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Opportunities in Latin America’s Healthcare Sector

Looking Ahead to 2016

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Foreword

Inatimeofeconomicinstability,privateandforeigninvestorshavetheopportunity to grow their presence in select healthcaremarkets. Thefollowing report delves into three contextual elements to understandhealthcaretrends intheLatinAmerica,threemajorburdenscountriesintheregionareallgrapplingwith,andfourtargetedopportunitiesforhealthcareproviders.

Contextual elements

• Currency Devaluations — As shifts in the Chinese economycontinuetocausefluctuations incurrencymarkets,allthemajormainplayers inLatinAmerica’shealthcare industryhavefelt theimpact of weakening local currencies. Despite dollar-denominatedpurchasesbecomingevermoreexpensive,alackoflocal manufacturing leaves many countries with no alternativebut to import form abroad. The private sector will have to becost-efficienttoremainflexibleandcompetitive.

• Corruption — Corruption in the healthcare sector has alwaysbeen a reality, but more so now in troubled economic times.Incidences such as counterfeit products and embezzlement bypublicfiguresandprivatecompaniesaddsunnecessarydisparitiesto the healthcare systems of the region. Transparency andaccountabilityareneededtomitigatethesepractices.

• Pubic-PrivatePartnerships(PPPs)—withthepublicsectorfallingshorton infrastructuredemands,privateenterprisesareneededto intervene and complement healthcare service provision,especially in rural areas. Diagnostic imaging and IT healthsolutionsaresomeofthebrightspots,asevidencedbythePPPsthatwerestruckin2015.Brazil’schangeofheartwhenitopenedup its hospitals to foreign investment constitutes one of thebiggest opportunities for capital and medical equipmentcompanies.

Major Burdens

• Ageing Population — A growing portion of Latin America’spopulation is ageing fast as the region reaches the apex of itsdemographic transition. This has accelerated the increase inhealthcare expenditures, while public health institutions are nolongercapableofassuming theburdenof caring for theelderly.Alternate solutions related to home healthcare may presentopportunities for care providers, nursing homes, and medicalequipmentsuppliersprovidingproductsthatcanmeettheneedspromptedbythesedemographicchangesatareasonablecost.

• Chronic Diseases — Brought about by the region’sepidemiological transition, non-communicable diseases (NCDs)now account for the majority of deaths in the region. Yet,becauseoftheprevailingbiomedicalmodelandalimitedfocusonprimarycare,thesediseasesremainlargelyunaddressed.Greateremphasisneedstobeplacedonprevention inordertoeasetheburden that NCDs place on healthcare systems. Diabetes andcardiovascular diseases are of particular concern, with highprevalence in the majority of Latin American countries. Thesituation gives medical device and capital equipment

manufacturers the opportunity to pioneer the shift towardslegitimizingpreventativecareintheregion.

• Obesity—Ariskfactorformanyofthechronicdiseasesplaguingthe region, it is fortunately the one that can most easily beaddressed. Consumers can micromanage their health indicatorsto break free of this pervasive epidemic. Innovative diagnosticand monitoring technology can quantify progress and bringawareness to patients,which can impede the gradual nature ofweightgain.

Targeted opportunities

• Prevention — Cost-effective in every sense of the word,prevention can alleviate the burdens of Latin America’shealthcare sectors by targeting at-risk patients andundiagnosed/unaware patients. Effective solutions by Mexicoand Brazil demonstrate that precise information coupled witheffective communication are the cornerstone for successfulprevention.

• Technology & Patient-Centric Healthcare — Simplicity andconveniencearecriticalfortheswiftadoptionanddisseminationofhealthtechnologysolutions.Thehomehealthcareandmobilehealth(mHealth)marketsneedtoembodytheseprinciplessincemany of their services and products require constant use.Segments for these markets include smartphone applications,diagnostic and patient-monitoring equipment. These productsandservicesfocusonprovidingactionableinformationtopatientsso that they can achieve their health goals, manage theirtreatments,andpromoteprevention.Asadoptionbecomesmorewidespread,patient-centrichealthcarewilltakeroot.

• Highgrowthprospectsforselectmedicaldevices—importdatafor medical devices and capital equipment throughout LatinAmerica in 2015 reveals certain high-growth niches, includingheighteneddemandforcardiorespiratoryequipment.

• Portability and Mobility — Portable X-rays and bracelet-typeblood pressure machines hold a significant share within theirrespective product classes. Trade statistics show that productsthat enable both simplicity and convenience are in demand,givinganedgetosupplierswhocanmarketsimilarproducts.

The report’s insights are intended to enable decisionmakers to seizethe right opportunities and inform their go-to-market strategiesthroughouttheregion.

To learn more about Americas Market Intelligence, our services,consultingengagementsandspeakingopportunities,pleasecontact:

GuillaumeCorpart,ManagingDirector

gc@americasmi.com

+1(305)441-9300

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Table of Contents

Foreword....................................................................................................................................................2

TableofContents.......................................................................................................................................3

1.Currencydepreciation:weakeningdemandforcapitalequipment.......................................................4

2.Illicitbusinesspractices:Theburdenofcorruptiononhealthcaresystems..........................................5

3.Budgetcrunch:governmentbelt-tighteningoffersopportunitiesforcompaniestofillhealthcaregaps............................................................................................................................................................6

4.AgeingPopulations:Aburdenforsome,agoldmineforothers...........................................................7

5.Thesilentmajority:Targetingtheundiagnosedandtheunawarewillreducetheprevalenceofchronicdiseases.........................................................................................................................................7

6.Theobesityproblem:Thefatthatishardtoshed.................................................................................9

7.Medicaldevices:real-time,continuousmonitoringisthefeatureofthefuture.................................10

8.Specialtymedicaldevices:growthratesofover20%in2015.............................................................11

9.Capitalequipment:Portabilityandmobilitytodrivedemand.............................................................12

References................................................................................................................................................13

AboutAmericasMarketIntelligence........................................................................................................15

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Currency depreciation: weakening demand for capital equipment

AsChinashifts its focustowardsdomesticconsumption, ithasunfavorablyimpactedglobalcommoditytrading.1Thecurrencydepreciation experienced throughout Latin America reflectsfallingdemandfortheirexportcommoditiesandisputtingtheregion’s long-established dependency on Chinese demandunder greater scrutiny (see graph). The region’s economicstagnation is expected to linger through 2018 as regionaleconomiesareexpecttopostonlymodestGDPgrowthof lessthan3%—well below the robust expansion seen from2003-2012.2

Slow growth and weaker currencies leave the region at adisadvantageinregardtodollar-denominatedgoods.WiththemajorityofmedicaldevicesbeingimportedintoLatinAmerica,manufacturers and distributors must revisit their pricingregularly inordertoensuretheyremainbothcompetitiveandprofitable. Meanwhile, healthcare systems address costincreases through “rearview-mirror” budget planning, makingfor a challenging balancing act. Industry and governmentinstitutionsareeachdefendingtheirrespectiveinterests,oftenresulting in a tug-of-war between public spending and cost-cutting initiatives, as was the case with Brazil’s healthcarebudgetthroughout2015.3

Though theeconomic instabilityof the regionwill continue toconstrain public health systems, Latin America’s totalhealthcare expenditure is expected to reach 7.7% of GDP by2017.4 Future growth will depend on the private sector’sflexibility,andcompanies’abilitytocatertoindividualsseekinghealthcareoutsidethescopeofthepublicsector.

With private expenditure representing 48% and 57% of theBrazilian and Mexican healthcare markets respectively, theseare the largest privatemarkets inwhich to thrive.5-7Mexico’sreboundsinceitseconomicslumpin2011reflectsthevitalityofhealthcare markets. Mexico’s healthcare spending grew bynearly 10% in 2012, a direct result of the expanding privatesector.9 Brazil’s novel policy change in 2015 to open privatehospitals to foreign investment also exemplifies the need forexpanded healthcare provision and the role of the privatesector in meeting this need. Other countries have also seenstrong growth within the private sector, notably Chile,Argentina,andNicaragua.7-9

As the second largest and most dynamic medical devicemanufacturerinLatinAmerica,Mexicoisalsoshowingpromise.Thanks to its geographical proximity to theU.S. and its lowermanufacturing costs, the countryhasbecome the fifth largestexporterofmedicaldevicesandremainsanenticingchoiceformid-sized medical device companies wanting to establishoperationintheregion.

Opportunitieslieinprovidingcost-effectivesolutionsthathelppublicandprivatesectorhealthcareproviderskeeptheircostsundercontrol.Onthecapitalequipmentside,thismaypromptamovetowardsrefurbishedorpre-ownedequipmentbackedbyamanufacturerwarranty;ortheextensionofmaintenancecontractsfordistributorsandintegrators.Localmanufacturingand contract manufacturing may be an option for certainmedicaldevicemanufacturersseekingtoshifttheircostsawayfrom the dollar. Increased competition from “budget”solutions will arise, affecting established brands in capitalequipment,devicesandconsumables.

Another promising niche are markets geared towards theelderly and chronic disease management, which have seengrowingdemand,especiallyforservicesandproductsthatcaterto the new patient-centric philosophy. Sub-segments includemHealthsolutions,telemedicine,andprevention,whichaimtobothreachmorepatientsandbeefficientwithresources.Givenbudgetarypressures,publichealthcareinstitutionswillbemoredeliberateabouttheirspendingonhealthcare.Certaincountriesmayevenneedtostreamlinetheirhealthcaresystems,findingefficienciesandnewwaystocollaboratewiththeprivatesector.

-60%

-55%

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15

Currency depreciation (Oct. 2014 – Oct. 2015, LC: US$1)

Mexico

Colombia

Chile

Argen2na

Brazil

Peru

Regionalavg.

Source: Americas Market Intelligence based on data from xe.com

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Illicit business practices: The burden of corruption on healthcare systems

Unethicalbusinesspracticeshaveaheavy influenceonthehealthcaresystems of Latin America. Theft, bribery and extortion have led tomonetary losses in the billions. According to TransparencyInternational’s 2014 Corruption Perception Index, the extent of thedamage is severe enough to classify two-thirds of the region’s 31countries alongside the world’s most corrupt nations.1 And yet theregioncanillaffordanythingthatwouldfurtherconstrainitshealthcaresystemby limiting available resources, lowering theeffectiveness andefficiencyofservices,or loweringqualityofoverallcare. Eventhoughengaging in corruption presents significant risks to companies – withthe risk of a tarnished reputation and billion-dollar corporate finesamongthemostsevere,unethicalbehaviorwillcontinuetoplayaroleinLatinAmerica.

“I have yet to hear of one country in Latin America that does not have an issue with the role of corruption.”

Leadingmedicaldevicemanufacturer

Much of the corruption stems from political figures and unethicalbehaviorinthepublicsector.Theprevalenceofstate-ownedorstate-controlled healthcare institutions have led to compliance challengesregardinganti-briberylaws.

• InMexico, kickbacksongovernment contracts can reach25% to30%ofprojectvalueintheformofcashandothermaterialgoodssuchascomputers,cars, land,constructions,homesandpoliticalfavors.

• InHonduras, thevice-presidentofCongress,LenaGutierrez,andsomeofherfamilyhavebeenchargedwithfraud,crimesagainstpublichealthand falsificationofdocuments.Theyare suspectedofhavinglinkstoacompanythatallegedlyembezzledthestatebysellingpoor-qualitymedicineatinflatedprices.2

• In Guatemala, political corruption in the health system hasdirectly led to loss of lives. Authorities arrested 17 people,includingtheheadoftheGuatemalanCentralbank,inanongoinginvestigation into fraud at the Instituto Guatemalteco deSeguridadSocial(IGSS).ThescandalrevealsthatIGSSemployeesand the head of the Bank of Guatemala stood to make 15% inkickbacks.Thesepersonshavebeenchargedwithfraud,bribery,conspiracy, influence peddling, illegal collection of fees, illicitassociation and insider trading. Charges of culpable homicidecouldbefiledasthescandalresultedinthedeathsofatleastfivekidney-failurepatients.3

Corruption goes beyond bribes and kickbacks. There are cases ofindividuals and entities often billing the government for services thatwere never rendered or even selling expired medications in alteredpackages.4InEcuador,suchbehaviorhasbecomeamajorissueforthehealthcare system. Guayaquil’s Teodoro Maldonado Carbo Hospital

hasbeenonesuchsourceofcorruptionwheredozensoftunnelshavebeenusedtosmugglemedicinesoutofthehospitalforillicitsale.5

Even Brazil’s image has been stained by corruption as the Petrobrasscandalcomestolight,involvingbothpublicandprivateindividualsinamulti-million dollar affair that appears to lead as high as thePresidentialOffice.

Impunityatthetopenablescorruptiontoflourish.Asnewleaderstakeoffice, theyhaveanopportunity to change long-establishedpractices.Theymustlooktowardsanti-corruptioninitiativestoreducetheimpactof unethical behavior in the region. The priority for improvinghealthcaremanagementsystems is to increase transparency.There isan opportunity for international agencies and civil society to cometogetherinthefightagainsttheseunethicalpractices.

• One such example is The World Bank, which assistscountries in appointing high profile committees toinvestigate the scale and scope of corruption in theirsocieties, to set priorities for anti-corruption activities, andtodevelopandimplementactionplans.3Theseactionplansare only effective when they receive high-level politicalassistance and involve the public and media by openingchannelsforparticipation.

• Organizations such as Transparency International canempower citizens to take action and hold politiciansaccountable for unethical government acts. Activities suchas holding regional workshops have helped equipconcerned citizens with new ways to combat corruptionsuchassurveyinstrumentsandcitizeninitiatives.3

Transparencyandaccountabilitymustincreaseiftheroleofcorruptionistodiminish.

Corruption perception index (Ranking out of 174 countries)

Mexico(#103)

Colombia(#94)

Chile(#21)

Argen;na(#107)

Brazil(#69)

Source: Transparency International

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Budget crunch: government belt-tightening offers opportunities for companies to fill health care gaps

As they strive to provide healthcare to large populationscharacterized by vast income disparities, Latin Americangovernments strugglewith the tradeoffsbetweenaccessibilityandqualityofcare.Brazil,forinstance,possessessomeoftheregion’s most renowned healthcare institutions, but themajorityofthecountry’spublichealthcaresystemsuffersfrompoor planning and understaffing. With few exceptions, mostBrazilianscomplainoflongwaittimesinthepublicsystem.1

Mexico also faces challenges with a lack of public-privatepartnerships and poor distribution of resources — publicinstitutions often overlap by geography and unnecessarilyduplicateservices; theyalsohaveyettoreachaconsensusonpatient portability.2 These legacy systems fall well short ofaddressing the growing healthcare pressures of an ageingpopulation.

The lack of infrastructure and misallocation of resourcesnevertheless offers opportunities for the private sector,especially in countries such as Brazil, Mexico, Chile, andColombia, where healthcare expenditures are rising.Companieswhocanofferhigh-qualitycareandtreatmentatareasonablecoststandtomakesignificantgains.3

However,privatesectorprovidersfacechallengesoftheirown.Private institutions inMexico, for example, face a shortageofnursesbecausetheyofferlowerwagesandbenefitscomparedtothepayonofferinthepublicsector.2While there is no perfect solution, governments can set thestage for private companies to complement — and in somecasesoffset—rigidandslowpublichealthsystems.Rulesandregulations will need to evolve as a result, and already somecountries have set up new frameworks to enable greaterprivateparticipation inhealthcareprovision.Encouraging localsolutions and alternatives to imports is particularly relevantgiven weakening currencies and grim economic outlookexpecteduntil2018.

• LeadingthistrendisBrazil,where inearly2015PresidentRoussefannouncedthatforeigncompaniescouldinvestinprivatehospitals,thushelpingtoexpandprivatecareand

shiftingpartofthefinancialburdenawayfromthepublicsector. Private equity funds Carlyle Group and GICHoldings investedover$600million in theRedeD’OrSãoLuizhospitalchain,toconstructnewhospitalsandexpandcurrentfacilities.4

• IFC recently helped expand Brazil’s outpatient servicecenters for its third largest diagnostic imaging company,andhasalsoprovidedtelemedicineservicestoColombiansinremoteareas.5

• Management Sciences forHealth (MSH) received fundingto provide technical assistance to Mexico, Nicaragua,Honduras, and other countries throughout the region toincreaseaccesstointegratedhealthservices.6

• Telemedicine gained traction in Argentina throughout2015. Through the recently launched NationalCyberHealth Plan, Argentina is developing a connectednetwork of hospitals. The country is taking advantage ofthisnew infrastructure topioneernew technologies suchas tele-ultrasounds and tele-resonance scans. Privatecompanies like Philips are investing in this field byexpanding the number of Picture Archiving andCommunication Systems (PACS), a remote-radiologyservice,inBrazilandintroducingthemintoArgentina.7-8

“…Private companies and entrepreneurs will take over a lot of government functions, sparking huge opportunities to profit from a vast population that won't mind paying to get the service they deserve — mostly in health care…”

LuisArnal,PresidentandFounderofINSITUM

These initiatives, though principally driven by cost-efficiencyconcerns,alsorevealadesiretotransitiontoward(1)acloud-basedframeworkand(2)patient-centrichealthcare.Suppliersinvolved with connectivity, health IT, and diagnostic imagingwillbeabletocapitalizeonregionaltrendstoexpandinthesefields.Private institutions, inturn,areexpectedtostep inandcomplement the public sector’s shortcomings with offeringsgeared to the “middle market consumers” – products andservicesgearedtothosewhowantaccesstobetterhealthcareatreasonablecost.

Source: The World Bank

Private health expenditure (% of total health expenditure)

2011 2012 2013

Brazil 47% 48% 48%

Mexico 50% 52% 57%

Colombia 75% 76% 76%

Ecuador 43% 45% 52%

Uruguay 61% 65% 70%

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Ageing Populations: A burden for some, a gold mine for others

Latin America is experiencing steady and significant ageing of itspopulation - largely driven by the expansion and modernization ofhealthcare provision and the ensuing rise in life expectancy. Theconfluence of continued technological progress and dropping fertilityrateshasledtogrowingconcernsaboutthesustainabilityofallpubliclyfinancedsocialwelfareprograms,particularlyhealthcare.

LatinAmerica’sgeriatricbaseisapressingissueforhealthcaresystems,bothpublicandprivate. In2010,10%of the region’spopulationwasover 60 years old. By 2040, this number is expected to more thandouble, reaching 21%.1 The phenomenon is not unique to LatinAmerica-othercountriesdealingwithsimilarissuesincludetheUnitedStates (where projections indicate that 22%of the populationwill beover60by2040)andJapan(where25%ofthepopulationiscurrentlyover 60 years old).2,3 The burdenof ageing demographics has led theJapanesehealthcaresystem intoacrisis,whichservesasacautionarytaletoeventhebestmanagedhealthcaresystemselsewhere.

Asthenumberofworking-ageadultsdecreasesasaproportionofthetotal population, the ageing of the population will result in a neteconomic burden, particularly when considering that seniors accountforadisproportionateamountofhealthcarecosts.Thesecostswillbepartially responsible for Latin America’s expected rise in healthcareexpenditures,increasinganaverageof4.6%peryearthrough2018.4

Chronic diseases are the principal cost driver associated with ageingpopulation, as over 80% of adults over 60 have at least one chronicdisease.5Suchdiseases require long-termtreatmentandroutinevisitsforlifestylemanagement.Thegrowingnumberof“emptynesters”isasegmentofinterestastheyseekgreaterindependenceandinvestmorein their health than previous generations, resulting in higher “out-of-pocket”expenditure.

In a culture where family bonds play a central role, the homehealthcare market presents vast opportunity, particularly as analternative to building more long-term care facilities. Home caresolutionsareexpectedtogrowby8.7%between2015and2020.6

“The rise in the aging population has become the biggest challenge for any economy in Latin America.”

Leadingmedicaldevicemanufacturer

Medical device manufacturers will benefit from supplying equipmentfor home healthcare solutions, such as ventilators, oximeters, bloodpressure and arthritis devices, and glucose monitors. Simplifyingproducts to minimize the learning curve will be critical to gain favoramongtheelderly,andadaptingtheseproductstoworkinconcertwithmobile technologieswill lead to efficientmonitoring. LatinAmerica’srapidassimilationofmobiletechnologieshasprimedtheregionfor itsimplementationinthehealthcarefieldasanindispensabletool.

Whereas traditional telemedicine initiatives in LatinAmerica focus onconnecting hospitals to each other, the combination of mobiletechnologieswith thehomehealthcaremarketwill allow for involvedfamilymemberstoremainconnectedwithvaluableinformation.

Thepersistentgatheringofpatientdataanditsautomatedanalysiswillbeadvantageousforformingelectronicmedicalrecord(EMR)systems.Health professionals will possess the ability to better detect at-riskpatients and increase lifestyle management, particularly for less-mobileelderlypatients.

Withthepublicsectorlimitedbyfinancialconstraints,privateprovidershavetheopportunitytocapitalizeonthistrend,pioneeringthepatient-centric movement focused on improving the quality of life for thehigherageclasses.

Population Pyramids for Latin America and the Caribbean

2015 2025 2035

Source: AMI analysis based on data from www.populationpyramid.net

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The silent majority: Targeting the undiagnosed and the unaware will reduce the prevalence of chronic diseasesInfectiousdiseasesinLatinAmericaarequicklybecomingathingofthepast. The most resilient diseases, such as AIDS, tuberculosis, andmalaria account for less than 10% of deaths in the region.1Chronicdiseases, on the other hand, are the principal causes of death forcountries in the advanced stages of their epidemiological transition,suchasChile,Argentina,Mexico,BrazilandUruguay.1Othercountriesin the region are expected to follow suit, thus elevating the burdenregion-wide.2-3These non-communicable diseases (NCDs) place a large strain onhealthcare resourcesdue to the regular and sophisticated treatmentsthey require. This is particularly true when considering higher agegroups and the health complications that ensue. With a growinggeriatricbase,thesefactorscompoundeachother,furtheremphasizingthechallengedassociatedwithchronicdiseases.Given the nature of chronic diseases, patients will continue to seektreatment involving long-term care. Yet the levels of dissatisfactionwithpublichealthsystemsissuchthatmanyseekouttheservicestheyneedprivatelywithout-of-pocketexpenditures.Privatecareprovidersandequipmentsupplierscancapitalizeonthistrendtostrengthentheirpresenceinkeymarkets.Prevention and awareness are themain strategies to combat chronicdiseases, and, indeed, public healthcare systems have been seekingfocusing on such activities to maximize returns on taxpayer-fundedexpenditures. Outreach programs in the form of social events andinternational collaborative efforts have been successful. The 2014WorldDiabetesDayinMexicoCityisanexemplarymodelforthekindofpreventiontheregionneeds.Involvingmorethan15,000people,theInternational Diabetes Foundation (IDF) aimed to educate the localpopulation about lifestyle choices and also provided services such assimplified blood sugar testing, healthy cooking workshops, andexerciseclasses.4Theregionisripeforsimilarawareness-raisingevents,suchas“WorldHypertensionDay”.Awareness programs remain as a cost-effective way to gain tractionwith at-risk populations and avoid the sophisticated treatment ofchronicdiseasemanagement.Thekey to their success isempoweringlocal communities and ensuring proper outreach to unawarepopulations by focusing the event on crowd-pleasing activities withtangible health benefits. Properly designed efforts can potentiallyunearththelargenumberofundiagnosedoruneducatedpatients,andsignificantly prevent costly health expenditures. According to theDiabetes Atlas, estimates show that of the 392 million patients withdiabetes in theworld,46% are undiagnosed.5 The ProspectiveUrbanandRuralEpidemiology(PURE)studyreleased late2014alsorevealedlow awareness rates for hypertension throughout Latin America. Atthe forefront of this trend are Argentina, Brazil, Mexico, and Chile,

where only 57% of people with hypertension are aware of theircondition.6Unsurprisingly,cardiovascular,respiratorydiseases,cancersanddiabetesrankasthemaincausesofdeathinthesecountries.

“The rapid progressive illnesses and deaths of yesteryear (infectious diseases and, more recently, cancers) have been replaced by vastly increased survival rate from such illnesses and a pandemic-like shift from acute to chronic illness, with long years of survival that are often accompanied by a reduced quality of life requiring more and longer home care.” GraceChristandSadhnaDawanfromCouncilonSocial

WorkEducation

Yet the disease profiles for Latin American countries also provide awelcome focus for designing high-impact awareness and preventionprograms. Health-coaching applications and wearable technologiescan work in concert with prevention and are expected to continueexpandingthroughout2025.7Surveys indicateconsumersarereadytoleadhealthierlifestylesandwillusewearabletechnologiesasawaytoexercise smarter, eat healthier, and track their medical history.8 AsLatinAmericanconsumerscontinuetodrivemobileadoption,thefaceofawarenesscampaignsmaywelltakeonatechnologicalcomponent.For example, the Pan American Health Organization (PAHO) createdsmartphone apps and online courses to deliver practical informationused in the management of population health. Such technologicalprogresswillmakeoutreachprogramsmoreeffectivethanever.Awarenessisthecornerstoneofprevention.Butmoreimportantly,at-risk patients are empowered through understanding. Prevention-related activities will help counter the onset of chronic diseasesthroughthepowerofinformation,thuspromotingearlydetectionandimproving quality of life. Such activities also relieve some of theexpenditure from acute symptoms such as strokes and myocardialinfarctions.

Proportional mortality

Argen&na Brazil Mexico LegendTotaldeaths:314,000.

NCDsarees&matedtoaccountfor81%oftotaldeaths.

Totaldeaths:1,318,000.NCDsarees&matedtoaccount

for74%oftotaldeaths.

Totaldeaths:605,000.NCDsarees&matedtoaccount

for77%oftotaldeaths.

11%7%

35%

21%7%3%

16%

13%12%

31%

17%6%6%

15%

11%12%

24%

12%6%14%

21%

11%12%

24%

12%

6%14%

21%

Totaldeaths:605,000.NCDsarees5matedtoaccountfor77%oftotaldeaths.

Communicable,maternal,perinatal,andnutri5onalcondi5onsInjuries

CardiovascularDiseases

Cancers

ChronicRespiratoryDiseases

Diabetes

OtherNCDs

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The obesity problem: The fat that is hard to shed

Nowrecognizedasaworldwideepidemic,obesityisresponsiblefornegative effects not just health-wise but also from a cultural andsocial standpoint – and Latin America is no exception. Obesity isthe fastest rising non-communicable disease (NCD) in the world,andnowafflictsover56%ofadultsinLatinAmerica—wellabovetheglobalaverageof34%.1Asaleadingindicatoroffuturehealthproblems,thespreadofobesitycannotgounmanaged.Populationsstand togain long-termhealthbenefits thatprotect themagainsttheburdenofchronicdiseases.

Eatinghabits,globalization,stress,andsedentarylifestylesaretherootcausesfortheprevalenceofobesity inLatinAmerica.Drasticdietarychangesare themostobvioussignof theepidemicacrossthe region. Following in the footsteps of North American eatinghabits, the sale of ultra-processed foods grew by 48% between2000and2013.2Sedentary lifestylesareduetothegrowingworkconstraints and busy schedules associated with urbanization, aswellasthelackofspaceforphysicalactivity.Thedoubleburdenofmalnutrition creates the unique situation where nutritionaldeficiency exists alongside obesity. Food insecurities and lowincomes propel this double burden, such as in Mexico andArgentina.3

LatinAmerica ishometosomeofthehighestobesityrates intheworld. Mexico,most famously, surpassed theU.S. in2013as theworld’s most obese country. It is expected that Mexico willcontinuetoseeasteadyriseinitsobesepopulationgiventhehighproportionofitspopulationconsideredoverweight.In2015,over70% of Mexico’s overall population and 57% of children wereconsidered overweight.4 Other Latin American countries such asVenezuela,ArgentinaandChilepossesssimilarrates.5 Thisplacesan enormous burden on the healthcare sector, as obesity is aprecursortomoreseverehealthissues.

“Obesity is a huge problem, but people don’t die from obesity. People die from health problems related to obesity.”

Leadingmedicaldevicemanufacturer

Thesamehigh-fatandsodiumdietsthatleadtohigherbodymassindicesalsocauseplaquebuildup,hypertension, inefficient insulinuptake,andmusculoskeletalconditions.6Thoughoneoftheeasierriskfactorstomanage,theconditionsarisingasaresultofobesityplace a huge strain on Latin America’s healthcare systems, mostnotablyintheformofcardiovasculardiseasesanddiabetes.

Productsthatcanmonitor,recordanddisplayhealthstatisticssuchas blood pressure, glucose levels, calories, and weight caninfluencebehaviorandreversetheeffectofharmfulnon-

communicablediseasesbeforecomplicationsarise.Theseproductscanpromotepreventionthroughawarenessbydemonstratingthegradual consequences of harmful diets, which otherwise gounnoticed.Withhealthcaremobilitysolutionsexpectedtogrowby25-30% annually through 2020, suppliers stand to benefit fromintroducing products such as wearables and smartphoneapplications,amongothers.7

Thedemand for thesemedicaldevicesandotherproducts in thisniche are part of a much larger trend toward patient-centrichealthcare.6 By empowering individuals to hold themselvesaccountable formanagingtheirpersonalhealth, there ispotentialfor much greater knowledge dissemination (e.g., nutritioneducation)aswellaseffectiveincentivesforbehaviorchange(e.g.,weightloss).Productsthatenableindividualstomicromanagetheirownhealth indicators (e.g., achievinga targetheart rate)make iteasier to detect progress — and relapses. The greater prize ofthese mobile solutions is the patient adherence and the vastamountsofdataresultingfromconstantcommunicationbetweenhealthcareprovidersandpatients.

Effectivehealthmanagementacrosslargepopulationsisnotfaroff.Thereareopportunities forbothpublicandprivate institutionstocollaborate in this space, whether via awareness campaigns,wearabledevices, integrationofelectronicmedical records (EMR)orothersolutions.

AddressingtheoverweightandobesepopulationsofLatinAmericagoes hand in handwith efforts to prevent chronic diseases. Forinstance, having a family reorganize their budget for foodpurchasesandmakethetimeforphysicalactivityislesscostlythanthe medication required for treating a chronic disease or theemergency care that sometimes results from it. This sort ofpreventative care against obesity could ease the burden on LatinAmerica’shealthcaresystems.

Source: AMI Analysis based WHO Infobase, OECD Health 2014, and foreignpolicy.com

Prevalence of adult obesity in the world (as a percentage of total population)

2%

2%

3%

4%

17%

18%

19%

19%

20%

29%

29%

31%

32%

33%

China

India

Japan

Korea

Russia

Brazil

Turkey

South Africa

Peru

Chile

Argentina

Venezuela

United States

Mexico

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Medical devices: real-time, continuous monitoring is the feature of the future Technologypenetration inLatinAmericahasprogressedatbreak-neckspeed.InternetandsmartphoneusageratesarenowonparwithNorthAmerica,Europe,andSoutheastAsia.Alreadyhometoover155millionsmartphoneusersin2015,theregionisexpectedtomaintaingrowthratesofover20%peryear inthenearfuture.By2019, it isestimated that42%of thepopulationwillpossessasmartphonedevice,andthemajoritywillhaveInternetaccess.1-3Successful technologies will soon permeate daily life to promotesimplicity and convenience. These benefits of technology aredesperately needed in the healthcare sector, where the ageingpopulation, rise in obesity, and increase in chronic diseases haveaccelerated demand for expensive, sophisticated and long-termtreatments.4Theneedisallthemoreacuteaspublichealthsectorresourcesareseverelystrained.Two target demographics stand out for the adoption of effectivehealthcaretechnologies:the“technologyconverts”andthe“digitalnatives,”who between them are forecasted to represent 75% ofLatinAmerica’spopulationby2020.As the population ages, more people are subject to the chronicdiseases, such as cancers and arthritis, where complications canariseandrequiremultidisciplinarycare.5-7Theseareusuallytaxingon the healthcare systems, and the patients themselves. Ageingpersons will benefit from diagnostic and monitoring equipmentpromoting remote (or home) healthcare,whichwill allow for themanagement of chronic diseases at a distance. The homehealthcaremarket is expected to growby 8.6% annually andwillreachavalueof$17.5billionby2020.8Theservicesandproductswithinthemarket(e.g.,bloodpressureandbloodglucosemonitors,hospicecare,therapy)willbringservicesusuallyadministeredatadoctor’s office to patients directly, therefore increasingconvenience for all parties. Anybody interested inmaintaining acloserwatch on their health in order to facilitate prevention andpromoteearlydetectionwillhavethemeansandthetoolstodoso.Countries with concentrated use of mobile technologies are themost attractive targetmarkets.Argentina,Brazil, Chile, Colombia,Mexico,andPeruaccountforapproximately84%ofallsmartphoneusers region-wide,1 making them ripe for adoption of mHealthsoftwaresolutions.

• Wearabledevices(“wearables”)suchasfit-bands,smartwatches and augmented reality glasses are “gadgety”elements that will help bring population healthmanagement to the everyday lives of consumers.Surveys show a preference for using these devices toimprove health by eating and exercising more smartly,andtrackingmedicalinformation.9

Thoughmarket studies suggest LatinAmerica isnotyetready forwearable devices, the region is forecasted tofollowinthefootstepsofmoredevelopedmarket,withalluringgrowthprospectsofupto41%annuallythrough2018.10

“Consumers are embracing their “quantified selves”, using sensors, software, and devices to measure multiple aspects of their health and well-being.”

PwCCustomerExperienceinthePharmaceuticalSector

• mHealth apps – healthcare and medical smartphone

applications for patients and healthcare professionalsare the most promising markets in Latin America.Applications dealing with diabetes management andbloodpressure&ECGmanagementareexpectedtobethe fastest growing sub-segments. The global mHealthsolutionsmarketisexpectedtoreach$59billionby2020,growing 33% annually, and Brazil and Mexico areexpected to offer the largest opportunities region-wide.11

• Wirelessly connected devices such as blood pressurecuffs and infusion pumps are the next frontier. Theirattractiveness is their ability toeffortlessly collectdata,present it to patients and transmit it to physicians.Automation and ease of use are key attributes in suchdevices, which aremainly designed for the elderly andpeoplewithdiabetes.

Eachofthesemarketswillpromotetheadoptionofamoreholisticapproachtohealthcare,whichwilleventually leadtoan industry-wideshiftawayfromroutinemedicalcheckupstodata-driven,“asneeded”appointments.Peoplewillbeabletomonitortheirhealthautomaticallyandmanage theirdataandhealth-relateddecisionswhenevertheywant. Thisrepresentsagenuineparadigmshift inhealthcare,whichwillpavethewaytowardsleaner,connectedandpersonalizedhealthsystems.

Likelihood of technology use, at equal or lesser cost

Diagnos(c Monitoring Treatment

Picturesforanopinion Strep-test

Urinalysis Ear-infec(ons

WirelesstransmitECG

resultsWebcam

appointment

Wirelesslytransmitvitalsigns

MRI/X-ray Dialysis

Chemotherapy

Source: AMI Analysis based on HRI/CIS Wearables Consumer Survey (2013),USA.

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Specialty medical devices: growth rates of over 20% in 2015

Examining medical device import trends offers intimate insightregarding the pressures and demands affecting the industry. Thisanalysis reveals opportunities for global players and regionalleadersalike.

In 2015, imports of capital equipment for the medical fieldcontracted slightly from$5.2 billion to $5.1 billion year-over-year(YoY). Despite stagnant numbers, there are still a number ofprofitable product classes in response to the region’sepidemiological transition, where ageing populations and apervasive obesity epidemic have left countries facing a highprevalence of non-communicable diseases (NCDs). Deathsstemming from chronic diseases are projected to reach 84% by2030, this is—and will continue to be—the primary driver forcapitalequipmentimportsincomingyears.2

Mexico, Brazil, Argentina and Colombia account for over 80% ofthe region’s import and sales of capital equipment. All of thesecountrieshavemadeefforts to revitalize theirhealthcaresystemsthat present opportunities for manufacturers, distributors andintegratorsalike.

In spite of the worsening economic downturn, the Braziliangovernment allocated funds towards teaching hospitals andimprovingspecialtyservices in2015;Mexicohas initiatedplanstostreamlinetheirmedical importsaswellasproposed initiativestomigrate systems to electronic medical records (EMRs); andArgentinahas initiated theirNationalCyberHealthPlan toexpandpatientoutreach.

Manufacturers, distributors and integrators can expect sustainedinterestincapitalgoods,ledbydiagnosticandpatientmonitoringequipment. Given the continued need for capital equipment aswell as the financial constraintsofpayers, second-generationandcertifiedrefurbishedequipmentmaygaintraction.

InMexico, infusionpumpsrankasthedominantproductclassforthe country’s imports, displaying a 7% YoY increase. Breath-enhancingmachines(suchasventilatorsandnebulizers)aswellasdefibrillators experienced the highest growth, with a 20% YoYincrease (to reachamarket valueof $98million), anda 23%YoYincrease (to reach a market value of $9.4 million), respectively.Other product classes showing significant growth are bloodpressuremonitors,witha2%YoYincreasetoreachamarketvalueof$11.6million. Suchgainsarenotexclusive toMexico. Brazil’shighest-growth product class, electrocardiograph machines,increased28%toreach$4.0million.Thecountryalsosawgrowthof 6% in ultrasound machines, reaching a market value of $107million. Meanwhile,Colombiadisplayeda5%YoYgrowth inMRImachines,reaching$15millionbyyear-end2015.

Suppliersshouldheedthecardiorespiratory-centricnatureofLatinAmerica’s imported capital equipment; such focus is not

coincidental. Currently, Mexico, Venezuela and Argentina areamong themost obese countries in the world; bleak overweightratesinBrazil,Colombia,andothercountriesforeshadowthesametrend elsewhere in the region. 3-6 Simultaneously, the potentiallyfatalconditionsthatgohandinhandwiththeobesityepidemicandanageingpopulation(e.g.,diabetes,cardiovasculardiseases,bloodvessel blockage) are expected to continue rising.4,8,9 Hence thesignificantpotentialforthediagnosticandtreatmentcapabilitiesofinfusion pumps, defibrillators, MRIs, electrocardiographs, bloodpressuremonitors, and ultrasoundmachines,which address theacuteandchronicsymptomsofthesediseasesandtheirassociatedrisk factors. Suppliers should expect resilient growth in productsaimed towards insulin management, hypertension,atherosclerosis, embolism/thrombus formation, and decreasedpulmonaryfunction.

Given gradual ageing of the population, the spread of chronicdiseases,andforecastsindicatingregion-widegrowthinhealthcarespending of 4.8% per year through 2018, the demand for theseproduct classes will persist in the near future.9 Additionalopportunitiesexist inaligningportablepatientmonitoringdeviceswith government awareness and education campaigns. Existinggovernment programs could use these devices to further publichealth objectives. Such is the case ofMexico’sNational StrategyforPreventionforControlofOverweight,ObesityandDiabetesandBrazil’s School Education Program, which also encourageawarenessandlifestylechanges.10

There isaclearregionaltrendtoembraceproductsmade“simpleandconvenient”,withportability featuresandhomeuse inmind,particularly if these are able to strengthen the patient-doctorrelationship.

Leading modalities – value and growth (2015f, US$, millions)

0

10

20

30

40

50

60

70

80

YoYGrow

th(%

)

COL

MEX

BRA

$181

$31

$9$15

$25$65 $5

$6

$16 $81

$3

MRI X-ray VitalSign

BreathingAid

BloodPressure

Defibri-llators

InfusionPumps

Ultrasound ECG

Source: Americas Market Intelligence, 2015.

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Capital equipment: Portability and mobility to drive demand

Asurbanizationandmedical technologyadvancementsextendlifeexpectancyanddecreasetheneedforacutecare,long-termstrategies and solutions are required. Equipment and devicemanufacturerswillwitnessgreatergrowth fromproducts thatprivilege mobility, portability and care outside of traditionalhealthcarefacilities.

Despitethecurrentunfavorableeconomicclimate,highgrowthisanticipatedindiagnosticandpatientmonitoringequipment.LatinAmericancountriesareexpectedtoleadglobalgrowthofX-ray devices through 2019.1 Additionally, the capnographyequipment market is expected to grow at by 15% annuallythrough2021,withBrazil,Mexico,ColombiaandArgentinaattheforefront.2 Growthisalsoexpectedinproductsrelatedtoblood-glucose monitoring and insulin delivery, with growthestimatedof6.3%peryeartoreach$2.3billionby2020,ledbyBrazilandMexico. Growth in theseareas isadirect responsetotheregion’sepidemiologicaltransition:theriseinrespiratorydiseases, diabetes, and cardiovascular disorders requires thenecessaryequipmenttomanageandmonitorsymptoms.Of particular interest among certain medical devices is thegrowing share of products that emphasize digitizedautomation and/or portability. For instance, the analysis ofmedical equipment imports reveals that portable X-raymachines represent nearly 20% of all the X-ray machinescomingintotheMexicoin2015,amarketsegmentexpectedtogrow by 7.6% per year through 2020.3 Similarly, there is agrowing preference for electronic blood pressure devices, asmanualsphygmomanometersaresteadilybeingphasedoutbyversions that require lesshuman intervention. Simplicity andconvenience are the main drivers, with bracelet-type bloodpressure devices growing their presence, enabling patients toreadtheirbloodpressureattheclickofabutton.Portable andmobile products focused on themonitoring andpreventionof chronic diseases,with easy-to-use features,willhaveastrongcompetitiveadvantageacrossLatinAmerica.Thiscan be achieved through two families of products: wearabledevices(wearables)andhomecareequipment.The traction wearables are gaining in Brazil and Mexicoforeshadowsopportunitiesintheregiontocome.Brazilisthe

4th largest smartphone market in the world, and 46% of itspopulations is aware of wearables. Samsung has alreadyestablished the strongest presence of wearables throughoutthe region.4,5 Similarly, Mexico’s wearable sensor market isexpectedtoincreaseby40.61%annuallyfrom2014-2020.6

The region’s adoption of smartphone technology andapplications has allowed care providers to take advantage ofcustomer’swillingness to reinforce patient-centric healthcare.Thishascreatedanuntappedmarketforproductsthatmonitorpatients’signsandcollectinformationtobeanalyzedandusedtowards early detection and treatment. Products likeliest tothrivearethosethathelpdetectearlyonsetofchronicdiseasessuchasdiabetesandcardiovascularissues.Though home care devices are currently in a nascent stage,emerging economies will soon begin to see its potential; themarketisexpectedtogrowatover8%peryearthrough2020.7Portability and mobility will legitimize products for at-homeservices,suchasmobileX-rayfacilities (already inexistence inNorth America and Europe), and will also give patients moretollsandoptionstomanagetheirownhealth.Recent efforts by governments to modernize and wirelesslyconnect their healthcare sectors give suppliers the ability toextend the functionality of their products by providingtelehealth-like communication between doctor and patient.Patients could use smartphone applications andwearables tomanually enter data their physicians can access; the devicesthemselves could automatically transmit the data. Suchproductsintendedforat-homeusagereducepatientvisitsandthewasteoftimeonthepartofbothpatientsandhealthcareinstitutions. By bringing healthcare services and solutions tothepatient, inclusivity ismaximized andpatientmonitoring iskept consistent, considerably reducing the degree of costlyprofessionalintervention.In the near future, global markets for mobile healthcaresolutions and wearables are expected to grow at 25%-30%CAGRduring2015-2020.Though itsadoption inLatinAmericamay be slow due to the high cost of devices and the lack ofawareness,supplierscanjumpstartthisgrowth.

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5Morla,Rebeca.“Ecuador’sHospital‘Mafia’UnearthedinGuayaquil.”PanamPost,March2015.3.Budgetcrunch:governmentbelt-tighteningoffersopportunitiesforcompaniestofillhealthcaregaps1"PerspectivesonHealthcareinLatinAmerica."McKinseyandCompany.2011.2"MedellínHas8oftheBestHospitalsinLatinAmerica."FirstAmericanRealtyMedellin.13Jan2015.3"GlobalHealthcareOutlook:SharedChallenges,SharedOpportunities."Deloitte.2014.4AMIAnalysisbasedon:Sreeharsha,Vinod.“CarlyleTakesStakeinBrazilianHospitalOperator.”NewYorkTimes.28April2015.5“IFCIssueBrief:IFCandPrivateSectorHealthCare-NoteworthyInvestments.”InternationalFinanceCorporation(WorldBankGroup).April2015.6“MSHReceivesPublic-PrivateFundingtoStrengthenHealthServiceDeliveryinLatinAmerica.”ManagementSciencesforHealth.8October2015.7“WhataretheFiveKeyStrategicPillarstotheNationalCyberHealthPlan?”E-HealthReporter.20August2015.8“TheFirstTele-magneticresonancescanperformedaspartoftheCyberHealthPlan.”E-HealthReporter.18September2015.4.AgeingPopulations:Aburdenforsome,agoldmineforothers1AMIanalysisbasedon:Heunchuan,Sandra.“Ageing,solidarity,andsocialprotectioninLatinAmericaandtheCaribbean.”EconomicCommissionforLatinAmericaandtheCaribbean(ECLAC).February2013.

2AdministrationonAging.“AgingStatistics.”U.S.DepartmentofHealthandServices,2014.3Hongo,Jun.“FearofDyingAlone:TheStateofJapan’sAgingPopulation.”TheWallStreetJournal(Japan),June2015.4“2015GlobalHealthcareOutlook:CommonGoals,CompetingPriorities.”Deloitte.2015.5“HealthyAging:ChronicDiseaseManagement.”NationalCouncilonAging.2015.6“RisingPrevalenceofChronicDiseasesPropelsLatinAmericaHomeHealthcareMarkettoUS$17.5bnby2020.”TransparencyMarketResearch.12October2015.

5.Thesilentmajority:Targetingtheundiagnosedandtheunawarewillreducetheprevalenceofchronicdiseases1Glassman,Amandaetal.“ConfrontingTheChronicDiseaseBurdeninLatinAmericaandtheCaribbean.”HealthAffairs29:12,December2010.2AMIanalysisbasedon:Heunchuan,Sandra.“Ageing,solidarity,andsocialprotectioninLatinAmericaandtheCaribbean.”EconomicCommissionforLatinAmericaandtheCaribbean(ECLAC),February2013.

3Pilania,Manju.“EpidemiologicalTransition.”LinkedInSlideShare,2015.4“BeaPartoftheWdd2015Campaign.”InternationalDiabetesFederation,2015.5BarceloA.,GordilloA.,QuianA.“TheCostofDiabetesinLatinAmerica&theCaribbeanin2014.”PanAmericanHealthOrganization,WorldHealthOrganization,2014.

6“PAHO/WHOUrgesMoreAttentiontoBloodPressureControl.”Pan-AmericanHealthOrganization,May2015.7“LatinAmericaWearableSensorsMarket–Growth,TrendsandForecasts(2015-2020).MordorIntelligence,August2015.8AMIAnalysisbasedon:“HealthWearables:EarlyDays.”PricewaterhouseCoopers,2014.

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6.Theobesityproblem:Thefatthatishardtoshed1Moloney,Anatasia.“ObesityWeighsonLatinAmericaAfterSuccessinFightAgainstHunger.”ReutersHealth,February2015.2”Ultra-processedFoodsareDrivingtheObesityEpidemicinLatinAmerica,SaysNewPAHO/WAHOReport.”WHO/PAHO.1September2015.3Hyman,Mark.“HowMalnutritionCausesObesity.”SolsticePublications:FoodandHealth.

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About Americas Market Intelligence

Americas Market Intelligence (AMI) provides groundbreaking and accurate information about healthcaresystems in Latin America and Asia to enable multinational firms to grow and understand the competitivelandscapeinthesemarkets.ThedataprovidedbyAMI focusesonhospital demographics, import data, andcustom research inorder tohelpbusinessessucceedinemerginghealthcaremarkets.

HOSPITAL DEMOGRAPHICS

AMI has the world’s largest hospital database focused on emerging markets, covering data such asnumberofbeds,medicalpractices,capitalequipment,procedures,amongothers.

MARKET S IZ ING

AMIhasthemostexpansivemedical importstatistics inLatinAmerica, includingdatasuchas importer,exporter,quantityandvalueofgoodstraded.

CUSTOMRESEARCH

AMI consultants have over 20 years of market intelligence experience in emerging markets, helpingcompaniesfindanswerstocomplexquestionsandmarketsituations.

Customers include medical device manufacturers, medical technology providers, pharmaceutical companies,medicalequipmentproviders,privateequityandsolutionsintegrators,amongothers.TolearnmoreaboutAmericasMarketIntelligence,ourservices,consultingengagementsandspeakingopportunities,pleasecontact:

GuillaumeCorpart,ManagingDirector+1(305)441-9300x302gc@americasmi.com

FirstpublishedinJanuary2016byAmericasMarketIntelligence.

©2015,2016.AmericasMarketIntelligence.Allrightsreserved.ThisdocumentcontainsconfidentialinformationandisthesolepropertyofAmericasMarketIntelligence.Nopartofitmaybecirculated,quoted,copiedorotherwisereproducedwithoutthewrittenapprovalofAmericasMarketIntelligence.