is the ‘hotspot’ for BME and the Medical Devices industry in
South Africa. This may be owing to the closely situated collaborative ecosystem of four
universities, two academic hospitals, the Medical Research Council and the CSIR.
With the projected market growth, South African graduates in BME can expect to have an
abundance of options available to them across a wide variety of fields.
A number of spin-off companies have originated in WC Universities, for example, Kit Vaughan’s
Cape Ray breast digital imaging system, George Vicatos’ facial reconstruction system, Peter Zilla’s
Strait Access Technologies heart valve replacement and repair devices, and Stellenbosch
Nanofibres, which are actively investigating medical applications. It is arguable that SU, in
comparison to UCT, has been insufficiently active in this domain to date.
Uptake in Education
Historically in South Africa, UCT, Wits and UP have been most active in providing degrees in
Biomedical Engineering. However, this circumstance is rapidly changing as several other
Universities are currently planning to provide such degrees. BME in SA will be a very busy space
by 2020!
In the Western Cape, the strong health sciences faculties at UCT and Stellenbosch University has
meant that about 45% of local medical technology companies commercialising inventions have
come from these Universities. The following is a non-exhaustive list of Biomedical Technology
Companies that have come out of the Western Cape Universities.
Stellenbosch University
• Diacoustic Medical Devices – Automated Paediatric Cardiac Auscultation (APCA) system is a
portable hand-held device providing healthcare providers with clinical decision support to
distinguish between pathological and physiological heart murmurs
• Surfactant Medical Technologies (SMT) – a synthetic surfactant formulation consisting of a
combination of readily accessible phospholipids and synthetic peptides
• Stellenbosch Nanofibres – some products of which are intended for medical applications
• Azargen – plant genetic engineering for human protein production
• Unistel Medical Labs – Genetic DNA profiling
• Kathleho Biomedical – a recent platform for the R&D and commercialisation of innovative
biomedical engineering concepts.
UCT
• Lodox – low radiation dose X-ray and Ultrasound imaging applications
• Cell-Life – e-Health technology development company
• Cape Ray Medical – low dose x-ray coupled with ultrasound or breast cancer detection
• Strait Access Technologies – heart valve and deployment device for heart valve repair
• Serapix CC – biosensors/diagnostic
• Antrum Biotech – extra-pulmonary TB diagnostic test – rapid bedside testing
• Attri Orthopedics – design of orthopaedic implants exclusively for people who have suffered
loss of bone tissue due to surgery.
UWC
• Hyrax Biosciences – clinical DNA analysis and drug resistance genotyping
Despite the above, HEI’s face a number of constraints to innovation
For example:
• The business of HEI’s is to grow good people. However, HEI’s have critical skill/human-capacity
shortages. They do not have the requisite manpower to meet the needs of training all the BME
students required. These students will become the innovators that Industry needs. There are
ample interested students but HEI’s lack the funding to train them. Clearly, sustained
investment is required in, for example, student bursaries, the staff compliment to train the
students and to some extent, the infrastructure underlying both.
• Government incentives to HEI’s are determined by research output metrics in the form of
awarded degrees and journal publications. The job performances of HEI staff are judged by
these indices, meaning there is no choice other than to prioritize them. Despite this,
technological innovations from HEI’s are widespread and common. There has been an historic
notion on the part of government, and possibly also industry, that education and innovation
are mutually exclusive. However, this is patently untrue. The above lists testify to this, and one
need look no further than Google for an excellent example.
• Funding for innovations to date has focussed on a project-by-project approach. This approach
has been ubiquitous among specialist agencies, such as the Technology Innovation Agency
(TIA), the Support Program for Industrial Innovations (SPII) and others. While such funding for
individual projects/innovations is obviously a good thing, accessing such schemes does not
help HEI’s to build sustainable long-term pipelines for innovation. Investment is required in
human capacity that is focussed on market-driven requirements. This also means that
appropriate government funding instruments require synchronization with the private sector.
• A one-size-fits-all solution is not appropriate for all higher education institutions. There are
pronounced asymmetries between the various institutions in terms of their involvement and
their capacities in the BME domain. For example, what UCT needs and what SU needs is
different. Further, HEI’s are in direct competition with science councils for government
funding. This despite the councils enjoying selective advantages regarding government
financial support.
• R&D innovations from HE institutions tend to adopt a technology-push rather than market-
pull strategy. Research often does not address the needs of the market and in instances where
this is the case, the cost of introducing the technology far outweighs the return on investment.
The knowledge and capacity to drive the industry-oriented commercial successes of
technological innovations is not usually available in academic institutions. This includes
knowledge regarding Medical Device Regulation, which means that compliance is often sought
at great expense after R&D giving rise to innovations, rather than early-on or intrinsic to the
process.
Ideally, a far greater synergy or synchronization is required between academia and industry than
currently exists. This approach is common in more developed countries. For example, in Germany
more than 70% of funding for HEI Engineering projects come from partners in Industry. Academia
and industry should really team up to tackle SA’s healthcare issues. In return for relatively small
investments in the form of bursaries and operating costs companies then receive the expert
knowledge of the supervisor/s, the innovative environment of the university and, following
project completion, a student trained specifically for the company’s needs.
Should the intended MDD TICP be established and be able to address such constraints, much
progress will be made to improving the outlook for the sector as a whole.
The SA Medical Devices Stakeholder Forum (MDSF)
The SA-MDSF was formed in late 2016. This is a national forum composed of representatives from
government funding bodies (DST, IDC, TIA etc.) science councils (MRC and CSIR), industry
representatives from groups of companies (MDMSA and SAMED) and higher education
institutions including SU. The purpose of the MDSF is to strategically grow the local Medical
Devices Industry by unifying the efforts of the members of the forum. The Gates Foundation has
provided significant funding to develop the medical device innovation sphere in particularly the
Western Cape, which is the ‘hotspot’ for Medical Devices in SA. SU is involved in this effort
through the participation of the Director of the IBE on the committees composing the MDSF. This
represents one of several (intended) sources of future external funding for the IBE. The following
diagram is represents the structure of the MDSF.
The Problem/ Industry Needs – The PAIN POINTS
The need for a Medical Devices Technology Innovation Program is evident. Despite having
strong academic institutions, science councils, government support, and an organized medical
devices industry, South Africa still struggles to successfully commercialize technologies and to
drive those technologies into the market to generate impact. The TIP will allow for the
provision of commercialization expertise as well as incubation/acceleration services to
promising opportunities from within the South African health innovation pipeline, which is a
severely unmet need in South Africa.
Growth in the medical devices sector in South Africa will contribute to increased access,
affordability, and availability of healthcare and drive job creation and economic
empowerment by developing local innovators and entrepreneurs in the health ecosystem.
This will help meet the significant healthcare and economic needs of the South African
population, as the country faces stagnant economic growth and the grapples with the decline
of other major industries.
Industry Pain Points are listed in order of priority as follows:
1. Need for greater industry/community cohesion along the value chain (public &
private).
2. Regulatory & quality management challenges/constraints.
3. A lack of policies that promote support local industry competitiveness (preferential
procurement).
4. Insufficient or poorly capacitated R&D and manufacturing incentives (costs related
to raw material & labour).
5. Need for interventions aimed at maintaining and building a skilled labour force.
6. Insufficient efforts and interventions aimed at stimulating local innovation and
technology development (localisation & other- what financial & non-financial
support is required). Should technology development be stimulated per disease
focus areas, enabling technologies and inputs/ components would be required.
7. Lack of strategic integrated infrastructure required by the industry.
Industry SWOT Analysis
Strengths
• Second largest economy in Africa with rich mineral resources
• Well establish innovation sector in the HEIs and SETIs
• Steady demand for medical devices, even during an economic downturn.
• Businesses benefit from good observance of contracts and intellectual property
rights
• Large population
• Strong private healthcare sector
Weaknesses
• The small size of the domestic market and the fact that only approximately 5% of
the devices used are manufactured locally.
• A “work in progress” regulatory framework for medical devices resulting in the
import of poor quality medical devices and long registration periods for some
medical device classes.
• Medical device research industry is underfunded, limiting the amount of research,
innovation and manufacture of medical devices in South Africa.
• Currency volatility over the years has hampered industry planning
• Extensive regulation results in a rigid labour market
• Poor healthcare infrastructure, particularly in the extensive rural areas, limits
service efficiency
• Private healthcare sector out of reach for most of the Black population
• Chronic shortage of medical personnel
• Purchasing procedures complex and fragmented
Opportunities
• A weakening Rand could be a positive driver for the local development and
manufacture of medical devices.
• New product lines driven by market demand and the introduction of innovative
technology.
• Emerging e-health solution. The development of medical device applications for
use on an iPad, iPhone or handheld device, present opportunities for the medical
fraternity and patients.
• Improved healthcare services in the rest of Africa will mean new markets for South
Africa-based multinationals, local manufacturers and importers.
• Emergence of affluent, Black middle class
• Inter-regional trade agreements facilitate trade flows and reduce costs
• Government health funding is set to increase in real terms through to FY2017-18
• National health insurance (NHI) scheme which is prompting further investment in
the public healthcare system
• Public-private partnership growth
Threats
• Increasing number of imports, as well as increasing number of cheap imports of
inferior quality.
• Inefficient public procurement and payment systems place smaller companies
under pressure and reduce business confidence in local suppliers and distributors.
• The increasing drive to bring down healthcare costs could mean difficulties
ensuring new technologically advanced devices are reimbursed by medical insurers
and medical aids.
• The introduction of the National Health Insurance (NHI) is positive but concerns
exist over the current model and whether the scheme will be managed correctly.
• Centralisation of certain functions within the National Department of Health
threatens to undermine the role of provincial health departments in delivering
healthcare services