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Medical Devices Roadmap in Malaysia (1 March 2009)

Malaysian Business, March 1, 2009

WHAT IS A MEDICAL DEVICE?

The Medical Devices Bureau (MDB) of the Malaysian Ministry of Health (MOH) defines a medical device as all products, except medicines, used in healthcare for the diagnosis, prevention, monitoring or treatment of illness or disability. This definition covers a broad range of products as diverse as contact lenses, condoms heart valves, ventilators, resuscitators, radiotherapy machines, surgical instruments, syringes, wheelchairs, walking frames, pregnancy tests, blood glucose monitors, pacemakers, ultrasound and MRI imaging machines.

AN EXCITING OPORTUNITY EXISTS for Malaysia to become a global medical device design, develop and manufacturing hub. Many of the essential ingredients are already in place, and in fact, Malaysia already manufactures a range of medical devices.

However, a concerted effort should see this grow into a specialized industry segment, similar to the growth of the ICT industry.

Malaysia already has a significant devices industry, mainly in catheters, surgical gloves, cannulae and medical instrumentation, supplying 80% of he global market in catheters, and 60% of the rubber glove market.

However, with the government’s drive to build a more knowledge based economy in biotechnology, the challenge and potential lies with going beyond these traditional manufacturing based operations and creating a dynamic research and development driven devices industry utilizing all the current supporting infrastructure and working towards plugging the current gaps.

The identity problem for the medical devices industry at present is that a large percentage of that device manufacturing, particularly electronic devices, is done under contract with companies who do not necessarily have a medical device focus.

Therefore, while the industry already exists to some degree, the statistics appear under manufacturing, rather than devices. With good infrastructure, viable electronics, manufacturing and ICT industries, access to academic sites, and strong government support, locations such as Penang, Klang Valley and Johor are all potential hot spots for device industries.

Penang currently hosts three major global medical device manufacturers, B Braun Medical Industries, Ambu and Cardinal Health. It was recently announced that St Jude Medical, which produces cardiac pacemakers, is setting up a large manufacturing operation in Penang which adds more weight to the growth of the devices industry.

THE BIO-MARKET

The global market for medical devices in 2007 was US$210 billion, of which the US has 43%, Europe 30% and Japan 11%. The global market is growing at 7% while the Asian and Brazilian markets show the highest growth rates.

Currently the medical devices industry in Malaysia is growing approximately at 8%.

The potential for Malaysia is to position itself as a developer, manufacturer and supplier of medical devices, becoming a hub for Asia growth region.

Malaysia can look to countries such as Ireland and Taiwan, which has develop viable medical device sectors through pro-active government policies, establishment of R&D facilities, and appropriate funding.

In the last 30 years, Ireland has become a world class global centre which develops, manufactures and markets a range of medical devices, leveraging on human capital, since the country has few natural resources. Part of this success is due to the pool of managerial talent from Ireland’s ICT industry, which was moved horizontally into the devices sector.

Malaysia can take heart from the fact that it already has many of the foundation industries as well as the managerial skills already in place to replicate this story.

THE NEED FOR BIO-BRAINS

While Malaysia places a high emphasis on education and produces many graduates in science and ICT, there are significant gaps in the current spectrum of graduates which will need to be addresses in order to create the necessary critical mass of human capital necessary to support the devices industry.

Given that medical device companies that are usually dominated by engineers rather that biologist or chemists, the output of “bio” graduates in this field is currently low. Few universities offer biomedical engineering courses, let alone specialty courses in topics such as biomaterials, biosensors and biomechanics.

While this could be viewed as a chicken and egg situation in relation to development of the devices industry, it cannot be denied that there is a need for improved output from these academic fields if the industry is to grow and consolidate.

If Malaysia wishes to move upstream in the knowledge capability chain the human capital factor becomes a crucial differentiator. If the proportions of science and engineering graduates from competing neighbours such as Singapore, Taiwan & South Korea are to be used as a comparison, Malaysia will need to increase the bio-graduate output tenfold.

THE BIO-MONEY STRATEGY

The investment factor is always going to be an issue in the development of a new industry. Malaysia established the Malaysian Life Sciences Capital Fund (MLSCF) in association with US based Burrill and Co in 2006 to provide venture capital for the biotechnology industry in Malaysia. Additionally Khazanah, Malaysian Technology Development Cooperation (MTDC) and Malaysian Debt Ventures (MDV) have developed investment strategies for life sciences projects.

The Malaysian Biotechnology Corporation currently acts as the government’s one-stop-shop for all biotech developments in the country and can provide assistance to BioNexus status companies in the form of grants and and taxation concessions.

Medical device development in particular is more attractive to venture capital as device development requires a shorter development and trial period (3-5 years) than typical drug development periods of 10-15 years.

One recommendation is to be use the incubator concept to establish venture capital funded companies who can source medical device technologies, develop them into prototype stage, then create spinoffs or out licensing deals which further stimulate the growth of the industry. The value of the incubator lies with intellectual property it acquires or generates, contributing to the development of the knowledge based economy.

The other economic development advantage lies in the additional growth of ancillary services such as legal and regulatory advisory services, intellectual property management, consultancy, supply chain and logistics.