FTC sees medical supplies market growing despite MDS acquisition

The Fair Trading Commission, FTC, which monitors competition, described the medical distribution market as expanding since the pandemic, while giving the nod to the acquisition of Cornwall Medical & Dental Supplies by a large rival.

The FTC was concerned that Jamaicans could see reduced competition in the market arising from the 60 per cent majority acquisition of Cornwall by rival Medical Disposables & Supplies Limited last year. But, the agency, having spoken to several entities in the trade, found that there were few barriers to entry, with start-up costs as low as “$10 million to $75 million”.

The existing players, however, described the market as largely saturated.

The FTC’s remit includes ensuring that mergers do not adversely affect competition. The commission, however, found no objection to the merger, stating that it would not reduce choice in the market.

“Further, the rivals indicated that the market for medical disposables was saturated, but new entrants were able to find a niche set of customers or a product,” said the FTC in its published report.

“They indicated that this had been the case particularly since the March 2020 onset of the COVID-19 pandemic in Jamaica. Rivals cited examples of new companies entering the market at various levels and competing for the same customers because they typically sourced products from the same distributors overseas.”

The FTC was unable to ascertain the dollar value of medical equipment and disposables market, but said it is served by about 25 to 50 companies. Medical Disposables, one of the largest in the market and a publicly traded company, generated annual sales of $2.4 billion in 2021 and $2.5 billion in 2020.

“Based on the above, the FTC concludes that the agreement is unlikely to have removed significant competitive constraints in the relevant market since both Medical Disposables and Cornwall Medical continue to face significant competitive constraints from other market participants,” the competition watchdog said.

Some rivals described MDS as a top supplier while also describing Cornwall Medical & Dental Supplies as having a dwindling presence in the market, the FTC added.

“Cornwall Medical is likely to have a relatively low market share since none of the participants interviewed identified it as being among the leading five suppliers of medical disposable items. This suggests that Montego Bay-based Cornwall Medical held no more than 17 per cent of the relevant market,” stated the FTC report.

Medical Disposables and Cornwall distribute medical equipment that include gloves, masks, medicines and other retail products. The acquisition allowed Kingston-based Medical Disposables to solidify its presence in western Jamaica; add dental distribution to its portfolio, an area in which Cornwall holds a key advantage; and add pharmacy assets to its holdings for the first time. The Corn-Med Pharmacy has two outlets in Montego Bay and one in Savanna-la-Mar, Westmoreland.

“The retail and dental segments represent areas that were untouched by MDS prior to now. Both entities Cornwall and MDS naturally found synergies in joining forces, particularly in the medical division, which we regard as a core strength with distinct advantages,” Medical Disposables said in its 2021 annual report.

Asked to clarify his company’s market position, Medical Disposables CEO Kurt Boothe declined, saying the available market data was insufficient to make the estimate.

business@gleanerjm.com