The development of endoscope

An endoscope is an indispensible instrument for diagnosis and operation of the departments like Department of General Surgery, Ear-Nose-Throat Department, Department of Urology Surgery, Department of Orthopedics, Department of Gynaecology, etc. at present, and also one of the products enjoying the fastest growth in the global industry of medical devices. 

I. Introduction to the Background of Endoscopes 

An endoscope is a medical device in common use, and it may be inserted into a person’s body through a natural orifice or a tiny surgical incision. By introducing the endoscope into pre-checked organs, we may directly observe the changes of relevant parts.

An endoscope is mainly comprised of three systems, which are respectively the endoscope system, imaging system and illumination system. The common video-endoscope at present, for example, includes an operating handle and a lens body. The lens body will extend into a patient’s body. Inside the lens body, there are multiple tubes in parallel, including optical fiber for lighting, optical fiber for image transmission (CCD video cables inside a video endoscope), gas transmission channel, water transmission channel, instrument channel, etc. The endoscope has extremely high-degree precision, and needs the mutual cooperation of multiple professional fields.  

As seen from the historical time axis, through the constant improvement of the two standards, namely the principle of imaging system and rigidity, the development of endoscopes has experienced four stages, namely rigid endoscopes, semi-rigid endoscopes, fiberoptic endoscopes, and video endoscopes. Generally, rigid endoscopes and semi-rigid endoscopes are defined as non-flexible endoscopes, while fiber endoscopes and video endoscopes are flexible endoscopes since they could bend freely, and their scope of clinical applications is also expanding constantly.

At present, video endoscopes are used for both diagnostic and operative procedures. Diagnostic videoscopes mainly indicate that, clinicians obtain real-time dynamic internal images through an endoscope, and obtain tissues for in vitro detection with appropriate instruments. Operative videoscopes indicate performing certain surgical procedures with professional minimally invasive surgical instruments. The applications of endoscopes mainly include the organs or parts like ENT, oral cavity, digestive tract, urethra, bladder, kidney, joint, abdominal cavity, etc.

II. Analysis on Barriers to Entry into the Endoscope Industry

1. Barriers to Entry

Medical endoscopes and instruments for minimally invasive surgery (MIS) cover the medical devices of class I, II and III. The State Food and Drug Administration strictly implements regulations on licensing and product registration for medical device manufacturers. New entrants are required to pass the examination of provincial food and drug administration, and obtain the License of the Medical Device Production Enterprise and the License of the Medical Device Operation Enterprise before starting business operation. In addition, manufacturers in the industry must obtain a Product Registration Certificate before starting the production and sale of corresponding medical devices.

Enterprises must meet the requirements on production environment, personnel quality, and equipment allocation, etc. before dealing with the production of medical endoscopes and instruments. Various products must passing through a series of detections, analysis and clinical tests, and product registration before sale. The barriers to entry are relatively high for new entrants. 

2. Technology and Talent Barriers

The endoscope industry is a multi-disciplinary and knowledge-intensive high-tech industry. The products of this industry integrate many disciplines like medicine, bioengineering, optics, precision manufacturing, image processing, medical materials, and OME information, so this industry has relatively high technical barriers. Enterprises in the industry need to develop and produce products of various series, specifications and models aiming at different departments, diseases as well as diagnostic and therapeutic tools, so as to meet the diagnosis and therapy requirements of medical institutions. The accumulation of know-how and cultivation of R&D capacities in endoscopes are a long-term process, and cannot be achieved by enterprises within a short period generally.

In addition, the technological innovation, production and processing of endoscopes and instruments require the support of stable technical teams. A deficiency of domestic talents in the endoscope industry is a major factor for the development slowness of industrial technology. Meanwhile, research personnel should communicate with units like medical institutions, scientific research institutes, colleges and universities, etc., get familiar with hospitals’ usage requirements, and combine technical theories with their own experiences. Therefore, it is very difficult to cultivate a large number of high-end qualified talents, which constitutes an important barrier to entry.

3. Brand Barriers

Endoscopes used for clinical diagnosis and minimally invasive therapy are directly related to patients’ life health, so medical institutions pay special attention to the brand and quality of such products. New brands are strictly investigated and verified before being accepted by customers, and even high-quality products need long-term accumulation before building brand effects. This also becomes a barrier difficult to overstep for new comers within a short period.

In addition, MIS instruments differ in conformity, corrosion resistance, surface roughness and medical materials as medical endoscopes of different brands have differences in field of view, edge light effect, angle resolution, and quality of field of view. Endoscopic physicians usually develop specific product preferences during operation training and surgical procedures. Also, considering patients’ safety, medical institutions tend to choose the brands of endoscopes that are often used by endoscopic physicians, so this has constituted a brand barrier to entry into this industry for new enterprises. 

4. Market Channel Barriers

The sale of endoscopes is featured by wide territorial coverage, high specialization, and customer dispersion, etc., so companies in the industry generally adopt the operation model of “distribution + direct selling” for sale to end users. First, distributors need to get the approval of relevant food and drug administration departments and obtain the License for the Medical Device Operation Enterprise before dealing with the distribution business. Then, apart from financial strength and marketing ability, they are required to provide professionalized services for end users and help physicians coordinate and solve the problems encountered during the use of devices. Moreover, such distributors have basically developed a long-term and stable cooperation with the enterprises having already entered into this industry previously, so it is very difficult for new entrants to find an appropriate distributor team in a short time

5. Financial Barriers

Medical endoscopes and instruments for MIS need relatively high one-off input at the early stage for their precision and high requirements on processing, inspection of equipment and process. In addition, such instruments have quite high technical contents and a long product-development cycle. From initiation to marketing, products go through steps like design, trial production, detection, clinical test, registration and approval, etc., so generally it takes a period of 3 to 5 years. The medical endoscope industry is experiencing a period of fast development. The research and development of new products is a pillar for enterprise development, and needs sustained high-amount investment in R&D. So it has high demands on new comers’ financial strength.

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