The Economic Impact Of Medical Tourism


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Presentation at the MTA\'s 2nd Annual World Congress (Speaks to economic impact of medical tourism on pharma/biotech and med equip/tech industries)

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The Economic Impact Of Medical Tourism

  1. 1. The Economic Impacts of Medical Tourism<br />Trevor Gunn, Ph.D.<br />Director, International Relations Medtronic, Inc.<br />David G. Vequist IV, Ph.D.<br />Founder/Director<br />Center for Medical Tourism Research<br /><br />
  2. 2. Agenda<br />Medical Tourism Trends<br />Impact on Medical Technology<br />Impact on Pharmaceuticals/Biotechnology<br />Pharmaceuticals/Biotechnology Definition<br />Pharmaceuticals/Biotechnology Sales Trends<br />Emerging Markets<br />Textual Evidence of the Impact<br />Additional Thoughts<br />Summary and Conclusions<br />
  3. 3. Medical Tourism Trends<br />World’s Fastest Growing Industry?<br />Recession Proof?<br />Sub-Categories Beginning to Take Shape<br />Health/Wellness Tourism (includes MedSpas, and MediSpas)<br />Retirement Tourism<br />Fertility Tourism, Death Tourism, etc.<br />Intrastate/region Medical Tourism<br />Politicians Beginning to Notice<br />Understanding of Competence/Marketing is Beginning to Mature<br />
  4. 4. Impact on Medical Technology<br />Includes Medical Equipment and Implantables<br />One of the U.S.’s Best Export Categories<br />Estimated Impact May Be in the 1-3% Range (i.e., Sales Growth in Countries with a significant Medical Tourism Presence)<br />Possible Additional Benefit of Up to $73 Million USD (Rough Estimate) <br />Competence and Growing Market are Impacting Both Sales and Manufacturing in Country<br />
  5. 5. Conversation With Dr. Gunn<br />Dr. Gunn is Director- International Relations for Minneapolis-based Medtronic, the world’s largest independent medical technology company.<br />Adjunct Professor at CERES/School of Foreign Service, Georgetown University.<br />He received his B.A. from University of San Francisco. He received his Ph.D. in International Relations from the London School of Economics in 1992.<br />He sits on the U.S. State Department’s Advisory Committee on International Economic Policy; is an official Trade Advisor to the Office of the US Trade Representative; and a board member of the Export Council and the US Department of Commerce’s District Export Council. <br />
  6. 6. Impact on Pharmaceuticals/Biotechnology<br />Pharmaceuticals/Biotechnology Definition<br />Pharmaceuticals/Biotechnology Sales Trends<br />Emerging Markets<br />Textual Evidence of the Impact<br />Additional Thoughts<br />Summary & Conclusions<br />
  7. 7. Pharmaceuticals/Biotechnology Definition<br />The Pharmaceutical and Medicine Manufacturing industry falls under the NAICS code of 3254 which includes sub-codes of: <br />32541 Pharmaceutical and Medicine Manufacturing <br />325412 Pharmaceutical Preparation Manufacturing <br />325413 In-Vitro Diagnostic Substance Manufacturing<br />325414 Biological Product (except Diagnostic) Manufacturing <br />Overall, this industry primarily comprises companies that are engaged in one or more of the following: <br />manufacturing biological and medicinal products; <br />processing (i.e., grading, grinding, and milling) botanical drugs and herbs; <br />isolating active medicinal principals from botanical drugs and herbs; and <br />manufacturing pharmaceutical products intended for internal and external consumption in such forms as ampoules, tablets, capsules, vials, ointments, powders, solutions, and suspensions. <br />
  8. 8. Pharmaceuticals/Biotechnology Sales Trends<br />The total US domestic drug sales were approximately $235.4 billion USD in 2007 and worldwide sales are estimated at around $568 billion USD (possibly rising to $800 billion by 2020). <br />The biggest pharmaceutical companies have traditionally had good growth and profits (10.8% in revenues and 10.4% in profits- Fortune 2008). <br />In addition, they are cash-rich (the top 20 companies have access to $ 7.5 billion in cash, equivalents and short-term investments) and relatively debt-free. <br />They have had a good run for the past few decades and have good cash reserves (top 20 companies- the average net debt, as a percentage of capital employed is just 6%) should ride out the current recessionary trends. <br />
  9. 9. Emerging Markets<br />The growth of the pharmaceutical market in emerging markets is impressive (a 14.7% increase over the 2005-06 period) and substantially greater than found in the developed markets of the EU and US.<br />Emerging markets offer access to sizeable patient populations and the added bonus of medical tourism patients from developed countries as well. <br />There are still some significant barriers that continue to exist in these markets (such as IP protections as mentioned above) but the overall potential is definitely there.<br />
  10. 10. Textual Evidence - Asia<br />In India, the impact of the pharmaceutical industry is everywhere to be found. <br />India has over 20,000 scientists engaged in the biotech sector, the highest number of FDA approvals worldwide outside of the US<br />World-class facilities for manufacturing generics that comply with international harmonized standards such as Good Laboratory Practices (GLP), current Good Manufacturing Practice (cGMP), and Good Clinical Practices (GCP). <br />Ernst & Young, has projected a robust growth for biotech, pharmaceutical and healthcare service sectors for the coming years- “the country was on the threshold of strong growth partially driven by the surge in medical tourism”. <br />Other Asian countries like Thailand and Singapore and Malaysia are offering competition<br />These countries were reportedly, altogether attracting 10 times more medical tourists from abroad than India. <br />In Malaysia, Frost & Sullivan, reported that one of the key drivers that will boost their pharmaceutical industry is the country’s medical tourism. <br />As more foreign patients will seek treatment here, and this will ultimately drive demand up for pharmaceutical products.<br />
  11. 11. Textual Evidence – Middle East<br />In the Middle East, it was reported that the kingdom of Jordon was also looking to boost medical tourism by developing innovative products through a burgeoning pharmaceutical industry. <br />Jordan’s pharmaceutical industry is relatively small with a value of $160 million USD, but they have an advantage of being a supporter IP rights and the FTA. This has helped stimulate a vigorous environment for clinical trials in the country. <br />This overall market could be increased if a Kuwaiti-Jordan consortium, in a $3 to 5 billion USD medical city near Amman that is focused on medical tourism, is completed by 2012. <br />Abu Dhabi is trying to develop other areas of its economy to sustain its long-term growth (Abu Dhabi Economic Vision 2030). <br />Oil and gas exports accounted for 74% of all Abu Dhabi’s revenues between 2000 and 2005 and they want to decrease the proportion of revenues derived from petrochemicals to about 50%.<br />To achieve the diversification they want, the Government plans to focus on developing the pharmaceutical and medical tourism industries. Abu Dhabi has a goal of becoming a thriving research and development center by attracting investment, strengthening IP rights and formulating a drug-testing system.<br />
  12. 12. Textual Evidence – Latin America<br />In Latin America, US patients have been quietly going to Mexico for years to take advantage of cheaper prices. <br />In 2005 Mexico&apos;s pharmaceutical market was valued at $7 billion, much bigger than India’s market, and was growing at 10% pace. <br />An older report (1999) by the AEI found that prices in the US are on average about 72 percent higher than in Canada and almost 102 percent higher than in Mexico. <br />In Mexico, for pharmaceutical products in the private sector have been increasing about 5% per year since 2002 and sales are expected to rise as medical tourism continues to grow.<br />A 2007 AT Kearney report suggests Latin America will be a popular near-sourcing location.<br />Brazil and Chile are mentioned as having strengths in pharmaceuticals and biopharma<br />
  13. 13. Additional Thoughts<br />Medical Tourism May Provide Pharmaceutical Companies from Developed Countries with Leverage in Intellectual Property (IP) Disputes with Foreign Countries (Williams and Seus, 2007) <br />US Patent and Trademark Office (USPTO), some 1,000 names are filed in Class 5 (the international trademark classification for pharmaceuticals)<br />According to the Economist (2005), as much as three-quarters of the value of publicly traded companies in America comes from intangible assets (such as patents on drug formulas)<br />Countries that are counting on medical tourism to help drive economic growth will have more incentives to respect IP regulations in order to be able to offer well-known, name brand drugs to prospective medical tourists<br />
  14. 14. Summary & Conclusions<br />Medical tourism may impact the pharmaceutical industry in several ways:<br />The amount of money spent on promotion (approximately 24.4% in 2004) versus R&D (13.4% for the same period)<br />MT’s impact on pharmaceutical sales in terms of percentage of revenue and logistics will be significant<br />Pricing, distribution, and IP rights which will become even more important as the market grows<br />Increased pressure on the drug companies and countries to have safe, secure, logical, free-market options to manufacture and distribute pharmaceuticals as close as possible to these medical tourists (should continue to drive the investment in pharmaceutical manufacturing to these developing countries)<br />
  15. 15. Thank you!<br />Trevor Gunn, Ph.D.<br />Director, International Relations Medtronic, Inc.<br />David G. Vequist IV, Ph.D.<br />Founder/Director<br />Center for Medical Tourism Research<br /><br />