Although the U.S. and Europe remain important drivers of Medtronic’s ongoing success, emerging markets may be the "the most important ones," according to medtech industry monolith Medtronic’s CEO Omar Ishrak.
Emerging markets have figured large in Ishrak’s vision from the moment he took over as CEO for the medical device giant last year, especially in China, which makes up about 40% of Medtronic’s emerging-market sales, he told CNNMoney.
Although Europe, the U.S. and other developed markets will continue to play a large role in advancing clinical knowledge and technology during the next decade, emerging markets will take over as the most important end markets, Ishrak said.
Developed markets may hold the lead on developing groundbreaking technologies and techniques, but "emerging markets are so big, and the growth of their own technical and clinical capability is so quick," that they may be the areas to focus on.
Ishrak has launched initiatives around patient awareness in emerging markets, which represent about 10% of Medtronic’s total revenue, or about $1.6 billion per year, he told CNNMoney.
Capitalizing on those markets in some cases requires re-education of the patients, especially in a system where patients are paying out of pocket for their care.
"There are people who have certain conditions, and the therapy for those conditions is well established, and they can afford it," Ishrak said. "Yet the adoption rate among that population is only about 5%. So if it’s so obvious, why hasn’t it happened? One of the biggest barriers is awareness among patients and physicians that a certain condition can be treated. The patient or even the physician may think there is no cure if a person has reached a certain age, while in fact it’s well established, over decades in some instances, that a person can be given a certain type of therapy, a device in our case, and maybe extend their life for another 20 years."
China continues to factor large in Medtronic’s emerging market plans, but the company is looking to expand elsewhere as well.
"The population of China is still well under half that of the total emerging market," Ishrak said. "So there’s a big opportunity outside China as well, where the markets are different but need our products."
One domestic factor that doesn’t appear to play a large role in Ishrak’s plans is the Affordable Care Act, which contains within it the 2.3% medical device tax slated to take effect at the start of the year.
"I’m not sure it truly affects us," Ishrak said of the Affordable Care Act. "We work in health care systems that are different all around the world, so we cannot customize our corporate strategy to any one system. Whatever the Affordable Care Act brings toward us, we’ve seen somewhere."
Ishrak didn’t specify whether his evaluation included medtech tax which will cost Medtronic about $136 million next year, according to estimates from Moody’s Investor Services.