زنجیره ارزش2013!03!20 gereffi medical devices gvc in costa rica

8/10/2019 Gereffi Medical Devices GVC in Costa Rica 2013!03!20

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Medical Devices Global Value Chain:Opportunit ies and Challenges for Upgrading

Gary Gereffi

March 20, 2013

Life Sciences Forum

San Jose, Costa Rica

[email protected]

Duke University

Based on Bamber, Penny and Gary Gereffi . (2013). Costa Rica in the Medical DevicesGlobal Value Chain: Opportunities for Upgrading. Durham, N.C.: Duke CGGC.


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1. Medical Devices

Global Value Chain


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Medical Devices Industry: Key Trends

Mix of low- and high-value items (from disposable

catheters to home test kits to MRIs)

Growing global demand: developed countries still

strongest, but emerging markets strengthening

Production is highly concentrated geographically &

among top firms in med devices GVC

BUT increased offshoring creating opportunities forother countries lower costs, leverage human

capital & target new markets


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Medical Devices Global Value Chain

Components

Manufacturing

Plastics Extrusion& Molding

Precision Metal

Works

Electronics/Electrical

Components

Software

Development

Weaving/Knittin

g Textiles

Assembly

Packaging

Sterilization

Assembly

Wholesale

distributors

Individual

Patients

Doctors & Nurses

Hospitals

(Public/Private)

Cardiovascular

Orthopedics

Infusion

Systems

Others

Marketing & Sales

Resin Metals

Chemicals Textiles

Input Suppliers

Disposables

Surgical & Medical

instruments

Capital Medical

Equipment

TherapeuticDevices

Final Products

Distribution

Market Segments

Post-Sales

Services

Consulting

Maintenance,

Repair

Training

Buyers

Research & Product

Development

RegulatoryApproval

Process

Development

Sustaining

Engineering

Prototype

Process

Development


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2. Costa Rica in the Medical

Devices Global Value Chain


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Key Trends in Costa Ricas Medical Devices GVC

Product upgrading: General increase in complexity of products Growing confidence in ability to meet regulatory requirements.

Market segment diversification: DisposablesInstrumentsTherapeutics. (Shift toward higher-value products)

Forward and backward linkages: In 2009-12, upstream (inputs) anddownstream (sterilization) firms established in country; increase in

country-capabilities & domestic value-added

Disposables, Instruments & Therapeutics categories are highlyconcentrated despite large number of entrants:

Disposables: Baxter & Hospira

Instruments: Arthrocare & Boston Scientific

Therapeutics: Allergan & St. Jude Medical

These six firms together exported 85% of the medical devices from

Costa Rica.


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ComponentsManufacturing

Plastics extrusion

& molding

Precision metalworks

Electronicsdevelopment

Software

Development

Weaving/Knittin

g Textiles

Assembly

Packaging

Sterilization

Assembly /Production Distribution &Marketing

Resin Metals

Chemicals Textiles

Input Suppliers

DisposablesUS$575.5 million

Instruments

US$270.5 million

Capital Equip.US$32.5 million

TherapeuticsUS$301 million

Main Segments: Exports

Post-SalesServices

Consulting

Maintenance,Repair

Training

Research &

ProductDevelopment

RegulatoryApproval

ProcessDevelopment

Sustaining

Engineering

Prototype

Local firms are mainly in packaging & support services (12 of 19) versus 4 in limitedrole in plastics molding & metal finish ing and 1 OEM with exports under $2 million.

Number of Firms

0 - 5

6 - 10

11 - 15

16 - 20

Costa Ricas Position in the Medical Devices GVC

Wholesale

distributors

Individual Patients

Doctors & Nurses

Hospitals(Public/Private)


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0

200

400

600

800

1,000

1,200

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ExportVa

lues($US

Million)

Year

Costa Rica's Exports by Product Category: 1998-2011

Disposables Therapeutics Instruments Capital Equipment

Evolution of Costa Rican Medical Device Exports

Disposablesstill the largest product category exported, but no longer astrong growth area.

Exports in surgical instruments have grown steadily since 2005. Therapeuticshas become 2ndlargest category since 2008; likely to increase

as newly established firms complete transfer of new product lines.

Limited export of highest value capital equipment


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2010

Initial plant reopens

after restructuring

2004: Manufacturing functions

2012: Engineering for process improvementsFocused on

cardiology segment; strategy to alleviate R&D costs in the US.

Functional Upgrading

Biopsy forcepsLabor intensive, basic metal works & extrusion.

Urethral stentThermoforming, laser marking, coating capabilities.

Guide WiresSophisticated Laser cutting & welding.

Today CR facilities cover 42 manufacturing processes.

Product & ProcessUpgrading

Gastroenterology segmentUrologyCardiovascularMarket Diversification

Recent co-location of sterilization vendors will allow the firm to exportdirectly to global distribution centers

Forward Linkages

Upgrading Success: A Leading Medical Devices MNCin Costa Rica

2004

First production plant

opens in Costa Rica

2008

Second plant opens.

First plant begins

restructuring

2005 2011

Exports:US$100 mill ion


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Evolution of Brazilian Medical Device Exports

Disposablesare both the largest product category exported and an area ofgrowing exports.

Medical equipment surpassed dental products as the second largest exportcategory in 2002.

Export statistics hide the sectors of greatest importance, since the main

export items tend to be low-tech. Brazilian government and private sectoractors are working to promote price-competitive, mid-tech exports.

0

100

200

300

400

500

600

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ExportValue(US$Million)

Year

Brazils Medical Device Expor ts by Product Category, 1997-2011

Dental Disposable Equipment Implants Laboratory Radiological

Costa

Rica

2x

Mexico

10x

Ireland

18x


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Components

Manufacturing

Plastics extrusion

& molding

Precision metalworks

Electronics

development

Software

Development

Weaving/Knitting

Textiles

Assembly

Packaging

Sterilization

Assembly /Production

Wholesale

distributors

Individual Patients

Doctors & Nurses

Hospitals(Public/Private)

Resin Metals

Chemicals Textiles

Input Suppliers

Laboratory (22)

Implants (32)

Dental (26)

Disposables (20)

Distribution &Marketing

Post-Sales

Services

Consulting

Maintenance,

Repair

Training

Research &

ProductDevelopment

Regulatory

Approval

ProcessDevelopment

Sustaining

Engineering

Prototype

Number ofNational Firms

0 - 20

21 - 40

> 40

82% of nationalfirms are SMEs

Brazils Position in the Medical Devices GVC

Medical

Equipment (120)

Radiology (10)

Market Segments

MNCConcentration

27


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GE Healthcare in Brazil: Market-Seeking Offshoring

GE seeks to gain access to Brazils rapidly growing healthcare market.

Industrial policy toolscreate further incentives for local production. The Brazilian informatics law: tax incentives for local production and R&D

The Dilma administration approved a 25% preference for the national healthcaresystem to purchase locally manufactured medical devices.

Certification by ANVISA, the regulatory arm of the Ministry of Health, is requiredto distribute medical devices in Brazil. ANVISA certification is very difficult and

time-consuming(1 year on average), so MNCs frequently find it easiest toacquire local companies.

GE is pushing for relaxed ANVISA requirements, but through its controlof the largest public healthcare system in the world, the Braziliangovernment is in a strong bargaining position.

2010

GE Healthcare opens

first plant in Brazil,

manufacturing 3

products

2012 June

GE aquires XPRO, a

local x-ray device

manufacturer

2012 April

GE fails to receive

approval to produce

14 new products in

Brazil

2013

GE plans to open a

multi-disciplinary

research center in Rio

de Janeiro

2012 June

Brazil approves a 25%

preference for locally

produced goods for

public hospitals


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Opportunities for Costa Rica

Product upgradingTherapeutics & capital equipment

Increasing value of products produced in country

Synergies with IT sector

Improve capability of local & foreign suppliers Automation to increase overall supply w/o increasing labor costs

Capture more value from participation in technology- and capital-

intensive production processes

Strengthen backward & forward linkagesin chain Locally available inputslower inventory needs and costs

Sterilizationopens up possibility for direct distribution


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Opportunities for Costa Rica (contd)

Diversification across geographic end-marketsfor

functional upgrading in marketing, distribution &

incremental R&D

e.g., Mexico Growing supply (exports) and demand (domestic)

Cultural & language bridge

Close to the US

Mature industry with training opportunities

Leverage offshore services experience


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Challenges for Costa Ricas Med Devices Sector:Expansion & Upgrading

Expansion of manufacturing segments -- constrained

Shortage of human capital, increased attrition & wage inflation.

All levels: Direct labor, technicians and esp. engineering staff

Sector competes with other priority sectors such as offshore

services firms for engineering talent.

Transportation infrastructure limits continued growth, particularly in

the Central Valley

Functional upgradinginto R&D

Cost and skills driven due to limited CR domestic market & EPZ

incentivesNeed to explore potential regional market

Limited R&D need to build academic strengths in cutting edge

technology


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Challenges for Costa Rica (contd)Building local l inkages

Expand opportunities for local firms

Local firms have limited presence in EPZs due to follow sourcing by

MNC partnersenhance supplier development programs

Sourcing decisions made globally

look for regional expansionopportunities.

Limited scale, access to finance & technological expertise inhibit

local firms from becoming reliable suppliers of critical inputs &

serviceslook for upstream and downstream GVC opportunities.


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Gary Gereffi

[email protected]

THANK YOU!

Questions?

Penny Bamber

[email protected]

زنجیره ارزش2013!03!20 gereffi medical devices gvc in costa rica

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