Early last week I moderated a panel on medical technology devices in emerging markets organized by the MIT Enterprise Forum. The panel featured Bill Rodriguez, CEO of Daktari Diagnostics and Una Ryan, CEO of Diagnostics for All.

The panel was enlightening, and confirmed our view that emerging and developing markets are ready for significant growth across a wide array of medtech markets. While there has been a lot of attention and focus on China, India and other BRIC economies, we continue to believe that other lesser developed markets, particularly in Africa, present profitable opportunities that have hitherto been neglected by medtech incumbents. However, a new breed of companies is increasingly addressing the compelling medical needs of these emerging economies. Daktari Diagnostics and Diagnostics for All are prime examples of such new players.

The trend of healthcare decentralization is creating significant opportunities for medtech companies. The migration from core hospital labs to specialty care units, doctors’ offices and homes promises much more widespread access to healthcare services—to people in developed and developing nations alike.

Despite the massive demand for diagnostics, emerging markets today represent a small slice of the device market. Bill Rodriguez, whose company, Daktari Diagnostics, is backed by the Bill & Melinda Gates Foundation, shed light on the significant opportunity for diagnostics in these markets.

“Thirty-three million people have HIV, and ten million of those people don’t know it. The dirty secret in addressing HIV infections is that it is not about a lack of technology, or a problem of having available drugs to treat it. The problem is the lack of available diagnostic testing,” said Rodriguez.

For example, diagnosing HIV takes a simple CD4 cell count test, which costs only $1.50. In Africa, the drug therapies for HIV are available at a subsidized cost of $100 per year. But nobody can get the test.

His product, which he is planning to launch in Africa next year, is a simple handheld diagnostic device that tests for CD4 cell count.

The problem with emerging markets is not about a lack of available technology, but the uncertainty within the market itself. The reason why these countries have been underserved up to now is that conditions on the ground did not justify the risk of market entry.

This situation is being repeated with other curable diseases such as TB and STDs.

But the good news is that the tide is turning. Countries are making large investments in building their healthcare systems and infrastructure, addressing the market entry problem. They are also making major changes in their healthcare regulatory and distribution systems, allowing novel innovation to penetrate healthcare clinics and permitting influx of new capital through well-endowed foundations. NGOs like the Clinton Foundation are helping to create functioning and more transparent markets that will support the market entry of much needed healthcare products. These actions seem to be working—BD, Siemens and Roche all have active businesses in lesser developed countries today.

Una Ryan, CEO of Diagnostics for All, thinks that if you can make it in emerging markets, you can make it anywhere. The threshold for success in emerging markets is very high—products that are extremely inexpensive, but that can also support a sustainable business, will naturally be competitive anywhere else.

She believes her company has the perfect answer: diagnostics tests performed on a postage-sized piece of patterned paper. These tests cost less that one cent to produce, and can perform multiplexing (test for multiple analytes at once).

Given these two technology examples, it seems as though emerging markets may have the opportunity to adopt the latest point of care (POC) products, and in effect leapfrog developed countries in some arenas. Additionally, the novel technologies of Daktari Diagnostics and Diagnostics for All may be contributing to the trend of “reverse” innovation: They were developed specifically for emerging markets, bypassed the traditional development paradigm (in this case migration from the core labs) and may eventually find their way into the developed world.

Simply, the conditions in Africa and other emerging markets make them ready for liftoff. Emerging markets are where we will see the first application of low cost and innovative disruptive technologies at work. They also allow companies to market technologies before going through the rigorous FDA approval process, thereby expediting new products’ launch.

Players in the medtech market need to take notice. Products that work in the rest of the world may not fit well with on the ground demands of emerging markets—ultra low cost, portable, easy to use, etc.

Therefore, medtech companies should consider creating dedicated business units or spin-outs that focus exclusively on regions such as Africa. The reward will be new revenue streams in growing markets, and the development of innovative new products that will eventually impact the developed world.

The question then becomes what technologies for which markets, and when and how to sell them.

Read more posts from Arshad Ahmed