Romania - Medical Equipment

SUMMARY

The Romanian market for medical equipment is growing steadily in parallel with the country’s efforts to improve the quality of the national health care system. But the system has been hamstrung by a lack of capital, and the comparatively low quality of medical equipment. The strategy adopted by the Ministry of Health over the past few years to refurbish medical equipment has focused on several areas, in particular upgrading and repairing existing equipment, as well as purchasing new equipment for new procedures.

There are only a few domestic producers of medical equipment, and they have a limited range of products of medium quality and use outdated technology. Production of medical equipment in Romania decreased significantly after 1989, as producers tried to identify new sources of capital to modernise and improve their products. Western European countries such as Germany, the Netherlands, Austria, and Italy, used to dominate the Romanian import market, but U.S. producers are also present and their share of the market is growing.

There is strong interest among Romanian producers in technology transfer and attracting foreign capital. American firms may consider expanding their positions in the Romanian market by means of investment, as well as through traditional distribution methods.

MARKET HIGHLIGHTS AND BEST PROSPECTS

Market Profile

The health care sector in Romania is undergoing major changes. Currently, more than 90% of the hospitals are state-owned, but privatisation of hospitals and parts of the health care system are being seen by the new government as a possible option. Government expenditure on public hospitals has declined significantly since 1989 but it saw a slight increase in 1997 to 3.4 percent of GDP, and is due to increase to 5% in 2002, but this is still not enough to meet the country's actual healthcare needs.

Family practitioners were established 3 years ago, and each employee has to pay 7% of his gross income in insurance for health care, excluding dentistry. The family practitioner is the first point of contact with the health care system, and has to decide whether the case can be treated on an outpatient basis or whether it requires hospitalisation.

The new government has indicated that national health care reform is one of its top priorities. Previous government reform established a health insurance plan, which partially functions and provides quasi-coverage for private and state run clinics and hospitals.

The medical equipment market consists of six main categories: diagnostic equipment, intensive care equipment, anaesthesia and surgical equipment, emergency equipment, technical aids, rehabilitation and hygiene. Within these categories, we find the following types of products:

Diagnosis and treatment: laboratory equipment, electrocardiographs, blood pressure apparatus, ultrasound lithotripsy equipment, pulmonary/vascular/digestive function analysis systems, endoscopy equipment, and medical imaging (classic and conventional x-ray radiology and x-ray radiology, ultrasound, scanography, and MRI-magnetic resonance imaging, angiography and three dimensional imaging), nuclear medicine, radio therapy, linear accelerators and cobalt therapy machines.

Intensive care: cardiac and respiratory monitoring, infusion and nutrition pumps, patient beds, incubators and therapy lamps, medical gases infrastructure.

Surgery: anaesthesia equipment, operating lamps, surgical tables, surgical lasers, surgical microscopes, medical fluid distribution arms and UV bactericidal lamps as well as equipment for sterile air conditioning.

Technical aids: prosthesis (cardiac, vascular, orthopaedic, ocular, mammary), hearing aids, ligatures, sutures, probes drains and thermometers.

Rehabilitation: disposable medical products, therapy equipment and supplies, and wheelchairs.

Hygiene: sterilisation equipment, disinfecting equipment, hygienic products and cleaning devices.

In Romania, more than 70% of the hospitals are in need of repair and/or modernisation and there is an urgent need for the following equipment and/or services: cardiovascular, respiratory, oncology, digestive, gerontology, obstetric, and paediatric services.

Although there is a growing trend towards privatisation, health care reform is in its early stages, and computerisation as well as standardisation of health care services and therapies is needed.

These industry trends are good opportunities for U.S. medical equipment producers or health care managers, as well as for those wishing to establish or acquire private hospitals, health centres, clinics or medical manufacturing capacities in Romania.

Best Sales Prospects:

The following range of products are expected to be good prospects for sales in Romania over the next two years:

Priorities for the Medical Equipment Sector:

- electro-medical equipment
- diagnostic equipment
- endoscopy, urology, laparoscopy and laser surgical equipment
- medical lasers for skin therapy
- orthopaedics surgery equipment
- dentistry equipment
- microscopes for surgery and laboratory use

Major procurement orders that are expected to be placed over the next 6-18 months include tenders from: Floreasca Emergency Hospital (Bucharest) for medical equipment (USD 25.0 million); new construction and medical equipment supplies for Fundeni Hospital in Bucharest (about USD 28.0 million); Aeronautical Medical and Training Centre in Bucharest (about USD 7.0 million); medical equipment for the Eye-Treatment Hospital in Bucharest(USD 20-25 million); medical equipment for the Network of Laboratories for Preventive Medicine (about 30-35 million Euro); medical equipment for the National Program of Urology (USD 15-20 million) and the National Program of Digestive Endoscopy (USD 10-15 million).

Some of these projects have already been approved but others are still proposals.

Estimated figures for annual procurement in different medical sectors:

- haemo-dialysis: USD 5-12m
- cardiology equipment: USD 6-10m
- monitoring and intensive care equipment: USD 3-5m
- advanced diagnostic equipment: USD 10-16m
- clinical laboratory equipment: USD 2-5m
- disposable, surgical consumables: USD 4-7m

COMPETITIVE SITUATION

Domestic Production:

Local producers have become less competitive since 1989 and export sales have declined. The share of the market covered by domestic companies is estimated to be about 10%. The main products are: dental units, microscopes, surgical instruments, prosthesis, cardiovascular valves, and software for E.C.G. machines. It is unlikely that domestic production will increase significantly in the near future, due to the limited manufacturing capability of local industry.

Imports:

The government has not imposed any special limits on importing equipment. In order to import medical equipment a company has to obtain an import license from the Ministry of Industry and Commerce and also have authorisation from the Ministry of Health and Family. These are valid for a period of five years. To import radiation equipment, approval must be granted from CNCAN, the Nuclear Safety Authority and also from the Ministry of Health and Family.

The main exporters of medical equipment to Romania are Western European companies, which have marketed themselves aggressively and used qualified local consultants to penetrate the market. Hospitals, clinics and district health departments buy low cost medical devices directly. For other medical devices like advanced diagnostic equipment, cardiology equipment, and laboratory equipment, purchases are made by the Ministry of Health and Family through its tender and acquisition department.

Occasionally, the Ministry of Health and Family may change its strategic objectives to develop the health care system, which may affect procurement practices.

U.S. Market Position and Share:

U.S. companies and products are well represented on the Romanian market. Several major U.S. companies have representatives and distributors in Romania: General Electric, Hewlett Packard, Stryker, ATL, Diasinics, Control X, Gendex, Bekman Coulter, Instrumentation Laboratories, Baxter, Medtronic, Chrono-log, Helena Laboratories, Denver Instruments, Endosonics, Bard Instruments, Space Lab, Hill Rom, Steris, Johnson & Johnson, Bennett, Accuson Corp., Datascope and 3M.

U.S. companies represent approximately 35% of the Romanian market for medical equipment, mainly in the high tech sector. This share is expected to grow in spite of the relatively high import duties of 10%, as these and other U.S. companies continue to market their products in Romania.

A key selling factor is the reputation of the product. Generally U.S. products are well received by the population and health care professionals.

Price is the main criteria hospitals use in deciding which equipment to buy from suppliers. But for important high quality products, price may become a secondary criterion.

Effective marketing and promotion can dramatically influence the market as companies had until very recently undertaken very little marketing.

Some companies may consider joint venture and cooperation ventures with Romanian companies to further penetrate the Romanian market.

END-USER ANALYSIS

The end-users of medical equipment are hospitals and outpatient clinics. The hospitals are free to make their own decisions on purchases up to approximately one billion lei, or USD 30,000. Their overall budget determines their spending limits but this does not restrict their individual purchasing decisions. But the Romanian government is faced with budget reductions every year in spite of the growing demands for quality health care.

Decisions about budget allocation are made and influenced by medical opinion leaders in key medical units, usually professors or chief physicians that are politically well connected. Sales to public hospitals are by tender and by direct sales. Sales to clinics are generally done either directly or through distributors.

MARKET ACCESS

Import climate:

The import climate for American medical equipment in Romania is positive. There are no import barriers for U.S. equipment with the exception of customs duties, which are generally around 10%.

However, goods originating from the EU don't carry customs duties, so for comparative US goods to be priced competitively, they have to be cheaper. In 2000, the Ministry of Health awarded tenders to select companies to supply new medical equipment designated to replace the existing equipment and modernise the hospital system. The tenders amounted to $280 million. Considering these large orders, it seemed highly unlikely that additional tenders would be offered in 2001. But, surprisingly, new tenders also came from the medical departments of the Ministry of Transport and Ministry of Justice, for USD 45 million and USD 20 million respectively, even before the Ministry of Health and Family had completed its orders.

Distribution/Business/ Practices

Sales are mainly by state tender or direct purchase. The distributing company needs to have good contacts in Romania, in order to have access to the appropriate decision making authorities. Suppliers should contact hospitals directly.

Financing:

The most common method of payment is by bank transfer, with terms of 45-60 days or even more, after the arrival of goods at their final destination in Romania. Delayed payments still occur, but this is not a serious risk. Non payment or refusal to pay is not common in Romania.