For medical device companies, the Chinese market is an obvious and inviting target.
Growth in China’s economy, in general, and its healthcare sector, in particular, has been well documented, but it’s worth taking a look at a few numbers again.
The medical device market in China is currently valued at $14 billion, and it’s expected to reach $50 billion by 2020. By that year, the Chinese middle class is expected to number 600 million, according to Damon Canfield, a principal with Columbus, Ohio-based consulting firm NPI. (Canfield, along with members of law firm Squire Sanders and trade groups BioEnterprise and BioOhio spoke Tuesday morning at an event called “Winning commercialization strategies: Paths to China.”)
Of course, getting a bite out of that large and lucrative Chinese market isn’t so simple for small- and mid-sized device firms that lack experience in Asia. “In China, everything is possible but nothing is easy,” Canfield said.
With that challenge in mind, here are five tips for commercializing medical devices in China:
1. Make a small bet: Before you do anything, plunk down some cash for a little Chinese market research. What are the competing products in China? Will your device work in China from a cost and design perspective? What are your odds of getting reimbursed? Some good market research will at least get you on the path to answering these questions.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
2. Figure out the regulatory pathway: Dealing with China’s equivalent to the U.S. Food and Drug Administration, called the SFDA, is typically less costly but can take a longer time, Canfield said. Approval for some Class III devices can take up to two years, so companies that have serious interest in selling to China need to get started on regulatory work ASAP. Having an experienced, on-the-ground partner obviously helps.
3. Protect your IP: Be careful in selecting partners and contractors because you don’t want to lose control of your intellectual property. Disclose only necessary information in product manuals. Consider having parts manufactured in different locations and assemble the product in yet another. Require that rejects be destroyed and prohibit or severely limit subcontracting. Awards of damages in Chinese courts are typically pretty small, so the legal process isn’t a great remedy for device makers.
4. Find the right balance: Chinese health officials are very cost-conscious, so it’s incumbent on device companies to find the right balance between price and volume. You may have to reduce prices, but to sell to such a high-volume market, it may be worth it.
5. Find well-incentivized distributors: Small, aggressive, niche distributors may be a better route than large ones. Small distributors’ sales will be more closely tied to yours, so they’re likely to push harder on your behalf. Don’t work with just one distributor, however. Set up exclusivity among multiple vendors by region or customer type, for example, Canfield suggested.
