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The healthcare products supply chain is unlike most any other you can think of, says Chris Holt, CEO of Tiger Medical Group, a Shanghai-based manufacturer and marketer of more than 1,000 consumable and disposable products, such as needles, gowns and masks. That's because the healthcare market remains largely national: most products are made and distributed within their host country or region. That's true for North America and for Europe.
"Healthcare just doesn't have the global footprint you see in most other industries," says Holt. Then, too, the healthcare market is governed by agencies whose regulations vary greatly from country to country. A product that is viewed one way by a given country's health and safety body may be seen completely differently by the authorities in another agency. Volatility in standards is problematic and can be very costly. "It often means you have to have different supply chains for essentially the same product."
Despite the national character of the industry, the extremely high cost of medical products is causing some providers to consider sourcing from outside their traditional lanes of supply. Holt says most of his company's business, in fact, comes from exporting from China and other Asian nations to the United States and Europe.
It's all about cost. The traditional model in the U.S., say, meant that sales and marketing, top managers, research and development, production and distribution took place within the U.S. An Asia-based model, on the other hand, calls for only the sales and marketing teams to be based in the U.S.
The downward pricing pressure is compelling health providers to make some tough choices. Do you cut staffs, defer capital purchases or reduce supply costs. With the latter amounting to between 30 percent and 50 percent of operating expenses, sourcing from a lower-cost supplier in Asia may make sense, Holt says.
At the same time, Tiger sees the huge domestic Chinese market as the future for companies like his. There are an estimated 400 million Chinese who can afford world-class medical care in top-flight institutions in Beijing or Shanghai. There are an additional 900 million who can afford a lower standard of care but one that's still far superior to what they've known. Holt says that should make for some highly exciting times ahead in his business.
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