Capitalizing on Change
Western health care companies hope to profit from reform in Asian countries
From Standard&Poor's Equity Research. Consumer demand for Western-quality medical care has prompted Asian nations over the past few years to establish tougher standards for health care products that align more closely with those of Western nations. More broadly, the countries are ambitious to increase their foreign trade and lead the way in health care innovation. The West, which is concerned that the erratic and weak supervision of health care products undermines foreign trade, has played a role by pressuring the industry in the "East" to evolve.
As a result, new winners and losers in the Asian health care markets are being created. In general, the changes bolster the competitive positions of large, multinational companies (MNCs) that have an increasingly strong stake in the region and are well positioned to gain from the Asian health care providers' preference for imports. A select number of well-capitalized, savvy local firms are positioned to profit as well. However, mid-sized and small domestic companies, most of which make a living by selling copies of innovative, patent-protected Western products, are getting hurt.
These new dynamics are particularly apparent in China and India, now that those countries are more exposed to Western scrutiny. Many large MNCs have an increasing presence in China and India, and Standard&Poor's believes they are likely to benefit in the mid- to long-term. On the device side, Medtronic (MDT; S&P investment rank, 4 STARS, buy; $47) and General Electric (GE; 4 STARS; $39) have been particularly vocal about their interest in the region. Pharmaceutical manufacturers, such as Roche (3 STARS, hold), Pfizer (PFE; 3 STARS; $24), and GlaxoSmithKline (GSK; 4 STARS; $50), among others, have taken steps to demonstrate their commitment to the area.
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