Medical Devices

To directly view a list of the largest Australian importers/distributors of medical devices, from our Kompass Australia 2003 Database, click here. Another good source of information is the Hospital and Health Services Buyers' Guide (http://www.hospitalandhealth.com.au/), which details of over 2,100 suppliers to hospitals, nursing homes and health establishments. You can search that database after setting up a free account.

Although a relatively small market, Australia's high per capita income means that there is demand for the full range of sophisticated medical equipment. In addition, Australia enjoys a high standard of medical practice. This, together with the expectation of state-of-the-art medical treatment by an educated population, ensures a continuing need for high quality and innovative medical equipment and products.

More than 80% of devices and diagnostics used in Australia are imported. Approximately 60% of these products come from the U.S. Other major market suppliers are Germany, Japan and the EU.

Australia is a mature market for medical equipment, characterized by modest sales growth and strong competition. A large number of small companies and a small number of multinational firms serve the market. More than 500 companies are involved in the medical device and diagnostics industry. The market is valued at approximately US$1.1 billion, representing about 1% of the global market.

The Government is the primary purchaser of medical equipment in Australia. Industry estimates that public hospitals account for 70% of sales of medical equipment, while State and Territory tenders account for 65% of medical consumables. The Government is also a major buyer of dental equipment, accounting for around 15-20% of the total market. Thus, government policy and activity in the provision of public health services is a major factor in the demand for medical equipment.

Nonetheless, the provision of health services by the private sector is increasing. Further increases are likely due to the rise in the number of Australians with private health insurance; the corporatisation of services such as pathology, radiology and general practice; and the expanding role of the private sector in the care of Australia's ageing population.

The medical equipment market in Australia is regulated by the Therapeutic Goods Administration (TGA). A new regulatory framework came into effect on October 5, 2002 to harmonize Australian regulations with international standards. The system classifies devices according to the degree of risk associated with their application. Thus, medical equipment, such as electromedical products, sterile devices, and implantables from all sources, are likely to require the most rigorous assessment by the TGA before they can enter the Australian market. As this approval can only be obtained by an Australian sponsor, foreign exporters need to appoint an Australian representative before their products can be approved by the TGA. The TGA regulations are discussed further below.

Opportunities exist for state-of-the-art and innovative medical equipment and products which can result in a significant improvement in clinical outcomes. In particular, products which serve Australia's ageing population, such as treatments for arthritis, or equipment which allows aged people to live independently, are likely to experience growth. Also in demand are information technology applications, which facilitate information sharing and service delivery over great distances, along with those relating to practice and records management and supply chain management.

2. MARKET SIZE

Australia is a small but sophisticated market for aids and equipment to assist daily living. Australia has a population of 20 million people, with life expectancy of 75.2 years for men and 81.0 years women. The population is relatively wealthy. Gross Domestic Product (GDP) per capita is approximately US$23,000. The country has an advanced health system, with the majority of healthcare services provided by the public sector, although the contribution of the private sector is increasing. Nursing home care, for example, is provided principally by the private sector. However, residential care for people with disabilities has declined dramatically over the past several decades. The prevailing philosophy at present, both for the care of people with disabilities and the elderly, is to reduce reliance on high-cost services and a preference to have individuals cared for in their own homes. Thus, a high proportion of care is provided informally by family members and community organizations, in addition to professional services provided by state-funded community health services, occupational therapists and physiotherapists.

2.1 Incidence of Disability

The market for aids and equipment for daily living has expanded over the past twenty years as the proportion of the Australian population with disabilities has increased. According to the Australian Bureau of Statistics (ABS), the rate of disability in Australia has increased from 15% in 1981 to 19% in 1998. This means that 3.6 million people in Australia currently have disabilities. The vast majority of Australia's disabled population lives independently in households.

78% of those with a disability, or 2.8 million Australians, were restricted in their self-care, mobility or communication. Restriction was profound in 3% of the total population, and severe in a further 3%. This means that there are approximately 1.1 million Australians (possibly more in 2001) with a profound or severe disability.

The vast majority of Australia's disabled population (94% or 3.4 million people) live independently in households. Of these, almost 2 million need assistance to move around or go out, shower or dress, prepare meals, do housework, light property maintenance, paper work or to communicate. This implies that a significant number are likely to need aids or equipment to maintain their independence.

2.2 Causes of Disability

A brief examination of the principal causes of disability in Australia gives some indication of the kinds of aids and equipment most commonly required by Australia's disabled population.

Disability usually exists as a consequence of disease, disorder or injury. The most common causes of disability in Australia are physical conditions, including musculoskeletal disorders like arthritis. Over 4 million Australians suffer some form of musculoskeletal disease and the incidence of arthritis is increasing dramatically, at around 8% per year. The majority of sufferers (over 60%) are women and approximately half are aged under 60 years.

Currently, 18,000 Australians are paralyzed as a result of spinal cord injuries. The majority is male (68%) and aged 15 to 44 years. Vehicle accidents and other road accidents (33%), falls (34%), and diving and water-related accidents (11%), are the most common causes of spinal cord injury. 52% of such incidents result in quadriplegia, and 48% result in paraplegia. Each year, approximately 260 Australians suffer spinal cord injuries.

Over 6,000 Australians suffer from Multiple Sclerosis. The incidence of the disease is highest in Australia's southern states. A further 1,000 are estimated to suffer the disabling effects of Motor Neuron Disease.

22% of Australians suffer some form of deafness. 17% of the population have a level of impairment likely to cause some difficulty understanding speech. However, in most cases impairment is mild, with the highest incidence in the range to 21dBHL.

Approximately 380,000 Australians have severe vision impairment. Of those, approximately 6% are totally blind. Vision quality declines with age. One in seven Australians aged over 80 years, and one in four of those aged over 85 years, is vision impaired. The ageing of the population is likely to lead to a rise in the incidence of vision impairment in the future.

Over 20,000 Australians suffer from Cerebral Palsy, a range of disabilities associated with movement and posture.

2.3 The Use Of Aids And Equipment

The extent and purpose for which aids are used varies according to the nature and severity of disability. The severely disabled tend to use aids for mobility and self care. The mildly disabled tend to use aids more for communication. People in health establishments, such as hospitals and residential accommodation for people with disabilities or the aged, are more likely to use aids than those living in households. According to the ABS, 81% of those in health establishments use aids, compared with 37% of those in households.

The most common purposes for aids are mobility and self care (48% and 44%, respectively). Around 340,000 people use aids for washing and bathing, 310,000 use equipment for walking (such as sticks, frames and crutches), and 230,000 use aids for hearing. Approximately 90,000 Australians use wheelchairs; 60,000 use belts, corsets and braces; 40,000 use eating aids; 30,000 use dressing aids; and 25,000 use orthotics.

2.3.1 Case Study: Mobility Aids

According to research conducted by the ABS in 1998, 317,000 Australians who have a disability use a mobility aid. The following table sets out details of the use of such aids by people aged over 18 years and living in households.

Use of Mobility Aids by those Aged Over 18 and Living in Households (in thousands of units)

Type of Aid Used	18-64	65 and over	Total
Wheelchairs	28.7	19.6	48.3
Canes	12.2	17.4	29.6
Crutches	10.7	9.0	19.6
Walking frame	13.1	40.7	53.8
Walking stick	59.4	130.1	189.5
Scooter	5.5	6.2	11.7
Car modification or aid	7.7	2.3	9.9
Other mobility aids	36.3	26.9	63.5

Note: the above statistics do not represent a comprehensive view of the market for mobility aids because they do not include the demand of hospitals and nursing homes. However, it is interesting to note that the rate of wheelchair use is different to usage rates for other mobility aids. This is because wheelchairs are most commonly used by younger people, principally those aged 0-17 years (60%) and 18-44 (30%).

2.4 An Ageing Population

A major reason for the increasing incidence of disability is the ageing of the Australian population.

There are 2.3 million Australians aged 65 years and over, including almost 1 million aged 75 years and over. The number of people aged 65 years and over is expected to increase to 5.1 million by 2031, increasing from 12% of the population to 21%.

Given that the rate of disability increases with age, the increase in the proportion of the population that is aged is likely to have significant implications for the demand of such aids and equipment. Moreover, even those elderly Australians without disabilities tend to need assistance with daily tasks. Significantly, the number of people aged 80 years and over, those most likely to require nursing home or hostel accommodation and other forms of support, is forecast to increase from 520,000 to 1.4 million by 2031.

The overwhelming majority of Australia's aged population (91% or 2.1 million people) lives in private dwellings. 7% of (or 161,000) elderly Australians live in special accommodation, such as nursing homes and aged care hostels. The remainder lives in non-private dwellings, such as boarding houses. Reforms in the 1980s by the Federal Government led to the expansion of home-based care and hostel accommodation and a reduction in the number of people being placed in nursing homes.

Those currently accommodated in nursing homes tend to be the most restricted in
their ability to self-care. According to ABS statistics, nearly all older people in special accommodation (97%) had a disability, and most (82%) had a profound core activity restriction. By contrast, 50% of older people in private dwellings had a disability. The percentage with a profound core activity restriction was also lower, at 9%. Thus, while demand for health aids and equipment is higher among those disabled or aged Australians in special residential care, a significant proportion of the aged population living in households is likely to require aids.

2.5 Market Data – Aids & Equipment

Australian Market for Aids and Equipment for Daily Living (AUD$millions)

	1997/98	1998/99	1999/2000
Imports	189	213	231
Exports	51	57.5	64
Domestic Demand	228	250	270
Imports as percentage of Total Market	83%	85%	86%

Approximately 900,000 Australians use one or more aids to improve their mobility, communication or ability for self-care. Mobility aids are the most commonly used devices in the category. Demand for equipment varies according to the nature and severity of disablement. Those most severely disabled are more likely to require mobility and self-care aids. Those with more mild disabilities are likely to use aids for communication. The incidence of the use of aids is highest among those disabled Australians living in residential care. This is to be expected, as those in care are most often those most severely disabled.

The range of equipment that can be classified as aids or equipment assisting daily living is vast. The category includes bathroom and toilet equipment; bedding, including pressure care products; seating; modified building fixtures; clothing and dressing items; communication aids; eating and drinking utensils; emergency call systems; household and kitchen equipment; lifting devices; and mobility aids, such as wheelchairs, walking frames and sticks, ramps, and scooters.

Most purchases of aids and equipment for daily living are made in consultation with health professionals such as occupational therapists and physiotherapists, under government-funded disability programs. However, nursing homes and hospitals also account for a significant number of purchases, and a small amount of equipment is purchased in retails outlets, such as pharmacies and hardware stores.

Due to the breadth of equipment in the category, the size of the market for aids and equipment assisting daily living is difficult to quantify. According to the advice of Australia’s leading disability support service provider, annual purchases under government-funded equipment procurement programs amount to AUD$200 million (US$104 million). However, this figure does not include rehabilitation purchases by hospitals and nursing homes, and retail purchases of items from outlets (such as pharmacies) by individuals. When these are taken into account, it is estimated that the Australian market for aids and equipment to assist daily living is approximately AUD$270 million (US$141 million).

2.5.1 Imports

As is the case with the market for medical devices, a high proportion of aids and equipment for daily living is imported. According to anecdotal evidence, the United States, Taiwan, the United Kingdom, Denmark, and Sweden are the principal sources of imported products. The United States is estimated to account for the majority of products imported in this category. It is regarded as a world leader in the
manufacture of powered mobility aids, such scooters and wheelchairs, along with
manual wheelchairs. It is also the leading source of environmental controls and intelligence in powered devices. Taiwan is a leading supplier of a scooters and wheelchairs, and small devices, such as household aids. The United Kingdom's reputation is as a supplier of pressure care products and mobility aids. Denmark and Sweden are best known as manufacturers of aids for children, hearing devices, continence aids, and modular bathroom products.

Most major international manufacturers in this category are represented in Australia by subsidiary companies or through agent/distributor relationships. U.S. companies De Puy, Baxter Healthcare, and Sunrise Medical, and the U.K.'s Smith and Nephew, for example, are directly represented in Australia. Other leading suppliers across a range of products in the category include U.S. manufacturer North Coast Medical; Swedish manufacturers RFSU and Romedic; and German manufacturer Otto Bock. Other prominent suppliers include De Puy (USA) and Posey (USA) (bedding aids); Homecraft (UK) and Good Grips (Taiwan) (household aids); Smith and Nephew (clothing, dressing and continence aids); and Invacare (Canada) (mobility aids).

In recent years, the demand for motorized scooters, electric lifting devices (especially in seating products) and environmental controls has increased rapidly. Most products in these sub-categories are imported. The demand for scooters, in particular, grew dramatically following the introduction of a number of models on the market in the mid-1990s. Demand for scooters is strong, due to their popularity among the aged, and their price advantage over powered wheelchairs. This sub-category is dominated by imports and is highly competitive, with a large range of products made by different manufacturers available on the Australian market.

2.5.2 Australian Manufacturers

There are several Australian manufacturers of aids and equipment for daily living. Most Australian manufacturers tend to specialize in particular subcategories of products, although some larger manufacturers, such as Pelican, Henry and K-Care, produce a range of products. Australian manufacturers have strengths in the manufacture of bedding-related aids and equipment, continence aids, lifting equipment and mobility aids, excluding scooters.

The majority of purchases of aids and equipment to assist daily living occur under government-funded programs, which provide equipment to people with disabilities, war veterans and those injured in workplace and traffic accidents. This is discussed further below.

3. REGULATORY ENVIRONMENT

The new regulatory system for medical devices in Australia commenced on 4 October 2002. The new system has been established by the Therapeutic Goods Act 1989 as amended by the Therapeutic Goods Amendment (Medical Devices) Bill 2002 and the Therapeutic Goods (Medical Devices) Regulations 2002.

3.1 What Is A Medical Device?

A medical device is defined in the legislation as:

“any instrument, apparatus, appliance, material or other article (whether used alone or in combination, and including the software necessary for its proper application) intended by the person under whose name it is to be supplied, to be used for human beings for the purposes of one or more of the following:

- diagnosis, prevention, monitoring, treatment or alleviation of disease,

- diagnosis, monitoring, treatment, alleviation of or compensation for an injury or

handicap,

- investigation, replacement or modification of the anatomy or of a physiological process,

- control of conception,

and does not achieve its principal intended action in or on the human body by pharmacological, immunological or metabolic means, but which may be assisted in its function by such means; or an accessory to such an instrument, apparatus, appliance, material or other article.”

It should be noted that a key part of this definition is the intended purpose specified by the manufacturer of the medical device. An accessory, to a medical device, is an article, or articles intended specifically by its manufacturer to be used together with the medical device to enable the medical device to be used as intended by its manufacturer.

3.2 How Are Medical Devices Regulated?

The Therapeutic Goods Act 1989 provides the legislative basis for uniform national controls over goods used in the prevention, diagnosis, curing, or alleviation of a disease, ailment, defect or injury. The Therapeutic Goods Administration (TGA), a Division of the Commonwealth Department of Health and Ageing, is responsible for administering the Therapeutic Goods Act 1989. The Office of Devices, Blood and Tissues (ODBT) is the area within the TGA responsible for regulating medical devices. Three statutory committees have been established to provide advice on the regulation of therapeutic goods. They are the:

- Medical Devices Evaluation Committee (MDEC), which provides advice to the Minister on issues relating to the safety, quality, performance and timely availability of medical devices. The Committee also provides advice on the policies, procedures and priorities that should be applied to the administration of the medical devices legislation.

- Therapeutic Goods Committee (TGC), which advises the Minister on standards relating to therapeutic goods, as well as the raw materials, manufacturing processes and testing procedures used to make them.

- National Coordinating Committee on Therapeutic Goods (NCCTG), consisting of representatives from the States, Territories and the Commonwealth, which discusses many aspects of the regulation of therapeutic goods (including medical devices).

The new medical devices legislation incorporates accepted best practice relating to safety, quality and risk management procedures, as well as providing the flexibility and capacity to regulate new and changing technology. The new framework also adopts the philosophies of the Global Harmonisation Task Force on medical devices.

The new regulatory system has the following features:

- a device classification scheme based on different levels of risk for each class of device;

- essential principles for the quality, safety and performance of the medical device that must be complied with before the product can be supplied;

- options as to how compliance with the essential principles can be satisfied and assessed – manufacturer quality systems, type testing, and design evaluation;

- the use of recognised standards to satisfy the requirements of the essential principles;

- a comprehensive post market surveillance and adverse incident reporting program;

- appropriate regulatory controls for the manufacturing processes of medical devices; and - the continued use of the Australian Register of Therapeutic Goods as the central point of control for the legal supply of medical devices in Australia.

3.3 Are All Medical Devices Covered By The New Legislation?

Some products, which were previously regulated as therapeutic devices, are not covered by the new legislation. These products will be known as ‘Other Therapeutic Goods’. They either do not fit the new definition of a medical device or else it has been decided that they should remain under the previous regulatory system while more specific requirements for their regulation are developed. More information can be found in the guidance document dealing with Other Therapeutic Goods.

Examples of products not meeting the new definition of a medical device are:

- tampons; and

- hospital, household and commercial grade disinfectants.

Products remaining under the current regulatory system are:

- in-vitro diagnostic devices; and

- devices of human origin.

3.4 The Australian Register Of Therapeutic Goods

The Australian Register of Therapeutic Goods (ARTG) continues to be the central point of control for the legal supply of therapeutic goods in Australia. The ARTG is the register of information about therapeutic goods for human use that may be imported, supplied in, or exported from Australia. Under the legislation some therapeutic goods have been specifically excluded from entry in the ARTG while others may be given specific approval for a special purpose without being entered in the Register.

Following the amendments to the Therapeutic Goods Act 1989, an additional part has been created in the ARTG for medical devices. The new part is for medical devices included in the Register. The parts of the ARTG for goods known as registered and listed goods will remain. Therapeutic goods, which are currently registered or listed in the Register, cannot be transferred to the new part.

An application will be required to have a medical device included in the ARTG. Sponsors are encouraged to use the Devices Electronic Application Lodgement system (DEAL) for these applications. DEAL will also be used to lodge details of medical device manufacturers, and the required declarations of conformity, before applications can be submitted to have a medical device included in the ARTG for all classes of medical devices, except for Class I.

3.5 Transition Period

The Therapeutic Goods Act 1989 as amended by the Therapeutic Goods Amendment (Medical Devices) Act 2002, has made provision for the following transition periods for certain therapeutic goods:

- Medical devices that are currently registered or listed goods in the ARTG can remain registered or listed until 4 October 2007. However, any registered or listed therapeutic devices in the ARTG after that date will be automatically cancelled. During this 5-year transition period an application can be made to include those goods in the ARTG. If the application is successful the registrations or listings will then be cancelled; or

- Medical devices that are exempt goods will remain exempt until 4 October 2004. After that time those goods, if they no longer satisfy the definition of exempt goods, will have to become included medical devices in the ARTG so that they can be supplied in Australia; or - Applicat