What Medtech Companies Need to Know About Colombia's Growing Medical Device Market
“It is strongly recommended that U.S. companies process the registration under their name and not under the local distributor name or else the U.S. company will not be able to change or add distributors during the lifetime of the registration, which is 10 years.”
Colombia has successfully positioned itself as the third largest medical devices market in Latin America, after Brazil, and Mexico. Business Monitor International forecasts indicate that Colombia is projected to stay in this rank for 2022.
This is the product of the dynamism of the medical device sector in Colombia. This segment has presented average annual growth rates between 2014 and 2017 of 18% in local currency (COP) and of 7,9% in USD. The capital city, Bogota, D.C., represents 75% of total sales of medical devices in the country.
Healthcare Demand Will Support Medical Devices Sales. Medical Device Market, Local Currency (COP), 2012-2022. Source: National Statistics, Fitch Solutions
The Colombian medical devices market relies overwhelmingly on imports, which made up about 93% of the market during 2017, despite strong domestic production focused mainly on consumables. Since the implementation of the U.S.-Colombia Trade Promotion Agreement (TPA) with the United States in 2012, 96% of U.S. medical equipment exports to Colombia receive duty free treatment.
According to BMI Research, domestic production of medical devices is concentrated at the low technology end of the market. U.S. imports make up the largest share of the Colombian market, accounting for 31.8% of all medical equipment imports, followed by China (13.3%), Germany (8.4%), Ireland (4.8%) and Switzerland (4.5%), with China quickly increasing market share.
Colombia has Free Trade Agreements (FTA) with leading medical device producers such as the European Union and Canada and is in FTA negotiations with Japan and Turkey. Among the top U.S. medical equipment exports to Colombia in 2017 were instruments and apparatus such as electro medical instruments, electrodiagnostic equipment, diagnostic reagents, and medical supplies which include orthopedic and fracture articles and prosthesis.
The country’s healthcare infrastructure is adequate in the larger urban areas but is generally in need of modernization and expansion. The Colombian government provides a universal medical system known as the “General System of Social Security in Health” (SGSSS, or Sistema General de Seguridad Social en Salud), which currently covers about 95% of the population thanks to Law 100 of 1993, whereby all citizens, irrespective of their ability to pay, are entitled to a comprehensive health benefit package. Colombia’s healthcare system is famous for its effectiveness. The World Health Organization (WHO) ranks Colombia's healthcare system as 22 out of the 191 countries they review. (That is better than Canada at 30 and the U.S. at 37.)
Source: GHI analysis based on data from the OECD, CEPAL, WHO, the World Bank and certain local ministries.
Leading sub-sectors
25 Key Health Facts About Colombia, Global Health Intelligence, 2019
According to the U.S. Department of Commerce, the best prospects for U.S. medical equipment manufacturers include:
Medical, surgical, dental and veterinary instruments
Electro-diagnostic apparatus
Orthopedic devices, hearing aids
Prosthetic devices
Diagnostic imaging equipment
Laboratory equipment and consumables
Ultrasound, mammography, and cardiovascular equipment
Dermatological and laser treatment apparatus and apparel (boosted by medical tourism and growing demand for plastic surgery)
Intensive care, cardiology, neurology and oncology-related equipment
Clinical laboratory equipment for hospital upgrades
Medical, surgical, dental instruments and electro-medical equipment
Data analyzed by GHI from its ShareScope service shows projected increases in the quantities of respiratory equipment (like nebulizers) that were imported in Colombia. GHI also noticed how demand grew sharply between 2017 and 2018 for the following type of medical equipment in Colombia:
Endoscopy towers (10.5%)
Hemodialysis machines (25%)
Cath labs expanded (42%)
Mastography (5.6%)
EKG machines (1.1%)
Laparoscopic surgery (3.2%)
Source: GHI analysis.
Opportunities
Colombia spent 6.8% of its gross domestic product (GDP) on healthcare in 2017. The Government of Colombia is the main buyer and foreign medical device companies can find public tender opportunities in the Colombia Compra Eficiente web site. Colombia Compra Eficiente is the government’s public procurement system, and it offers participants tools to facilitate the tender process. According to GHI data, about 50% of Colombia's hospitals are public.
Ivan Duque's presidency will benefit Colombia's healthcare sector, with continued emphasis on healthcare reforms and health awareness promotion, which will increase patient access to healthcare and boost demand for medical devices.
“Access to this market is not easy for newcomers. The market is mature and competitive, with many foreign firms selling medical equipment and medical products.”
The construction of new hospitals under public-private partnerships (PPPs) will support hospital infrastructure modernization and increase healthcare access in the District Council of Bogota, which will benefit medical device sales.
There are many high-quality hospitals and clinics located throughout Colombia that provide both general and specialized medical services. There will be upcoming tenders in Bogota for five hospital projects: two new hospitals will be constructed, and three hospitals will have major upgrades and overhauls. Four of these projects will be public private partnerships and one will be done through public works. These projects will add 1,272 beds and nearly 670,000 square feet of infrastructure to Colombia’s health system.
The best approach to enter the Colombian market is through a local partner such as a distributor, as Colombian companies prefer to buy from companies located in Colombia that can provide after-sales services. However, some of the country’s largest end-users do import equipment and supplies directly. The medical device industry is concentrated around the capital city (Bogota, D.C.).
While there is some domestic capacity for manufacturing basic items, the medical device market is heavily reliant on imports, especially for more high-tech items. A few multinationals manufacture within the country.
Foreign medical device manufacturers should maintain close contact with end-users and provide training and demonstrations so end-users can familiarize themselves with their products. This strategy has been used effectively in Colombia by European manufacturers.
With modest economic growth, supported by gradually higher oil prices and rebounding private consumption, greater access to more efficient healthcare services and increasing hospital infrastructure modernization, medical device sales are likely to experience a tailwind. Fitch Solutions Macro Research maintain its forecast and projects that the market will register a 2017-2022 CAGR of 9.8% in local currency terms and 9.2% in US dollar terms, which will take the value to COP4.9trn (USD1.6bn) by 2022.
Source: GHI analysis.
The medical device registration process
Foreign medical device companies must be aware that medical devices require registration with INVIMA (Instituto Nacional de Vigilancia de Medicamentos y Alimentos). INVIMA is in charge of inspecting and supervising the marketing and manufacturing of health products, identifying and evaluating the violation of health standards and procedures, implementing best practices, and providing medical approval for the import and export of products.
It is strongly recommended that U.S. companies process the registration under their name and not under the local distributor name or else the U.S. company will not be able to change or add distributors during the lifetime of the registration, which is 10 years.
Classification of devices in Colombia follows a four-tiered risk model (Class I, Class IIa, Class IIb, and Class III). Colombia’s device classification system is similar to those of the European Union and other Global Harmonization Task Force (GHTF) systems. If the device falls into a lower-risk category in Colombia (Class I or IIa), the company may qualify for an expedited review and achieve market entry in a shorter time.
Access to this market is not easy for newcomers. The market is mature and competitive, with many foreign firms selling medical equipment and medical products. It should be noted that the registration procedures can often be challenging and may pose a barrier to entry.
Using agents or distributors to sell in Colombia
“U.S. companies should consult a local attorney to execute an agency or distribution contract and thoroughly vet the prospective partner by conducting a background check. ”
Colombian law does not require foreign firms to secure local representation for private sector sales. However, Colombians prefer to deal with companies that have a local representative to ensure access to after-sales services. The one exception to this law is for sales to the government, which do require foreign bidders to have legal representation in Colombia.
To secure an agent, representative, or distributor, the foreign company must execute a contract that meets the provisions of the Colombian Commercial Code. This contract must be registered with the Chamber of Commerce in the city where the agent/representative is located. Agency or representation agreements do not require government approval.
An agent or representative differs from an appointed distributor. The former is legally associated with the principal and may enter into legal agreements on the principal's behalf, while the latter may act independently from the principal. Distributors may purchase items from a foreign supplier or wholesaler and then sell them locally at their own discretion and risk.
The U.S. Department of Commerce recommends that U.S. companies consult a local attorney to execute an agency or distribution contract and thoroughly vet the prospective partner by conducting a background check. Formality, personal relationships and trust are key ingredients for a long lasting contract. Colombians want to know their supplier or business partner personally before deciding whether he or she is trustworthy. Foreign companies seeking agents, distributors, or representatives in Colombia should consider contacting a trusted third-party consultant to request assistance in entering the Colombian market.
You should make informed business decisions when evaluating potential Colombian business partners. Before you do business with a prospective agent, distributor, or partner in Colombia, contact a trusted third-party to aid you with your research.
A local third-party can provide you with in-depth background check information on a specific Colombian company to help determine its suitability as a potential business partner. The service should includes a site visit to the target foreign company and interviews with principals/references. You should have your local trusted third-party investigate the capabilities, legitimacy and financial strength of a Colombian firm and provide useful information gleaned from government, industry and financial contacts, the local press and other sources.
The background report that you receive should include detailed answers to your questions about the specific Colombian company in which you are interested —competitors, credit rating, profit and loss numbers, key officers, and an opinion on the overall viability of the firm in this market.