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Market Research Report

LATIN AMERICA

June 2023

Table of Contents

1. Introduction …………………………………………..3

2. General Market Overview ……….....…….…5

3. Nation-Level Comparison ………..…..………7

Economic Outlook

3.1 Gross National Income Per Capita….…..7

3.2 Real GDP Long-Term Forecast …..…...….7

Demographic Insight

3.3 Diabetes Rates by Country .....……….....…8

3.4 Median Age of Populations ....……......…..8

Health System Fitness

3.5 Stroke Diseases Mortality Rate …......…..9

3.6 Health Spending Per Capita ………......…..9

3.7 Population Without Insurance .............10

3.8 Number of Physicians Per 10,000 People …………………………………………………………………….10

3.9 Hospital Beds Per 1,000 People …………………………………………...................……………...……………11

3.10 Private Health Expenditure as % of GDP ……………………………….……………………….…………….11

3.11 Public Health Expenditure as % of GDP ……………………………………….………………….……………12

3.12 Total Health Expenditure as a % of GDP …………………………………….……………………..………….12

4. Brazil

4.1 Healthcare System Overview ...………13

4.2 Demographics Overview ......…..……..14

4.3 Regulations & Compliance …..………..15

4.4 Public & Private Reimbursement …16

4.5 Additional Considerations ........……..17

4.6 Potential Challenges ..……………....……18

4.7 Market Dynamics & Drivers ....………18

5. Mexico

5.1 Healthcare System Overview ....…..20

5.2 Demographics Overview ……….……..21

5.3 Regulations & Compliance …….……..21

5.4 Public & Private Reimbursement…22

5.5 Market Dynamics & Drivers …………23

5.6 Potential Challenges ………………...……24

6. Chile

6.1 Healthcare System Overview ….…..25

6.2 Demographics Overview ………….….26

6.3 Regulations & Compliance …….….…26

6.4 Public & Private Reimbursement...28

6.5 Potential Challenges ..………………...….28

6.6 Market Dynamics & Drivers ….....….29

6.7 Additional Considerations ……....……30

7. Colombia

7.1 Healthcare System Overview ….....…..31

7.2 Demographics Overview ……..…......….32

7.3 Regulations & Compliance ……….....….32

7.4 Public & Private Reimbursement .....33

7.5 Additional Considerations ………….......34

8. Tariffs & Taxes .......…………………….....…….35

9. Potential Market Sizes ………..…….....……36

10. Competitive Analysis .………..…….....……38

11. Closing Statements ………………......……….43

12. References …………………………….......………44

Introduction

In recent years, the global FES medical device industry has seen significant growth largely

driven by technological advancements, an aging population, and increasing prevalence of chronic

diseases that require significant rehabilitation and neurostimulatory modulation therapy, such as

stroke and diabetes. Latin America is no stranger to these issues, and studies show that the

demand for treatment has shifted towards the developing nations of the world. A rapid

transformation has taken place because of the combination of decreased physical activity,

increased consumption of highly processed foods, and a general lack of education due largely to

economic inequality in this region.

This report aims to provide a comprehensive, unbiased analysis of four key Latin American

markets - Brazil, Colombia, Chile, and Mexico - and to evaluate their potential for providing new

business to xxxxxxx. The report will delve into each of these markets, examining the factors

that could influence market entry strategy and potential for successful deployment.

Successful market entry into Latin America requires a deep understanding of various factors

that are unique to each country, and as such the following topics will be discussed to provide a

higher-level overview of each market and further assist in evaluating feasibility of success.

These topics include economic and social determinants, disease prevalence rates, healthcare

system infrastructures, regulatory considerations, private reimbursement potential, competitive

landscapes, tariffs, country-specific incentives, health population demographics, and more.

To provide a comprehensive analysis of these markets we have employed a multi-faceted

research methodology that consisted of data collection and analysis from a variety of sources

such as:

➢ International health organizations

➢ Government health departments

➢ Economic databases

➢ Industry trade reports

➢ Academic studies

➢ Remote in-person interviews

*Note: While most of the sources used in this report are highly credible, reliable, and

chronologically recent in their documentation, certain data is often times scant, contradictory, or

just doesn’t exist. A serious effort was made to fill in any existing information gaps or clarify

data that seemed contradictory, but holes in the data sometimes nonetheless persisted and

therefore may be present in this report.

Overall, our findings indicate that all four countries present unique opportunities and

challenges. Brazil and Mexico, with their large economies and high prevalence of diseases like

stroke and diabetes, offer a substantial customer base. On the other hand, Colombia and Chile,

while having smaller economies, have well-developed healthcare systems and lower competition

levels.

While entering the Latin American healthcare market would not be without its challenges,

preliminary research reveals evidence of significant growth opportunity in these emerging

markets, along with the potential for a first-mover advantage given the uniqueness of the

products offered by xxxxxxxx.

The hope is that insights and recommendations from this report will guide the strategic

decision-making process for xxxxxxxx, helping to identify the most promising markets and assist

in the development of effective strategies for market entry and growth.

General Market Overview

While Latin America is the world’s third-largest economy, it currently makes up for

approximately 7-8% of the 536-billion-dollar global medical device industry, and almost

one-third of that is attributed to Brazil alone. [1], [2]

For the FES device market specifically, 73% of revenues originate out of North America and

Europe alone, with only 27% currently coming from all other emerging markets combined. [3]

Meanwhile, conditions benefiting from these devices such as diabetic peripheral neuropathy and

stroke are most prevalent on a per capita basis in the developing world, presenting the industry

with ample additional growth opportunity.

Upwards of 90% of the medical device market in Latin America is supported by product

importation with little domestic manufacturing taking place, making for a less competitive overall

market. [4]

Latest official data (2018-2022) on total average annual Imports for HS6 Code 902190xx

(Worn or carried orthopedic articles to compensate for defect or disability) in USD for Brazil,

Mexico, Colombia, Chile, and Costa Rica combined was only $356 million per year, or $0.83 per

person. Comparing this to the US who imports $1.9B per year ($5.55 per person) or Canada with

$262M per year for 39M people ($6.71 per person), this suggests that a significant opportunity

for growth still exists in the Latin American market segment. [5]

Ground-level discussions with physiotherapists, occupational therapists and university

professors working in the more developed countries of the South American neuromodulatory

rehabilitation space (such as Chile, Argentina, Brazil) seem to concur with the most previous

point regarding minimal FES business activity as per recent trade data for these countries.

Notable points of discussion:

➢ In Brazil, a lack of healthcare insurance in the northern regions has limited the

availability of care in this area. Reports of healthcare insurance being largely

limited to the urban areas of the Southeastern regions echo data found in clinical

papers that have cited the same issue (Although the number is surprisingly high --

between 20-26%).

➢ Wearable technologies hadn’t even been heard of by someone with 10 years of

experience in stroke rehabilitation therapy, highlighting a general lack of

professional awareness in regard to up-to-date and innovative therapeutic

modalities.

➢ Basic neuromodulation products are produced domestically in Brazil by one

company called Ibramed (www.ibramed.com.br) and are utilized in-clinic only.

Ibramed is the second largest of 89 domestic medical device companies in the

“Electromedica” category in Brazil (as per annual revenue and employee size data),

yet their product lines appear to be more limited technologically, and nothing

similar is offered by this company.

➢ Access to imported products are highly limited due to what seems to be a general

lack of awareness of new and innovative advancements in therapy among multiple

individuals surveyed, followed by high cost of products for patients with no health

plans.

Broadly speaking, our research has revealed a consistently emerging theme of aging

populations faced with increasingly urbanized and sedentary lifestyles leading to rapidly rising

levels of metabolic diseases, despite increasing health sector investment by governments. But

as healthcare systems continue to improve with increased investment, and as awareness of new

and innovative therapies grows, South American markets seem primed for growth as they begin

to catch up to the developed world.

Nation-Level Comparison

The following segment aims to provide a bird’s eye view comparison of the countries in

question in the form of graphical representations to better understand their level of “fitness”

from an economic, social, governmental and health determinants perspective.

Economic Outlook

Fig. 3.1: Gross National Income Per Capita [6]

Fig 3.2: Real GDP Long-Term Forecast [7]

Demographic Insight

Fig. 3.3: Diabetes Rates by Country, 2023 [8]

Fig. 3.4: Median Age of Populations [9]

Fig. 3.5: Stroke Diseases Mortality Rate [10]

Health System Fitness

Fig. 3.6: Health Spend Per Capita ($USD) [11]

Fig. 3.7: Population Without Medical Insurance [12]

Fig. 3.8: Number of Physicians Per 10,000 People [13]

Fig. 3.9: Hospital Beds Per 1,000 People [14]

Fig. 3.10: Private Health Expenditure as a % of GDP [15]

Fig. 3.11: Public Health Expenditure as a % of GDP [16]

Fig. 3.12: Total Health Expenditure as a % of GDP [17]

Brazil

Brazil is the largest economy in Latin America with a GDP of approximately $1.4 trillion and a

substantial population of 216 million people. The country has a diverse economy with

well-developed agricultural, mining, manufacturing, and service sectors. However, it has been

dealing with economic instability, has a high inflation rate of 9.7%, and a high government debt of

1100% of GDP. Brazil is one of the few Latin American nations whose fiscal policy is aggressively

addressing their inflation though, with tight monetary restraints in place to tame the problem.

The country's economic growth rate is projected to be a modest 1.2% in 2024.

The Brazilian Healthcare System

➢ Brazil runs a 2-Tiered healthcare system composed of a public / universal domain called the

Sistema Único de Saúde or SUS, and a private domain composed of additional hospitals and

clinics and the private insurance companies that cover them.

➢ The SUS will cover medical devices that are deemed essential and can demonstrate clinical

and cost effectiveness for the patient and the government.

➢ In recent years they have seen a significant increase in investment into public health by the

government, as evidenced by significant growth of healthcare expenditure as a percentage

of GDP (9.5% in 2020 vs. 13% in 2022).

➢ With 36 Hospitals per 1 million people, they have substantial healthcare infrastructure.

Furthermore, they also have the highest number of hospital beds per capita out of Brazil,

Mexico, Colombia, Chile (BMCC) at 2.5/1000 people.

➢ 66% of hospitals in Brazil are private, while only 33% are publicly funded.

➢ Brazil is the largest importer of medical devices south of US border.

➢ They are the 12th largest medical device market globally, worth $6.5 Billion as of 2021.

➢ Their healthcare system was ranked # 83 / 167 by the Legatum Institute.

Demographics Overview

An Unfortunate Opportunity

Brazil is unique among Latin American countries because stroke is the leading cause of

death in the nation. The most conservative data for Brazil shows the stroke-related mortality

rate is on average 50 per 100,000 people (Up to 183). [18] This rate is up to 70% higher than

the rates of Colombia, Mexico, and Chile, and is more than twice the rate of Costa Rica.

While per capita stroke rates are going down over time, it is still an aging population that is

becoming increasingly overweight and sedentary, with co-morbidities such as hypertension and

diabetes on the rise.

Medical Device providers such as xxxxxxxx whose products are designed to assist in the

stroke rehabilitation process would be well-advised to consider this outlier variable, as it means

Brazil provides up to 2x the market size on a per capita basis versus other markets whose overall

size already pales in comparison from a population standpoint.

Fig. 4.1: Stroke Diseases Mortality Rate per 100,000 in 2019

.

Regulations & Compliance

Medical devices are regulated by the National Health Surveillance Agency (Agência Nacional

de Vigilância Sanitária, or ANVISA), which classifies medical devices into four risk classes, from

Class I (lowest risk) to Class IV (highest risk).

Importers must obtain an Import License (Licença de Importação or LI) from the Brazilian

government. This is dependent on registration and approval via ANVISA first.

All device manufacturers must register with ANVISA before doing business in Brazil, and

foreign companies must appoint a Brazilian Registration Holder (BRH) to handle regulatory

process and device registration. This requires technical documentation, clinical data, and

information on the device's safety and efficacy. Review can take up to a year. After a device has

been registered and approved, it is typically granted a 5-year market validity period.

ANVISA also conducts inspections and audits to ensure compliance with the regulatory

requirements. Non-compliance can result in penalties, such as fines, product recalls, or

suspension of the device's registration.

GMP certification is also required, with Mutual Recognition Agreements applicable.

Public & Private Reimbursement

Under the Sistema Único de Saúde (SUS), medical devices are generally provided free of

charge to patients. Federal, state, and municipal governments jointly fund the SUS, and the

reimbursement for medical devices is allocated through their budgets. Reimbursement is based

on a pre-determined list of approved products called the Tabela de Procedimentos,

Medicamentos, Órteses, Próteses e Materiais Especiais do SUS, aka SIGTAP, or the Standardized

Table of Medical Procedures, Medications, Orthotics, Prosthetics, and Special Materials.

As of 2015, 74% of Brazil was covered under the public health plan, with the other 26% of

Brazilians having private health insurance (This works out to approximately 54 million people.

Compare this to Canada, where roughly 26M have some form of private health insurance).

Private coverage is highly concentrated in urban areas in the southeastern part of the country,

however. [19]

Surprisingly, Brazil's private health insurance market is the second largest in the world,

trailing only the United States. [20]

This matches relatively closely with a study in 2014 that found 20.1% of surveyed Brazilians

to have private health insurance (where n=2155). Meanwhile, this same study found that only 2%

of Colombians surveyed had private health insurance (n=2066) (More on this later). [21]

Additional Considerations

Import duty exemptions exist and can be requested for products deemed important to

public health in Brazil. Requests are evaluated based on factors such as the availability of similar

domestic products, and the importance of the product to public health. These policies exist to

encourage eventual domestic production of novel products such as those produced by xxxxxxxx

by local competitors to in turn drive down prices.

Reductions in both state and federal taxes may also be applicable for medical devices [For

state level - VAT (ICMS - Imposto Sobre Circulacao de Mecardorias e Servicos); For federal level -

IPI (Imposto Sobre Productos Industrializados)]

While macro-level data on tariffs suggested that Brazil’s import tariffs for medical devices

was only 1.75% for products imported from the Netherlands, a deeper analysis revealed that 28%

of devices imported paid 0%; most paid roughly 11%; and some paid as high as 18% depending

on the product and the country importing.

Unfortunate Opportunity #2

In addition to having a higher-than-normal prevalence of stroke, Brazil also has the 4th

highest number of diabetic patients in the world, with an estimated 20 million diabetics as of

2023. [22] The prevalence of diabetic peripheral neuropathy (DPN) among diabetics in Brazil is

33%. [23] The prevalence of diabetes is also highest in the southeast region where more urban

populations are less physically active and have easier access to highly processed food choices. [24]

In 2009, prevalence was already at 13.5% in the southeast region of São Paulo and is now

undoubtedly much higher in 2023. [25] Fortunately, this is also where most of the Brazilian

population who have private health insurance reside.

Potential Challenges

➢ Despite the universality of the SUS, the public system faces significant challenges such as

insufficient funding, inadequate infrastructure, and disparities in access to healthcare

services between urban and more rural areas. These challenges have led to long waiting

times, overcrowding in public hospitals, and limitations in the availability of certain medical

devices and treatments.

➢ Private health insurance is still relatively limited compared to developed nations, with only

approximately 21-26% having coverage. [26], [27]

➢ Lack of awareness of newly innovative products among professionals who work in relevant

fields of rehabilitation mean uptake may be slow to start and could require considerable

efforts in marketing.

➢ Brazil is said to be Latin America’s most complicated and bureaucratic business environment

due to burdensome regulations, a conflicting legal environment, and a variety of taxes and

tariffs imposed. For these reasons among others, “Most foreign entries take about three

times longer to reach positive returns in Brazil versus any other Latin American market.” [28]

Market Dynamics & Drivers

1. High prevalence and growth in non-communicable diseases = high demand.

✓ Obesity - 60% of Brazilians overweight and 22% obese.

✓ Very high levels of ischemic stroke.

2. High reimbursement levels concentrated in southeast Brazil where most of the economic

development has taken place and most of the health problems have arisen.

3. Short-term economic slowdown in Brazil - Policy rates are projected to decline in 2023,

creating tighter credit conditions to reduce core inflation. A move that will pay off in the long run.

(Policy rate reductions are not expected in Chile, Colombia, and Mexico before 2024 due to

persistent underlying inflation dynamics and minimum wage increases). [1]

4. The largest domestic producer of neuromodulation devices in Brazil is Ibramed (2nd largest

company by revenue & employee size - of 89 companies falling under the category of

“Electromedica” in Brazil), but their product lines are more dated and used for in-clinic visits only,

with nothing remotely close to that of xxxxxxxx. [2]

Mexico

Mexico has the second largest population of Latin America with approximately 133 million

people and a GDP of around $1.5 trillion. The country has a diverse economy with strong

manufacturing and export sectors. Mexico's GDP growth in 2022 was 3%, recovering from an 8%

contraction in 2020 due to the pandemic. The central bank forecasts that Mexico's GDP will

grow 1.8% in 2023. However, inflation in Mexico is high, and was at 7.8% at the end of 2022.

Healthcare System Overview

Mexico also has a 2-tiered healthcare system. Universal healthcare is administered mainly

by Mexican Institute of Social Security (IMSS), but is severely lacking in resources, producing long

wait times and inadequate services. For this reason, many choose to pay out-of-pocket to

obtain private medical insurance and ensure access to the large number private facilities.

➢ As of 2020, Mexico was spending only 2.5% of its GDP on healthcare, despite 25%+ of

Mexicans having no access to the “universal” system. [31], [32]

➢ They have 39 Hospitals per 1 million people.

➢ 70% of the hospitals in Mexico are private, while only 30% are public.

➢ They have the lowest number of hospital beds per capita out of Brazil, Mexico, Colombia,

Chile at only 1 per 1000 people.

➢ They have a significant medical tourism industry due to less strict regulations, enabling

increased innovation and experimentation with new and promising therapies such as stem

cell therapy.

➢ Their healthcare system was ranked # 71 / 167 by the Legatum Institute.

Demographics Overview

Despite Mexico having the lowest median age (33) and lowest over-65 population among

the 5 countries being studied, they have the lowest life expectancy and the highest rates of

obesity, heart disease and diabetes, with 74% of their population being overweight and 29%

being fully obese. [33] This is extremely alarming to say the least and will only add fuel to the

fire of an already overburdened and under-funded healthcare system.

And while the average healthcare spend per capita is $1227 USD, it varies widely by region

from as low as $0 in many rural areas, to up to $13k USD in Mexico City. [34]

While the majority of the healthcare facilities in Mexico are privately run to compensate for

a poorly funded public system, only 2-8% of Mexicans have private health insurance, with

sources varying. [35], [36]

To further highlight the disparities existing in the Mexican healthcare system, consider this:

While 70% of the hospitals and clinics in Mexico are privately run, 70-80% of all medical services

in Mexico are funneled into the bottleneck of the public healthcare system. [37]

Regulations & Compliance

The medical device industry is managed by the Federal Commission for Protection against

Health Risk (COFEPRIS), which is a part of the Mexican Ministry of Health. COFEPRIS is for the

most part harmonized with FDA & EU regulations and holds mutual recognition agreements,

making new product approvals a relatively smooth process.

*Note: COFEPRIS can take up to 12 months to review a product. However, if the

review is conducted by a private third-party authorized by COFEPRIS, it typically takes

about 4 months. [38]

Rigorous documentation is required and must be in Spanish, and higher risk devices typically

require more time for the approval process. Emergo is one company available for regulations

and compliance consulting when bringing new devices to market in Mexico, and can be found

here: https://www.emergobyul.com/

Public & Private Reimbursement

Public reimbursement for a medical device depends on whether it’s included in the benefit

plan for the Mexican Social Security Institute (IMSS), Seguro Popular, the Mexican Civil Service

Social Security and Services Institute (ISSSTE), or PEMEX (Mexico’s state oil company).

Representatives from COFEPRIS, IMSS, and other member agencies form an inter-agency

committee to review benefit plans and build the healthcare policies in Mexico.

Manufacturers and public institutions can propose that a new technology becomes covered.

The National Center for Health Technology Excellence (CENETEC) then produces health

technology assessment (HTA) reports for the commission to assist them in evaluating the

product.

Through the inter-agency committee, all providers to the public system negotiate pricing for

their services. Every year, the council negotiates the price of all items on a list of approved

procedures. Mexico’s list of approved procedures is called Cuadro Básico y Catálogo de

Instrumental y Equipo Médico. Patients in Mexico receive complete coverage for the procedures

and devices included in this list.

Given the market size and the fact that only 2-8% of Mexicans have private health insurance,

submitting a proposal and negotiating with these agencies to approve coverage of the devices

under certain low-margin conditions could be worth exploring given the potential scale of the

market. Likelihood of approval is low, but if public approval isn’t an option, xxxxxxxx would be

wise to wait on deploying capital to Mexico until more favorable reimbursement conditions arise.[38]

Market Dynamics & Drivers

➢ Mexico is the second largest medical device market in Latin America after Brazil and is the

leading medical importer in Latin America. The total market value was estimated to be

worth $6.09 billion USD in 2017. [39]

➢ Mexico’s own “Unfortunate Opportunity”: 1 in 6 adults is diabetic as of 2022. [40]

With an adult population of 83 million people, this means there are almost 10 million

Mexicans currently dealing with diabetic peripheral neuropathy (Mexico has the highest

prevalence of DPN in the Americas at 69%) who could need therapy for DPN-induced foot drop.[41]

➢ Unfortunate opportunity #2: For every increase of one degree in latitude there is an increase

in the prevalence of MS of 0.33 per 100,000 inhabitants for reasons that aren’t entirely clear.

This is why MS occurs in 30 per 100k people in Mexico, vs 3 per 100k or 5 per 100k for

Colombia and Chile, respectively. [42]

➢ Mexico’s over-65 population is about to double from 8% in 2020 to 16% by 2030. [43] As

old age is a significant risk factor for conditions like stroke, diabetes, MS and spinal cord

injuries, the increasingly aged population is expected to drive demand for FES devices.

Potential Challenges

Lack of transparency and accountability - Systemic corruption continues to plague Mexico,

meaning financial resources often fail to arrive at their proper destination and the healthcare

system fails to improve upon itself, irrespective of the government’s investment claims. How

directly this would affect a company such as xxxxxxxx with its niche product lines is debatable

however.

Lack of private health insurance among up to 92-98% of the Mexican population means true

revenue potential will be limited to as little as 2-8% of Mexico. While this might be perceived as

a negative at first glance, this still represents over 10 million people with private insurance and

may therefore still be an opportunity worth pursuing for xxxxxxxx.

And again, a lack of awareness of new and innovative therapies among professionals who

work in the rehabilitation industry was present in conversations and could mean that uptake may

be slow to start. If FES rehabilitation products are being used and offered in any of these

countries, it’s at the hospital level almost exclusively.

Chile

Chile has a high-income economy with relatively higher living standards in comparison to

the rest of Latin America. It has a population of 19.11 million people and a GDP of $298.2 billion.

The country has a diverse economy, with a large service sector accounting for 60% of its total GDP.

Chile's economy is expected to grow by up to 4% in 2023, and it has a relatively low inflation rate

of 2.7%.

Healthcare System Overview

Chile runs on a two-tiered system. The public system is known as the Fondo Nacional de

Salud (FONASA) and covers 78% of Chileans. In contrast, the private system is called the

Instituciones de Salud Previsional (ISAPREs) and covers an additional 18%. [44]

Chile has the highest number of physiotherapists per capita of all four countries at a rate of

1.8/1000 people (vs 0.18-0.58), as well as the most physicians per capita at a rate of 2.8/1000.

These metrics provide a good reflection of the country’s level of advancement in the healthcare

industry as well as their awareness of the importance of rehabilitation specifically. [45]

➢ They have a modest 16 Hospitals per 1 million people.

➢ 67% of hospitals in Chile are publicly funded, while only 33% are private.

➢ They are one of the highest rated Latin American countries for healthcare investment as a

percentage of GDP at 9%.

➢ Healthcare spend per capita is significantly higher than the other 3 countries, with $2608

USD per person spent (vs a range of $1200-1500).

➢ Their healthcare system was ranked # 51 / 167 by the Legatum Institute.

Demographic Overview

Chile represents the most advanced country of the four being considered, and that is easy to

see by their high scores in the Human Development Index (0.86) and Corruption Perceptions

Index (67/100), as well as their Nominal GDP Per Capita and Healthcare Spend Per Capita, making

it an appealing choice for market entry.

What makes Chile unique among Latin American nations is its combination of a high overall

life expectancy (78 years), very high over-65 population (13.4%) and high median age (38 years).

Because their population is so significantly aged relative to its neighboring nations, it’s no

surprise that they currently rival Mexico for having the highest rates of obesity, with 74% of their

population being overweight and 34% being obese. [46]

This situation will undoubtedly apply additional stress to the Chilean healthcare system over

the coming decades, and as such it is likely that demand for all medical devices related to

assisting an aging population will rise considerably.

Regulations & Compliance

The Public Health Institute of Chile (ISP) is the main regulatory body for Chile’s medical

device industry, and oversees all product registration, control, and surveillance. [47] The

following are ways in which the ISP stands out from other Latin American countries:

➢ Simplified Registration Process for Recognized Devices: Expedited process for devices that

have been previously approved by recognized regulatory authorities like the FDA or EMA.

➢ Commitment to Harmonization: Chile aligns its regulations with international standards and

has adopted the Global Harmonization Working Party (GHWP) classification for medical

devices. [48]

➢ Strong Post-Market Surveillance: The ISP actively monitors the safety and efficacy of medical

devices in the market, which includes monitoring adverse events, product recalls, and

conducting inspections.

➢ Health Technology Assessment (HTA): Not all Latin American countries have robust HTA

processes. Chile's emphasis on HTA through its Department of Health Technology

Assessment (DEIS) sets it apart. Their HTA process helps the government make informed

decisions on adoption and reimbursement of new medical technologies, and this can be

beneficial for medical device companies by providing a clear path for the adoption of

innovative products.

“The Easiest Market to Enter”

Only four types of devices are subject to mandatory registration with Chile's National Drug

Agency (ANAMED - a branch of the ISP): contraceptives, gloves, needles, and syringes. Other

medical equipment and devices do not need regulatory registration. [49]

This means that Chile's medical device market is largely unregulated and allows foreign

manufacturers to quickly sell products after finding a distributor to act as their importer of record

(IOR). Despite this lack of regulation, Chileans prefer to purchase from American or European

companies with voluntary registration at ISP-ANAMED rather than Chinese or Indian imports that

have bypassed ISP-ANAMED and don't have an established brand or reputation. [50]

* Well-established distributors in Chile include CEGAMED, Socofar, and Reutter. Expo

Hospital is an annual trade show that foreign manufacturers should attend to exhibit their

medical innovations and meet potential distribution partners. [51]

Public & Private Reimbursement

The National Health Fund (FONASA) is the public health insurance agency, providing

coverage to approximately 76% of the population. FONASA beneficiaries include lower-income

residents, the unemployed, self-employed, and pensioners. It operates on a tiered system (A-D),

with different levels of co-payment, which ranges from 0% (for the poorest) to 20%. [52]

FONASA covers a broad range of healthcare services and products, and has explicit

guarantees of coverage set out by the Regime of Explicit Health Guarantees law (AUGE) for 80

different conditions, including 4 that could benefit from xxxxxxxx products, namely Type-2

Diabetes, Ischemic Stroke, Parkinson’s Disease, and MS. [53]

As many as 18% of Chileans opt for private health insurance, producing a market size of 3.56

million people covered under one of the 13 ISAPRE private insurance companies. [54]

It should be noted that in Chile, high out-of-pocket (OOP) expenditure has still created major

barriers to health care access, with OOP payments as a percentage of total health expenditure

being 32.4% compared to the OECD’s average of 19%, and ISAPRE users have larger OOP

payments than FONASA users (respectively 6.1 and 3.8% of their income). [55]

Potential Challenges

Chile’s medical device market is relatively smaller and quite competitive for manufacturers

who sell products without proprietary technology. Their lack of market regulations means

companies from countries such as China, India and Turkey can produce and market similar

knock-off products and offer them at a significantly lower price point than the more reputable

producers of the US, Germany, etc.

Gaining reimbursement for a new device can be a lengthy and uncertain process. Devices

not included in the AUGE list or not covered under the recent Ricarte Soto Law will have more

limited access to the public market, and private insurance coverage varies by plan.

High out-of-pocket payments (35% - 5th highest of all OECD countries) for healthcare in

Chile could also dissuade purchases whether covered partially by private plans or not; The

healthcare reform proposed by the president of Chile, Sebastián Piñera, in 2019 did mention

plans to work with private payers to increase allowances and improve co-payments in order to

bring down OOP payments, however. [56]

Market Dynamics & Drivers

➢ Chile’s medical device market is quite robust and is showing very healthy growth, with an

estimated worth of over $1.7 billion in 2021. From 2017 to 2021 it grew by 75%, producing

a CAGR of 7.45%. [57]

➢ 95% of this market relies on foreign imports. [58]

➢ Chile’s newest president, elected in 2018, has committed $10 billion US dollars to building

75 new hospitals and 120 primary care centers with 12,400 beds in his health investment

plan for 2018-2022. [59]

➢ As previously mentioned, the median age in Chile is 38, with more than 13% over the age of

65. By the year 2050, it is estimated that the over-65 population will rise to 25%. The

combination of having a heavily aged population, long life expectancy, and very high rates of

obesity and obesity-related metabolic diseases means that Chile’s system will experience a

significant stress-test and demand for many medical devices including those produced by

xxxxxxxx will be in high demand over the coming decades. [60]

Additional Considerations

➢ Technological Advancement - Chile is one of the most technologically advanced countries in

Latin America with a relatively higher quality of life and disposable income.

➢ Increasing health expenditure - Their considerably higher level of healthcare-spend as a % of

GDP, in conjunction with recent policy reforms and new facility projects previously

mentioned, are positive expressions that reinforce the country’s commitment to improving

their healthcare sector.

➢ Aging population - Their significantly older-than-average population and very high rates of

metabolic disease almost guarantee that market demand for devices will grow.

➢ Public-Private Partnership (PPP) Opportunities: The Chilean government has shown interest

in public-private partnerships to improve healthcare delivery. This provides a unique

opportunity for medical device companies to work directly with the government and

influence the development and implementation of healthcare solutions. [61]

Colombia

Colombia has a population of 50.88 million people and a GDP of $327.98 billion. The country

has a diverse economy that is expected to grow by 3.6% in 2023. The International Trade

Administration estimated their medical device industry to be worth approximately $1.3 billion in

2019 making it the third largest medical device market in Latin America.

Healthcare System Overview

The Colombian healthcare system is composed of 2 regimes:

1. The Contributory Regime (for those who can afford to pay into the system)

2. Subsidized Regime (for low-income or unemployed individuals)

Together, these two systems provide healthcare for 95% of all Colombians.

➢ The number of physiotherapists per capita: 0.58/1000.

➢ There are 15 Hospitals per 1 million people.

➢ 75% of hospitals in Colombia are publicly funded, while only 25% are private.

➢ Healthcare spend per capita is $1336 USD.

➢ Healthcare expenditure as a % of GDP has recently grown over the past few years to 9% as

of 2020.

➢ Out-of-Pocket spending has been consistently declining and was 13.6% as of 2020.

Demographics Overview

At first glance, Colombia appears to be a slightly less than attractive candidate for expansion.

They have the lowest GDP per capita, the fewest hospitals per capita (at 15 per million people),

they score low on the corruption perceptions index (39/100), and they spend half of what Chile

spends on healthcare per capita. Their healthcare system has also been scrutinized for

producing sub-par care with major inequities in treatment access across classes (Can you name

one that hasn’t?).

But upon further inspection, they become more impressive. They have created a universal

healthcare system that more closely resembles that of Canada, where contribution by the

employed is mandatory, and in return they are provided broader healthcare access. Their

public healthcare spending has also gone up remarkably in recent years, almost tripling from

$3.2B in 2017 to $9B in 2020. [62] And just this past February, Colombian President Gustavo

Petro, who ran on a platform of addressing Colombia’s social inequalities, presented his new

healthcare plan that introduces initiatives to improve access, increase pay for healthcare workers,

and provide more subsidies for the poor and elderly. [63]

Regulatory & Compliance

An advanced and efficient regulatory system - Another surprising benefit

Colombia is the only country in Latin America with a Good Clinical Practices (GCP)

certification system at the institutional level, with roughly 130 GCP-certified clinical research

centers, the majority of which are level 4 hospitals. This level of institutional regulation has

made Colombia a favorite choice for innovative foreign companies to invest in early stage or

first-in-human clinical trials.

Secondly, Colombia offers an impressive regulatory approval process under The Ministry of

Health and Social Protection (MinSalud) and National Food and Drug Surveillance Institute

(INVIMA) organizations.

In Colombia, the regulatory approval time to obtain market clearance for a medical device

ranges from 15 to 90 days (vs approx. 360 days in Brazil). [64]

The validity of an INVIMA sanitary registration is 10 years, allowing foreign manufacturers to

be the title holders of the registration certificate (as opposed to in other countries, where they

must use the services of a third-party registration holder). The fact that Colombia allows foreign

entities to hold the title of the INVIMA registration certificate enables foreign companies to fully

control any amendments to the registration and add or remove distributors.

Public & Private Reimbursement

The healthcare reimbursement system in Colombia is highly complex. The system is

funded by having all employees contribute 4% of their income, with employers contributing an

additional 8%. [65] In total, approximately 40-50% of all Colombians contribute directly to the

system in this way.

While the universal nature of this system can be said to apply to 97% of all Colombians, in

reality there are many different tiers of service and reimbursement that depends on employment

status, level of tier chosen by the employing company, as well as whether or not additional

supplementary private insurance has been purchased by an individual (which accounts for the 2%

figure previously mentioned).

The complex nature of this system makes the market’s reimbursement potential difficult to

assess and is heavily reliant on acceptance and support of a product from the Contributory

Regime. However, best estimates suggest that around 40% of Colombians are covered under

some form of private healthcare coverage.

Additional Considerations

➢ The Colombian medical device market is the third largest in Latin America after Brazil and

Mexico and has an estimated annual growth rate of 7.1% between 2020 and 2025. [66]

➢ Of all the best ranked hospitals in Latin America, roughly 50% of them reside in Colombia.[67]

➢ Roughly 83% of all medical devices sold in Colombia are imported, and 75% of them are sold

directly in Bogota. [68]

➢ Colombia’s rank on the Legatum Institute’s list of the best healthcare systems in the world

for 2023 was an impressive #36 out of the 167 countries evaluated. [69]

Tariffs & Taxes

Imported products are classified using a globally universal “Harmonized System” that allows

for accurate tracking and classification of all goods traded around the world every year. Each

category of goods is provided with a code. For xxxxxxx products, they would fall under HS6

code 902190, which includes all “Orthopedic articles and appliances, which are worn or carried,

or implanted in the body, to compensate for a defect or disability”. More specifically, HS8 code

90219080 - “Other apparatus for compensating deficiencies/illnesses”.

Most tariffs for products that bring positive net benefit to a country are usually waived, and

available tariff data for 2021 for HS6 902190 showed this to be the case for all of the following

countries except Brazil, whose effective applied rate was 1.75% for all products under the

Harmonized System codes beginning with 902190. [70]

Additional VAT and other import taxes may be applicable depending on country, product, and

individual agreements, and this is especially true with Brazil, which is known for adding

numerous additional taxes to imports, depending on the product being imported and the country

doing the importing.

Fig. 8.1: Trade data - A prime example of a missing or incomplete data set.

Estimating Potential Market Sizes

Determining potential market size for a given medical device requires creating a simple

evaluative coefficient based on known relevant variables. For example, the potential

addressable market size (M) for the L300 Go in stroke rehabilitation (S) in country (x) is identified

using the following formula:

SM(x) = P x I x S

Where SM(x) = the sum of [population (P) multiplied by the number of insured (I), multiplied by

the prevalence of stroke (S)].

Example 1

For Brazil: SM(B) = [216,000,000 x 0.25 x (125/100,000)] = 67,500 per annum

For Chile: SM(C) = [19,600,000 x 0.18 x (80/100,000)] = 2822 per annum

We can therefore deduce that Brazil has an addressable market of people with private

insurance experiencing strokes each year that is roughly 2400% larger than that of Chile.

Example 2

For Colombia: M(CL) = [54,000,000 x (0.40 + 0.02) x (75/100,000)] = 17,010 per annum

For Mexico: M(M) = [132,700,000 x 0.08 x (80/100,000)] = 8492 per annum

In example 2 we can see that while Mexico has nearly triple the population of Colombia and

possesses 2.6x more hospitals per capita, making it seem like a more attractive choice, its total

addressable market is still only half of that of Colombia.

Other variables could also be added to or interchanged within the equation to provide

further clarity and insight, such as those describing the population age (ie. median age,

over-65 %).

The objective herein is to highlight how individual variables such as disease prevalence,

private health coverage, and overall population are key factors in evaluating demand, each of

which need to be given consideration, even at a macro level. For example, when comparing

LATAM to other emerging economies such as Asia, the difference in demand for products

addressing metabolic diseases becomes obvious (Obesity rates for India, Vietnam, Japan, S.

Korea, Cambodia, China all fall between 2-6%). [71]

So, while this level of analysis may seem rather rudimentary and only provides one part of

the bigger picture, it is an appropriate starting point from which to build a more nuanced strategy,

with other pieces of even more specific data to then refine focus further.

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