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Opportunities & Challenges for Swiss Companies.
The People‘s Republic of China Market for Medical Devices.
Medtech Switzerland Wankdorffeldstr. 102 P.O. Box 261 3000 Bern 22 +41 31 335 62 41 email@example.com www.medtech-switzerland.com
Dr. Urs MATTES Senior Advisor China, Medtech Switzerland firstname.lastname@example.org Dr. Jingjing CAO, LL.M. Associate, Taylor Wessing, Beijing +86 10 8587 5886, email@example.com Stanley CHANG Partner, Ernst & Young Advisory, Beijing +86 10 5815 3628, firstname.lastname@example.org Liv MINDER Investment Promotion Director, Swiss Business Hub China +86 10 8532 7537, email@example.com
Sarah Moyle (Medtech Switzerland) Dr. Patrick Dümmler (Medtech Switzerland)
While this report is intended to provide an overview of this specific market and its opportunities at the time of its edition, each individual manufacturer, exporter or company may have to conduct their own analysis to get a better understanding of the possibilities and opportunities available to them. You are encouraged to explore and develop your opportunities based on research and in-depth analysis. Readers should take note that Medtech Switzerland does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations, associations, companies and individuals listed herein. Readers of this report should verify the accuracy and reliability of the information contained herein before making a business decision. © Medtech Switzerland 2012
Table of Contents
1. Executive summary 2. Introduction 2.1. Medtech Switzerland 2.2. Objective of report 2.3. Development, facts and figures about China 3. Cultural aspects: East versus West 4. Healthcare system in China 4.1. Size and growth 4.2. The role of doctors 4.3. Patients and hospitals services 4.4. The Government 4.5. Hospital tier system 4.6. Hospital financing and equipment 4.7. Basic medical insurance 4.8. Medical tourism 4.9. Demographics 4.10 Future challenges 5. Medical device & equipment market 5.1. Size and growth potential 5.2. Role of foreign and domestic companies 5.3. Example of the orthopedic market in China 5.4. Regulatory bodies 5.5. Bidding / Tender process 5.6. Logistics and distribution services 6. Intellectual property rights 7. What to do when entering the Chinese market as an SME? 8. China as manufacturing base 9. Chinese medtech companies to go abroad 10. References 4 5 5 5 6 7 9 9 10 11 12 12 13 14 14 14 15 16 16 17 20 21 22 23 23 25 26 31 31
The diabetes and obesity epidemics in China have risen in tandem with the wealthier middle class and provide opportunities for medical device companies with products in these segments. The current crisis in the Chinese healthcare system can best be illustrated through a common Chinese household phrase: “It is too difficult and too expensive to see a doctor!” The SARS epidemic of 2003 provided a wakeup call for citizens. The loss in the value chain is huge because distributors demand a big share of the pie under the pretense they are pressured into bribes which could ultimately lead to their imprisonment. About 80 per cent of the medical resources are clustered in urban areas where only about 20 per cent of the population resides. tertiary care hospitals are caring for patients across a wide spectrum of illnesses and injuries (even minor illnesses) due to the fact that they house the best doctors and maintain the best facilities. In other words. The highend market in China is in the hands of foreigners while the low-end. China´s small market base combined with a healthy growth rate however. Currently. laparoscopic and endoscopic devices. primary and secondary care facilities are underutilized and need government subsidies to stay afloat. China has a diverse and large population with a growing need for new medical technologies. Executive Summary Any company intending to start a business in China must know that a different clock ticks there. economic market is dominated by domestic companies. general taxes and out-of-pocket contributions.5 per cent of GDP as compared to 9 per cent for the European Union and 16 per cent for the USA. In urban areas. continues to make this market interesting for the future. while lifestyle changes have lead to a sharp rise of cardiovascular diseases. Foreign companies which are able to adjust their product portfolio to mid-tier hospitals will enjoy a lucrative business in China and be in a position to export these mid-segment products to other countries both in the region and elsewhere. It is possible for a manufacturing base to transfer technical know-how from headquarters elsewhere to China. Today’s roadblocks for new entrants into the Chinese medical device market are: 1) a registration process which is not transparent. rural health insurance. 2) a bidding / tender process which takes years to finalize access to the market and 3) the looming danger of IP infringement. The People‘s Republic of China Market for Medical Devices. which must be strategically addressed. One of the most disturbing practices in China which is rarely discussed openly both in China and internationally is the rampant corruption in healthcare. ophthalmic. use of the word `China´ will refer to mainland China. doctors demand additional incomes through kick-backs paid by distributors. Patients saddle the majority of healthcare expenditures themselves which in turn contributes to lower costs for most individuals not using health services. . This is the primary reason why almost all medical device companies need to have distributors. One can simply not copy what works in the West and transfer it to China with the belief it will be successful. Healthcare expenditure in China is only 4. Due to low salaries. The reforms which were implemented as a result of the SARS crises provide a great opportunity for medical device companies selling medical equipment 4 such as imaging. It is inaccurate and misinformed to believe that a gold mine awaits foreign medical device companies ready to enter the Chinese market. the major focus is to upgrade the hospital network with better equipment. The rapidly aging population additionally offers opportunities for orthopedic and cardiovascular medical device companies. The future challenge for the Chinese healthcare system is to find a gatekeeper which channels patients into lower-ranked hospitals rather than allowing most patients to seek treatment at top hospitals which are overcrowded. For the time being. The market for such mid-segment products is large when taking the high number of mid-tier hospitals into consideration. In the following report. It is of paramount importance to understand the micro-environment of business practices in China.1. For instance temporarily downgrading high-end Western products (usually imported) in a local market is a promising strategy for market entry that should be in the mind of all foreign medical device companies in China. but procedures for stepping into the Chinese market with the intention to market and sell require a different strategy. Contrary to this. suppliers of instruments and apparatuses will fare better than suppliers of implants and consumables. There are several roadblocks for foreign companies. not Hong Kong and Macao which have more developed healthcare systems. the entire healthcare system should be inverted to make it more efficient. the healthcare sector and the government in that the current healthcare system is unprepared to deal with medical crises management. Healthcare in China is primarily financed through urban health insurance. particularly SMEs with limited financial resources. Entering the Chinese market 10 to 20 years ago was easier and more lucrative than today’s shifting and tenuous landscape.
including Swiss Business Hubs at Swiss embassies and consulates. multinational corporations. on behalf of the Federal Government. The Managing Director of Medtech Switzerland is Dr. though a The People‘s Republic of China Market for Medical Devices. tax. Some businesses have already succeeded in reaching a significant global market position. It provides support and services for export activities to all businesses throughout the industry. Assuming that a company can change the Chinese system of doing business is a wide-s pread flaw in thinking. and the resulting trade barriers make market entry for SMEs very difficult. and research and development companies. the formation of work groups to exchange relevant export know how or the organization of buyer’s events. and Intellectual Property Rights (IPR). is responsible for the strategic leadership and supervision. This association. Medtech Switzerland has been charged with helping SMEs overcome those hurdles. the export platform is promoting a sector that has built up an excellent technological base thanks to clinical research and first-class engineering and scientific performance. Osec also incorporates various participants. After an initial funding of about CHF 4 million by the Federal Government. Bern. internationally active consultants and bilateral chambers of commerce. The board has established its operative organization with offices in Bern together with the Medical Cluster. including manufacturers. and bring them to the attention of Swiss businesses. Short-term views and aggressive expectations are prone to failure. MEDTECH SWITZERLaND Medtech Switzerland is the export platform for the Swiss medical technology sector and was developed by Osec on behalf of the Federal Government in 2010. expert consultants in different countries (“senior advisors”) will identify business opportunities in the target countries. in which industrial partners as well as Osec are represented. Google knew when it stepped into the Chinese market that the Chinese government controls internet content. opportunities.2. services and contacts to SMEs in the Swiss medtech industry and thus promotes and facilitates entry into the relevant export markets worldwide. Patrick Dümmler. concerning the business functions in China. weaknesses.2. suppliers. specialist knowledge and experience in medical technology. government agencies and foreign medical technology companies. In many market areas. The reader should recognize that a different clock ticks in China which requires special attention to cultural and business practices. founded in 1997. In addition. Several years after market entry Google withdrew its servers from Beijing to Hong Kong due to unsolvable differences in the view of web content. Medtech Switzerland provides relevant information on major medical technology markets. a number of different hurdles must be overcome.1. and threats. Introduction 2. 5 . and quality of services. small and medium-sized enterprises (SMEs). the export platform is based on business partners that can meet the highly specific requests concerning seniority. The export platform for the medical technology sector was established within the framework of the third stabilization package approved by the Federal Council and is intended to support the concerns of Swiss businesses in their export activities. CEO Synthes / Mathys Medical) is President of the Board of Directors. All participant businesses can use its services. It is not the objective of this report to go into operational details as a company who wishes to commence an operation in China will need the consulting and expert advice of an advisor in law. service providers. related associations and federal offices. 2. Many companies seeking to enter China have failed due to a lack of willingness and understanding. is a network organization of medical technology businesses along the entire value added chain. though has since shifted its strategy and has added investments for a data centre hub in Hong Kong. In addition. It is the goal of this report to convey to the reader that success in China is not simply a copypaste function of procedures in Europe or the US. The marketing activities contain a broad range of services including the participation in relevant trade shows and conferences in major markets. As a result Google lost substantial market share to mainland domestic competitors. with the purpose of building lasting business relationships and generating export orders for Swiss medical technology businesses. Medtech Switzerland will be financed increasingly by the private sector. regulatory and administrative structures are strongly politically influenced. The board of directors. The association is led by the general assembly of its members. For example. Medtech Switzerland has been devised as an open platform for the Swiss medical technology industry. To provide local support to export-oriented Swiss businesses in their target markets. Erwin Locher (former President. The focus is to establish effective relationships with public and private customers in healthcare services. market access has become increasingly complex due to ever more dense regulations. OBJECTIVE OF REpORT The purpose of this report is to frame a picture of the medical device market in the People’s Republic of China by outlining its strengths. often from company headquarters. In order to boost export sales. patience and longterm thinking usually lead to success. It is of note that Hong Kong. but for many SMEs with comparable technological conditions.
Moreover. having surpassed Japan. In almost all segments of the medical device business. creation of a diversified banking system. but China rebounded quickly. Measured on a purchasing power parity (PPP) basis that adjusts for price differences. explicitly looking to establish globally competitive national champions. 2.1 Surprisingly it is rare to hear discussions and information distribution concerning these practices at international seminars focused on the Chinese market. In 2009. The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978. Also often overlooked are the differences in time and cost for China versus Europe. Despite these short-comings. including: (a) reducing its high domestic savings rate and low domestic demand.3. when Beijing allowed resumption of a gradual appreciation. Early in the development of the Chinese market foreign companies did not face many regulatory hurdles. fiscal decentralization. information on corruption is widely understood both at the level of the government and by citizens. China in 2010 stood as the secondlargest economy in the world after the US. The challenges in entering the Chinese market even for the financial giants of the global market are demanding. The Chinese government is seeking to add energy production capacity from sources other than coal and oil. Despite these numbers however. rapid growth of the private sector. privately held companies with a flexible approach to business. Economic development has progressed further in coastal provinces than in the interior. It is recommended that recruiting several distributors might be a better option than relying on one. In 2010 China became the world’s largest exporter. focusing on nuclear and alternative energy development. Imported products often need to be adjusted to the demands of the local market in order to satisfy the needs of Chinese customers. outperforming all other major economies in 2010 with GDP growth around 10 per cent. it usually engages sub-distributors which will eat away some of the margin. In China however. From mid-2005 to late 2008 cumulative appreciation of the Renminbi (Yuan) against the US dollar was more than 20 per cent. New comers to the market on the other hand now require much more time to gain entry. The government vowed in the 12th Five-Year Plan adopted in March 2011 to The People‘s Republic of China Market for Medical Devices. Caution must be exercised with market research as the Chinese market is so fragmented by region that market research should be viewed from the perspective of where it was performed. (c) reducing corruption and other economic crimes. and (d) containing environmental damage and social strife related to the economy’s rapid transformation. increased autonomy for state enterprises. some with less success. Many of the Fortune 500 companies have stepped into this challenging market. The challenges for small to medium sized enterprises (SMEs) with limited financial resources can be significantly greater. (b) sustaining adequate job growth for tens of millions of migrants and new entrants to the work force. DEVELOpmENT. the global economic downturn reduced foreign demand for Chinese exports for the first time in many years. there was no bidding / tender process in place and more room for foreign competition. and expanded to include the gradual liberalization of prices. only a fraction of these individuals are able to afford imported goods. Still. Modern demands from foreign companies in China range from tedious regulatory paperwork to payouts at the level of the hospital. In recent years. The government tries hard to stop these practices but has been unable to overcome them. The economy appears set to remain on a strong growth trajectory in 2011. and is openly targeted in the Chinese media. lending credibility to the stimulus policies the government rolled out during the global financial crisis. hospital equipment departments and doctors using medical devices earn additional “income” by corrupt practices. development of stock markets. but the exchange rate remained virtually pegged to the dollar from the onset of the global financial crisis until June 2010. Reforms began with the phasing out of collectivized agriculture. This reality prevents foreign companies from going through direct channels and forces them to rely on Chinese distributors who have the know-how to manage this side of the business practice. The Chinese government faces numerous economic challenges. FaCTS aND FIGURES aBOUT CHINa Since the late 1970s China has moved from a closed.part of the People’s Republic of China is a unique and very small market as compared to mainland China. This fraction is growing rapidly and offers potential for small to medium sized enterprises (SMEs) entering the Chinese market. it 6 is beneficial to force healthy competition among distributors and compare their performances. If one distributor is selected. some with great success. Many companies prefer to pilot and learn from trial and error though thorough market research and understanding of differences in cultural and business practices is essential before launching a market entry strategy. and a few with bad results. foreign interest and activity in China remain high.600 US$. . China has implemented reforms in a gradual way. per capita income on PPP basis is only 7. China has renewed its support for state-owned enterprises in sectors it considers important to its economic security. and opening to foreign trade and investment. Most of these Chinese distributors are small. centrally planned system to a more market-oriented economy that plays a major global role. A good rule of thumb is to assume that most business plans for China need twice as long and cost twice as much to execute. and approximately 200 million rural laborers and their dependents have relocated to urban areas to find work. China has more people than any other country in the world.
A new trend to buy luxury goods has shifted the efforts of many top brands to focus on China and not only Japan.3 billion people. Cultural aspects: East versus West There is a vast difference in thinking and behaviors between Western and Asian people. Since the 1970s more than 500 million people have moved out of poverty leaving 22 million people in the rural population left with an income below 1 US$ per person and day. Below is a list which demonstrates some of the difference between the two global cultures. it is the world’s fourth largest country. This middle class generates a consumer group which is capable of buying imported goods. a middle class is developing which is estimated to be approximately 200 to 300 million people living mainly in urban areas. China is quickly becoming the largest purchaser: It is number one in the world with 750 million mobile phones in use. Despite China´s long-standing struggle with poverty and overpopulation. 92 per cent of the population is Han Chinese with the rest consisting of minorities. China’s area is slightly smaller than the US. 3. China has the largest population of any country in the world with approximately 1.9 million cars purchased in 2009. This is a huge achievement for the Chinese government and one which is unprecedented in human history. but there are other ways to become successful and happy Tan skin Low influence on employees Western people buy smaller cars to protect the environment Mainly raised by parents Individuals have the power to block a project which might be considered damaging to the society at large Western people like to write long contracts and litigate if the contract is not adhered to Education system awards innovative thinking and focuses on individual skills Seniors are transferred to retirement homes Easy to recognize Western managers openly discuss positive or negative performance in front of the group Beauty Management Cars Pale skin High influence on employees Chinese like to buy big cars if they have the financial resources Raised by parents and grand-parents The government decides if a project needs to be built or not Chinese like to renegotiate a contract if the situation changes Education system awards obedience and memorization Seniors are taken care of in families Hidden and difficult to recognize Chinese do not blame anybody in front of others Children Construction Contracts Education Elderly Emotions Face The People‘s Republic of China Market for Medical Devices. China is now also considered the biggest polluter in the world. 390 million internet users and 13.2 TaBLE 1: DIFFERENCE BETWEEN EaST aND WEST WITH SOmE EXampLES Issue Academic performance East Very important for Chinese parents West Important. 7 .continue reforming the economy and emphasizes the need to increase domestic consumption in order to make the economy less dependent on exports. The majority of Chinese speak Mandarin (Putonghua) while in the south of China Cantonese is spoken.
many cities in China have experienced significant change making life in China less difficult for Westerners. short and to the point Solve problems with a few people Strong and firm A grade A minus is considered good Reporting Negotiation Network Opinion Parenthood and performance Pollution Problem solutions Punctuality Queuing Society Big concern Direct approach Focused and on time In an organized line Individuals have the power Travelling Way of life Individual or family Independent and individualistic A frequently asked question by companies is whether to employ a Chinese local or send a Western employee from the company´s headquarters. lengthy discussions Solve problems with many people Flexible and not firm A grade of A minus evokes panic and additional lessons are arranged for the child Little awareness Complex and indirect approach Relaxed Pressing and elbowing The society at large counts and not the individual In groups with cameras Oriented towards the communities Likes to express individuality and the role of one´s own importance Bad news is reported immediately after it has happened Formal and based on contract. the results can be good.2 years to China however is inefficient and often results in failure as it typically takes a minimum of several years to become accustomed to the culture and to learn what works and what does not. Beijing and Guangzhou are cities with an acceptable living standard and good schooling for the children of foreigners. Over the past 10 years. Doing successful business in China requires a unique solution for each company. it is important to train him or her at company headquarters abroad. If he or she is a fast learner. An important task for the Western expatriate is to develop talents within the company so that he or she has a replacement when the contract expires. . The advantage of inserting a Western expatriate is that the individual will bring the culture of the company headquarters into the Chinese operation. Sending a Western employee for only 1 . 8 The People‘s Republic of China Market for Medical Devices. If a Chinese talent is taken on board.Individual Wants to be part of a group and not be considered special Bad news is reported on Friday at 6pm Based on trust and friendship. Shanghai.
One of the fundamental cultural differences between China and the West concerns household economics.0 1990 39.2 35.0 2000 24. Healthcare system in China 4. For comparison. respectively. Studies have shown that medical costs are the primary reason people fall into debt and poverty in China.0 2002 27. 9 . The report concluded: “Most of the medical needs of society cannot be met because of economic reasons.3 Personal Social Government 35. The majority who do have coverage reside in urban areas. The rate at which this expansion will occur is pure speculation even though the growth rates of above 10 per cent are encouraging. Chinese save money at much higher rates than people in Western countries. Half of the 4. HEALTHCARE EXPENDITURES BY SOURCE OF PAYMENT 100 90 80 70 60 50 40 30 Percentage 20 10 0 25. The consumption of healthcare products and services in China is relatively small however with approximately 195 billion US$ accounting for only 3 per cent of world-wide consumption. The low number for China however.5 58. Figure 1 below outlines the trend of a decline in government subsidies for healthcare over more than a decade while expenditures for out-of-pocket expenses have increased to more than 50 per cent.4 59. The development of the healthcare sector today is far behind the economic development of China. Europe and Japan. Poor people cannot even enjoy the most basic healthcare.3 18.1 16. The need to pay out-of-pocket can also mean that households do not seek care when it is needed.7 46. SIZE aND GROWTH The world-wide healthcare market is estimated at 6 trillion US$.5 15. Chinese people are additionally motivated to save money for family members and often assume that educational or medical costs will be a burden in their future. Health expenditure is estimated to be approximately 4. indicates that there is a seemingly huge potential for future expansion in consumption of healthcare products and services.5 per cent healthcare expenditure is from private sources.0 60. While Americans in particular are inclined to borrow money and tend towards consumerism. Chinese save money and keep consumption under control.1. It is deeply engraved in the Chinese society to save for a crisis situation which may occur throughout life. The healthcare system is lagging behind the economic development of China and the government has begun to recognize the problem. A survey sponsored by WHO ranked China the forth worst country in the world in its term of fairness in the allocation of its medical resources.0 55.5 per cent of GDP in 2009 as compared to 16 per cent for the US and on average 9 per cent for Europe.0 1995 17. FIGURE 1. Many patients wait too long for treatment and approach doctors when the disease has progressed so far that treatment becomes difficult and expensive.5 16. There is a wide gap between the urban and the rural population in terms of access to medical services and products.4.” This problem is becoming an important political issue in China with sharp criticism even emanating from the government itself. particularly following the SARS epidemics of 2003. 26 and 10 per cent for the US.6 25. Out-of-pocket payments for health can cause households to incur catastrophic expenditures which in turn can push them into poverty. figures of world-wide healthcare consumption are 42.0 2003 Source: Chinese Health Statistics Summary 2005 The People‘s Republic of China Market for Medical Devices.0 2001 26. The institutional social safety network in China is underdeveloped with currently less than 25 per cent of the population covered by basic insurance schemes. a frequent occurrence in the rural areas of China.
which is the key to high-quality care for chronic diseases. . If a patient in China has enough financial resources a treatment which is comparable to a Western patient will be administered. it is vital to include the doctors into the promotional and educational efforts when trying to sell a medical device product in China. hospitals and clinics. the patient will get no treatment which is often the case in rural areas of China. and in the worst case without financial back-up. Beside the doctor.g. as well as many others. In short. the price of a medical device product is higher in China than in the Western world due to the red envelope money rather than customs duties which are relatively low. Noteworthy are the salaries of Chinese doctors who are government employees. Including the patient as a target group in mass media advertising of medical devices is heavily restricted and needs local government approval. the role of doctor goes beyond diagnosing and treating patients. the patient would be left without a device. particularly at top hospitals. China is still a society coined by Confucian values. if not. Many medical device companies will inadvertently subsidize the salaries of doctors at hospitals through their distributors. Chinese love education and it is a privilege to teach in China. Doctors hardly have any time to talk with patients and establish their needs. It is normal that 10 a well-known Chinese doctor will see more than 50 to 100 patients a day with less than five minutes per case.In 2009 the central government announced a RMB 850 billion three-year healthcare reform package that includes: • Improve healthcare facilities (e. When the patient is a passive recipient.2. The People‘s Republic of China Market for Medical Devices. patients generally choose an imported device if they have enough financial resources followed by a domestic product when fewer resources are available. which is usually managed by the distributor. THE ROLE OF DOCTORS In China. especially in rural areas) • Universalize access to basic healthcare • Revamp the pharmaceutical supply system A SWOT analysis of China and its healthcare market is outlined in the table below: TaBLE 2: SWOT aNaLySIS OF CHINESE HEaLTHCaRE maRKET Strength • Large population • High economic growth • Unmet needs in healthcare • Possible to get medically qualified employees Opportunities • Growing middle class • Introduction of basic insurance Weaknesses • Inefficient logistics • Low healthcare expenditure per person • Fragmented market • Complicated product registration • Lengthy access to market because of tenders Threats • Corruption • Domestic competitors upgrade products from low-end to medium-segment • Enforcement of patent protection 4. what medicine will be administered or what medical device will be implanted. if available. For medical device companies operating in China. An important function of the Chinese doctor is to give advice to patients about the costs of a medical treatment which is rarely the case in the Western world in which government reimbursement or insurance coverage take this role. direct access to the market is not possible because of these practices. Due to poor salaries many doctors seek to raise their income. This decision is heavily dependent on the financial resources of the patient and family as insurance coverage. particularly if medical implants are needed. Many companies have developed a great business by focusing on education rather than promotion of their products. Salaries are significantly lower as compared to European and US physician salaries. physical activity and compliance. it is important to also address the purchasing & equipment department of a hospital. it is easy to employ medical doctors because of the higher salary offered in the private sector. For many foreign companies operating in the medical device industry in China. is limited and covers only part of the treatment. As far as medical device products are concerned. Education is important in a Confucian society and is an essential part of marketing and sales management. Doctors in China in cooperation with the patient will decide what treatment will be applied. If your products demand education and trainings. and seldom give advice on diet. Segments of the medical device industry which are heavily affected by kick-backs are cardiovascular and orthopedic. you have the best and most willing audience to get your message across. Very often. even though the workload is overwhelming in China. optimum outcomes cannot be expected. Doctors will frequently engage in kickback practices (“red envelop money”) which are given by distributors and added into the margin of medical device products.
Hospitals like the Sino-Japanese Friendship Hospital and the Peking University Medical College now have special wings for wealthy and non-Chinese-speaking patients.363 1. the government approved the establishment of the Beijing United Family Hospital.072 11.881 6. Looking at only cardiologists and surgeons for instance. In simple terms. Official policy is slowly making it easier for hospitals and investors to serve the growing wealthy middle class and foreigners. a medical supply company based in Bethesda.897 1. 11 Due to the corrupt practices of doctors in China. This difference is also reflected in the orthopedic and cardiovascular market in China whose sheer patient numbers require a far larger availability of specialists.987 3. patients are scarred to enter a hospital and seek treatment.775 26.173 284 245 334 3.194 17. This process will take you at least one to two weeks.881 US 30. 4. In the Western world it has become evident that the size of a hospital is directly related to the quality of services. Often. Customization and care is not always a top priority in China. PaTIENTS aND HOSpITaL SERVICES insufficient infrastructures makes it impossible to provide good services. Many Chinese try to use or build a relationship network with medical professionals to have objective and transparent information about diagnosis and treatment.202 7.304 17.412 6. The hospital primarily serves foreign and wealthy Chinese clients. employing doctors who have been trained abroad or have foreign language skills.379 856 298 3.411 4.480 23.113 46.TaBLE 3: DOCTORS By SpECIaLTy COmpaRING CHINa WITH THE US Doctors Anesthetists Cardiologists Dermatologists Diabetologists Endocrinologists Gastroenterologists Geriatricians Hematologists Hepatologists Nephrologists Neurologists Gynecologists Oncologists Ophthalmologists Pediatricians Psychiatrists Pulmonologists Radiologists Rheumatologists Surgeons Urologists Source: Global Data 2007 China 7.581 772 2. Maryland. In 1997.376 4. The same process will take you only one hour in China. the optician will check your eye sight in a first visit. A simple example from the consumer sector demonstrates this problem: In Europe when you are purchasing contact lenses. bargaining power shifts towards cardiologists and surgeons which fuel the demand for kick-backs.226 16.681 160 5.918 7.881 10. patients receive much less attention that in the Western world. As a result of this imbalance. smaller hospitals provide better services than large hospitals when the proficiency level of the doctors is comparable. .104 1.356 17. patients and their families travel for days and queue for hours to seek treatment at a top hospital in one of the large cities to get professional and correct advice about diagnosis and treatment. This figure does not take into consideration the differences in population between China and the US which makes these numbers even bleaker.218 9. order tailor-made contact lenses to be tested at the second visit and see you a third time for checking the outcome.281 The figure above shows that there is a lack of specialists in many segments of medicine. The service level provided by Chinese hospitals is a big concern for patients.342 1. the disparity between China and the US is apparent. particularly without insurance and in rural areas. If one compares numbers of oncologists the US has 25 times more specialists than China.313 27.006 2. a joint venture between the Chinese Academy of Medical Sciences and Chindex International. In Shanghai the situation is similar.3.850 9.670 4.763 9. The large number of patients seeking treatments at top hospitals with The People‘s Republic of China Market for Medical Devices.805 19.389 34. The discrepancy is even more prominent in the field of diabetes and hematology. The government will allow foreign-financed hospitals to have more freedom in setting their own fees which are sometimes as much as eight times above governmental levels.013 5. In the Chinese healthcare system.
224 China’s pyramidal healthcare system is structured around many small hospitals at the bottom (not graded – 10. the National Development & Reform Commission (NDRC) has tried to curb the high prices of some of the imported medical implants. The enforcement of most proposals was ineffective because many of the provincial governments and municipalities did not follow the lead of the NDRC. 4. sometimes on provincial.4. TaBLE 4: HEaLTHCaRE INFRaSTRUCTURE IN CHINa3 (2006) Institution Hospitals General Hospitals TCM Hospitals Specialized Hospitals Health Centers Urban Health Centers Township Health Centers Sanatoriums Out-patient Department & Clinics Women & Children Health Centers Centers for Disease Control & Prevention Medical Research Institutes Others Description Number 19.738). the more sophisticated medical equipment is allowed to be purchased.670 Renminbi. In several parts of China bidding / tender processes were introduced. China has approximately 300.022 40.151) and a small number of very large hospitals at the top (Level 3 – 1. The higher the grade. Level 3 hospitals are the best in terms of equipment. while the average consultation cost per stay for inpatients was 4. The bidding / tender process has created a new administrative hurdle for medical device companies entering the market. THE GOVERNmENT The medical device industry generally is not as mature as the pharmaceutical industry and less government regulations are in place in China.246 13. In recent years.791 816 39. . The near and medium term future will be excellent for medical device companies providing apparatus and equipment to upgrade hospitals. What might become a lucrative business in the healthcare sector in China is development of products for the mid-segment of the market which is now under attack by domestic as well as foreign companies. These bidding / tender processes forced many medical device products to suffer from price declines as margins were squeezed. The reforms which were implemented as a result include upgrading hospital facilities and services and restructuring insurance schemes. particularly cardiovascular and orthopedic devices.120 2. 12 The People‘s Republic of China Market for Medical Devices. In 2006.4. sometimes on city and even on hospital levels for all classes of medical devices. it is common in China that the Government intervenes into the market. HOSpITaL TIER SySTEm The Chinese healthcare system is highly fragmented with different levels of government being responsible for different parts of the network.033 3. The difference between the top hospitals and the base is huge in terms of equipment. Different models were proposed such as fixing a margin of a medical device product from the import price to the end-user.045). the healthcare sector and the government.243 3. While in the Western business world the Government sets the framework. it needs to acquire approval by these bidding / tender process before being able to promote and sell products in hospitals. education and staff. The SARS epidemic of 2003 provided a wakeup call for citizens. Mid-tier hospitals demand products from the mid-segment and less from the high-end.000 healthcare institutions.548 248 28.975 264 212. sparking concern that the current healthcare system is inadequate to manage similar crises. particularly SMEs which have a weaker voice and fewer relationships with government bodies. For any SME entering the Chinese market it is important to realize that government interventions in the healthcare sector are common and can occur on short notice.312 / Level 1 – 2. If a company wants to enter the market with a new product. The government grades allow hospitals to buy medical equipment based on their rankings.5.665 3. A lot of the governmental resources channeled into the healthcare system have been for basic needs and not items in the high-end market which is dominated by foreign companies. education and staff. A huge opportunity exists for companies which adapt to the domestic market and provide products that mid-tier hospitals require. Additionally the People’s Liberation Army (PLA) also issues tenders for the military hospitals. the average consultation cost per stay for outpatients was 130 Renminbi. fewer midsize hospitals in the middle (Level 2 – 5.
There are about 2. many patients seek diagnosis and treatment at TCM hospitals prior to visiting a hospital with Western diagnosis and treatment concepts. disease is interpreted as a disharmony. even for colds or headaches. Acceptance of general practice has been slow against the background The People‘s Republic of China Market for Medical Devices. One of the biggest problems for healthcare in China is that patients always go straight to the top. Today about 50 per cent of healthcare spending is on drugs compared to around 10 to 15 per cent in most developed nations. Traditional Chinese Medicine (TCM) refers to a broad range of medicine practices sharing common theoretical concepts which have been developed in China and are based on a tradition of more than 2.738 A B C Total 8. In rural areas. While patients are mobilized shortly after a surgery in the West.934 Moreover. This creates a bottleneck at city hospitals. called `for profit´ hospitals. comprising nearly 200 institutions. Drugs and expensive tests have become the cash cows providing hospitals with revenues. The way that Chinese people view going to the hospital is what is causing the problems in the healthcare system. While the suppliers of the top hospitals are mainly foreign medical device companies. These practices are a common part of medical care throughout East Asia.005 551 182 8.TaBLE 5: HOSpITaL LEVEL aND SUB-LEVEL SySTEm IN CHINa3 Hospital Level L3 Number 1. Some of the TCM hospitals have incorporated wards with Western-style medicine. TCM hospitals.000 years. Often. or concept of disease. Interestingly. mainly by palpating the pulse and inspecting the tongue. clinics are being set up in large cities to cater to the growing number of wealthy Chinese that demand higher quality medical care. while smaller hospitals remain under-utilized.929 118 2. Smaller and lower graded hospitals are lacking basic surgical and diagnostic equipment.104 1. Doctors and hospitals survive from money collected from patients. but is mainly concerned with the identification of functional entities.045 Hospital Sub-level A B C L2 5. exercise. Since drugs and tests are the lifeblood of hospitals. It is why the middle and lower tiers of hospitals have not had a chance to develop. including the model of the body. TCM’s view of the body places little emphasis on anatomical structures. and dietary therapy.6. acupuncture. TCM diagnosis consists in tracing symptoms to an underlying disharmony pattern. TCM plays still a dominant role. These also include special practices and Sino-foreign joint venture hospitals. but are considered alternative medicine in the Western world. Even in today’s modern China. massage. Often. doctors are encouraged to overprescribe them.934 Total Number 647 364 34 3. the Chinese People’s Liberation Army (PLA) governs the largest centrally administered hospital network in China. including research hospitals and medical colleges. Most foreign medical device companies compete in level 3 hospitals and late entrants in any medical device market feel that it is hard to get into these hospitals without having innovative product features. Hospitals still operate under soft budget constraints similar to those of state-owned enterprises in the 1980s: those with high operating deficits are given large subsidies. 13 . have units which use Western style medicine.650 in China.000 private hospitals. 4. The introduction of general practice in parts of urban China began in 1999. are not supported by modern evidence-based medicine. the lower tiered hospitals are serviced by domestic manufacturers with cheaper and technologically less advanced products. By the late 1980s the proportion of doctors of Western medicine had exceeded those of traditional practices. including various forms of herbal medicine. thereby locking inefficiencies into the system. The doctrines of Chinese medicine are rooted in tradition and many of its assumptions. family members provide food and give support at hospitals. There is an urgent need in the three-tier hospital system to develop and upgrade level 2 and 1 hospitals in order to provide better services for patients and release level 3 hospitals from the large inflow of patients. while profitable hospitals receive no funds. there is little available in terms of rehabilitation. they are kept bed-ridden for days in China. about 2. Western style medicine is preferred while elderly folks go to TCM hospitals. Among young Chinese. The Chinese healthcare system is lacking a gatekeeper which is the General Practitioner (GP) in many Western countries. HOSpITaL FINaNCING aND EQUIpmENT Chinese hospitals are well equipped with ultrasound imaging systems and CT apparatus comparable to European hospital standards.151 A B C L1 2. While health is perceived as harmonious interaction of these entities and the outside world. Increasingly.
These figures are quite astonishing when taking the under-developed healthcare system for the majority of Chinese people in rural areas into consideration and is most likely linked to a healthy diet in that population. accounting for 26 per cent of all deaths. General Practitioners (GPs) are acquiring a good local reputation and are attracting large numbers of patients. MEDICaL TOURISm Asia has become a medical tourist destination for patients from the Middle East. The beneficiaries of the aging trends are medical device companies offering products for elderly patients such as ophthalmic. and the perceived right of the individual to use the provider of their choice. 73. Many medical students say they do not want to work at smaller hospitals but would rather find work at a top-tier hospital in a big city.7 years / women 76. Between 2009 and 2012 the government plans to increase its contribution. In several cities. and of those covered. has created a diabetes epidemic in China with almost 1 in ten adults having the disease.8. Children.6 years (men 72. notably in Zhejiang. One of the aims of the healthcare program approved in 2009 is to provide some form of medical insurance for 90 per cent of the population by 2011.6 per cent between 15 to 64 years and 8. 4. While patient preferences are part of the problem. though this problem is not only limited to China but also most nations.06 to 1). government pledged to spend 123 billion US$ over three years to deliver basic healthcare and health insurance to 9 out of 10 Chinese. far more than India – a huge opportunity for companies with products in this segment of the medical device market. the Chinese population is as follows: 17. Cerebrovascular and cardiac diseases follow with shares of 19 per cent and 17 per cent. particularly in urban areas. Europe and North America. cardiovascular and orthopedic companies. and the government would begin a system of producing and distributing necessary drugs this year. In 2009.7. BaSIC mEDICaL INSURaNCE In 2003. Even though at birth.9. Finding answers to how China will pay for its aging population and how it will compete once its population ages are more and more urgent. By 2020. the majority is living in urban areas.6 per cent between 0 to 14 years. The law calls for a revamping of hospitals and providing better services at lower costs. The government has stepped in by declaring sex determination illegal in order to stop this trend which is not good for men and society at large. 4. the figure in China is 1. About 120 million people have signed up for this. One consequence of the “one child” policy is that China is now one of the most rapidly aging countries in the world. has led to an increasing proportion of elderly people and an increase in the ratio between elderly parents and adult children. the rapid decrease in China’s birth rate. The adoption of Western eating habits and a sedentary lifestyle. The life expectancy is 74. DEmOGRapHICS The age structure of the Chinese government gave more money to rural medical cooperatives and set up a system in which farmers put in 3 US$ a year and the government provided a 12 US$ subsidy for coverage of 25 per cent to 30 per cent of hospital expenses but little for outpatient care. 4. . it can be assumed that less than 25 per cent of the population is currently covered by insurance.of a strong urban tradition of hospitals as primary care providers. One of the hopes of the program is that it will help generate growth by encouraging people to spend more money on consumption by removing the need to save on medical problems. Even though the above schemes mention several insurance plans. over 23 per cent of China’s citizens are expected to be over age 65.9 per cent 65 years and over. Medicine would also be covered by the insurance. 14 The People‘s Republic of China Market for Medical Devices.18 to 1. According to the New England Journal of Medicine4. The figures suggest China has some 90 million diabetics. mainly due to abortion of females. the outcome has been poor with the exception of medical tourism in stem cell treatments due to restriction in most Western countries. The treatment and service experience at these top hospitals is equivalent or better to Western standards with lower costs incurred by overseas patients. The main cause of death amongst the Chinese population is cancer.9 years). Thailand and Singapore. Jiangsu. migrant workers and the unemployed all qualified for the same 12 US$ subsidy received by rural people but because healthcare costs are higher in the cities than rural areas. In 2007. Even though China has tried to step into this market. the government extended coverage to urban workers and families who had been without coverage since the end of the 1994 collapse of the work unit system. and Guangdong provinces. resulting in a major challenge to China’s medical and social insurance system. the natural sex ratio is higher for men than women (1. the widespread belief that specialists are more skilled than generalists even for minor complaints. respectively. combined with stable or improving life expectancy. Each person covered by the system would receive an annual subsidy of more than 17 US$ starting in 2010. The Chinese government appears to be running pilots in the healthcare system to evaluate what works and what does not work. elderly. Key players in this business are top hospitals in India. doctor preferences also play a role. The coverage does not sound that great but 850 million enrolled in it. urban people have to contribute more than 30 US$ — instead of 12 US$ — a year.
Although the prevalence of obesity in China is relatively low compared with Western countries such as the United States where over half of adults are either overweight or obese. Current ecosystem Tertiary Treat all types of patients with all levels of severity. the currently existing pyramid of the healthcare system should be inverted as illustrated below. 15 . China was once considered to have one of the leanest populations. but it is fast catching up with the West in terms of the prevalence of overweight and obesity. Data from the 2002 national nutrition and health survey showed that 14. it is the rapid increase of the condition especially among children which is particularly alarming. FIGURE 5. private clinics and community healthcare centers. provide emergency and general hospital services eri ve s ou r re co ne ss of ns fe Primary Provides community services. treat mostly outpatients co Tra nd itio n Source: IBM Institute for Business Value Analysis If the current service system can be inverted. a trend that was particularly marked in boys. kg/m2) ≥ 25) and another 2. this transition has occurred in a remarkably short time. FUTURE CHaLLENGES The future challenges are to encourage patients to seek help in level 1 instead of level 3 hospitals.5 4.e. This progress will depend upon creating a gate-keeping function (i. a “SERVICE pROVIDER ECOSySTEm” TO RESOLVE INEFFICIENCIES IN THE CURRENT.3 billion. such that there are 184 million overweight people.10. Large number of operations and outpatients Disproportionate number of patients Secondary Include out and inpatients and emergency treatment Not fully utilized Primary Emergency room. In short. research fe Re ng l rra nit ori ba se mo do ns ry r fo Secondary Larger regional hospital. collaboration between doctors.7 per cent of Chinese were overweight (Body Mass Index (BMI. efficiency can be brought into the Chinese healthcare system. GPs) to channel patients into the low level hospitals and to upgrade them with the necessary equipment. Disturbingly.6 per cent were obese (BMI ≥ 30).About one fifth of the one billion overweight and obese people in the world are Chinese. The People‘s Republic of China Market for Medical Devices. mostly outpatients Low utilization Service provider ecosystem or Tertiary Specialized hospitals focus on treating difficult cases. Data from the China national surveys on the constitution and health in school children showed that the prevalence of overweight and obesity in children aged 7-18 years increased 28 times and obesity increased four times between 1985 and 2000. and a further 31 million obese people in China out of a total population of 1.
two parents and one child. Segments with high growth are: cardiovascular. The size of the Chinese medical device market is 10 per cent of the US market which is estimated at 121 billion US$. The Chinese medical device market grew at more than 10 per cent between 2000 and 2009 with a slight decrease below 10 per cent to be expected over the next couple of years. this is never the case and should be assumed as impossible. immunology or metabolism. Never believe a distributor which tells you that he can manage the entire country.09 billion US$ in 2009. prevention. SIZE aND GROWTH pOTENTIaL Medical device in China is defined as any instrument. It is a fragmented market where a distributor from the south will have troubles to establish itself in the north and vice versa. catheters. TaBLE 6: CHINa’S ImpORT OF SOmE LaRGE-SIZED GROUpS OF mEDICaL DEVICE pRODUCTS IN 2010 Commodity Medical. but which may be assisted in its function by such means. treatment. The value of the Chinese medical device market is estimated at 12.6 The Chinese medical device market is not homogenous like the US market. cannulae X-ray generators Magnetic resonance imaging apparatus Spectrometers Endoscopes Therapeutic devices. artificial respirators X-ray tubes Ophthalmic instruments and appliances Orthopedic and fracture apparatus Patient monitors Dialysis apparatus Syringes Artificial joints Hearing aids. • Diagnosis. The most reliable data in China are import and export figures based on HS codes (reason: there are tax implications on import and export goods). treatment or alleviation of disease. and more support by the government for healthcare. Reasons for this positive outlook are: an aging population. apparatus. dental. appliance.1. material. The medical device market in China is very likely to grow robustly for the next couple of years. Medical device & equipment market 5. an increasing middle class with growing incomes. Medical device companies offering testing and equipment for diabetes patients might step into a large market due to the diabetes epidemics. surgical X-ray application instruments Color ultrasound scanners X-ray computed tomography (CT) apparatus Medical. endoscopy and laparoscopy. replacement or modification for anatomy or a physiological process. veterinary instruments Needles. monitoring. excluding parts and accessories Import value (million US$) 612 582 503 501 441 436 430 354 222 177 172 156 149 137 129 112 106 47 Change over previous year (%) 22 26 45 28 23 26 54 26 31 35 18 32 18 32 27 10 50 -3 16 The People‘s Republic of China Market for Medical Devices. It does not achieve its principal action in or on the human body by means of pharmacology.5. dental. monitoring. a family structure with four grandparents. the use of which is to achieve the following intended objectives: • Diagnosis. surgical. being the second largest in Asia after Japan. or other article whether used alone or in combination. . • Investigation. Below are two tables outlining the import and export figures of some of the most important medical device products in the year 2010. alleviation of or compensation for an injury or handicap conditions. an increasing number of private hospitals. and ophthalmic devices. including the software necessary for its proper application. • Control of conception.
090 659 622 541 418 396 332 285 269 274 263 247 245 244 222 178 91 44 Change over previous year (%) 18 10 19 26 19 33 20 3 15 37 41 27 29 -1 20 12 50 84 The imported products consist of high-end medical apparatus and instruments. The exports of hearing aids is 244 million US$ versus imports of 47 million US$. They focus on low-end.3. More than 50 per cent of the Chinese demand is met by imports worth 12. Increasingly. foreign enterprises bring their manufacturing of medical device products to China which can be observed for hearing aids and orthopedic products. price sensitive products such as patient aids.09 billion US$. Foreign companies compete mainly at the top hospitals while domestic companies focus on low-level hospitals. veterinary instruments Shygmomanometers X-ray generators Syringes. In the paragraphs below we outline some foreign and domestic medical device companies in China which have gained reputation. In chapter 5. cotton.2.segment of the tiered hospital market to enlarge their market share. where instruments dominate over consumables. Therefore. It is assumed that approximately 12. end market of medical devices is dominated by foreign manufacturers including General Electrics. catheters. Siemens. The exported instruments such as X-ray generators. bandages. excluding parts and accessories Other gloves of vulcanized rubber Other wheelchairs Orthopedic and fracture apparatus Artificial joints Import value (million US$) 1. The People‘s Republic of China Market for Medical Devices. syringes and medical and surgical instruments.000 domestic manufacturers hold less than 50 per cent of the market. the competition at top hospitals is so crowded that foreign players are forced to enter the mid. the high- Leading countries providing high-end products are the United States. Philips and Toshiba. Switzerland is also a key player. This presence proves that a medical device segment which has large imports into China encourages foreign companies to start local manufacturing for the domestic market. followed by exports in a second step. ROLE OF FOREIGN aND DOmESTIC COmpaNIES Generally speaking. 5. diagnostic reagents X-ray computed tomography (CT) apparatus Color ultrasound scanners Patient monitors Therapeutic devices. Quite the opposite is the case for exported products which are overwhelmingly low-end consumables and apparatuses.. dental. artificial respirators Wheelchairs. As outlined earlier. the Chinese hospital market is like a pyramid with low-end hospitals at the base and high-end hospitals at the tip. Germany and Japan. CT devices and patient monitors are manufactured in wholly-owned companies or joint ventures by General Electrics. The domestic market players consist of a large number of relatively small companies. Increasingly. cannulae Medical. not mechanically propelled Hearing aids. gauze.TaBLE 7: CHINa’S EXpORT OF SOmE LaRGE-SIZED GROUpS OF mEDICaL DEVICE pRODUCTS IN 2010 Commodity Massaging devices Absorbent. Siemens and Philips. The complicated bidding / tender process add pressure on the product margin at top hospitals. bandages Needles. 17 . surgical. The majority of these companies have less than 20 million US$ in sales and consolidation among the domestic manufacturers is to be expected for the years to come. details with the orthopedic market in China will be explored as this is one example of a sector which was developing at an early stage of the medical device industry in China. with or without needles X-ray contrast medium. many foreign companies start to adjust their products for mid-tier hospitals to open a new market segment. while the low-end market is in the hands of smaller Chinese domestic companies.
low-frequency treatment equipment. the group ranks among the leaders in its industry. 18 The People‘s Republic of China Market for Medical Devices. as well as diabetes devices and orthopedic products. As the trend continues. and the other was GE Hualun Medical Systems with National Medical Equipment Industry Corporation. The joint venture has a registered capital of about US$ 30 million. clinical thermometer. Both parties will retain their own brands. Statistics show that mid-segment and economy market products hold 75 per cent of the Chinese medical market and 45 per cent of the global medical Microport Medical in close cooperation with recognized international physicians and scientists worldwide develops and produces cardiovascular and other vascular devices. GE Hangwei Medical Systems remained a joint venture.000 professional hearing aids fitting centers have been set up to offer support for patients suffering from hearing problems. More than 1. Philips and Neusoft Medical Systems will begin developing and manufacturing computed tomography (CT). a joint venture with China National Equipment & Supplies Import & Export Corporation. these products show an annual growth rate of 15 per cent in China and 8 per cent in the worldwide market. SIEmENS HEaRING INSTRUmENTS (SUZHOU) As the first foreign invested enterprise at the Singapore Suzhou Industrial Park. The company also produces other stents to treat vascular diseases and disorders in other parts of the body. has subsidiaries in 23 countries and distributors in 60 more. MICROpORT MEDICaL (SHaNGHaI) one of the major businesses in the GE family. body fat meters. The GN ReSound Group is a leading international manufacturer of advanced hearing health care solutions. Currently it has more than 700 employees and 6 branch offices around China. PHILIpS NEUSOFT MEDICaL The joint venture by Philips Electronics of the Netherlands and China Neusoft Group is located in Shenyang. the GN ReSound Group also creates innovative solutions for all types of ear-related diagnostics and is the largest global supplier of computerized audiology and hearing instrument fitting equipment. the mid-to-economy range products will soon become the mainstream in the medical market. aspirators. GE HEaLTHCaRE CHINa GE Healthcare is market. In 1996 GE Healthcare established two more joint ventures. sales forces and service networks. It entered the Chinese market in 1991 by setting up GE Hangwei Medical Systems.434 1. Philips is able to quickly deploy its strategy for the market in China and gain a direct link to a long-term supply of skilled workforce as well as R&D talent.000 employees. Siemens Hearing Instruments was founded in 1995 to manufacture and sell Siemens Audiologische Technik GmbH hearing aids in China. It is the most popular brand in China. With approximately 3. RESOUND HEaRING AIDS TECHNOLOGy (CHINa) The GN ReSound Group. GN ReSound’s manufacturing plant is located in Xiamen and the investment was 50 million Renminbi (Yuan). with the aim to build the new JV into a global competence center of Philips for economy to mid-range products. pedometers.000 1. With its early bird status. The company is one of the key manufacturers of hearing aids in the world. Northeast China. . ultrasound and X-ray equipment based on Neusoft Digital Medical Systems previous production capabilities and product designs from both houses. magnetic resonance imaging (MRI). which later became GE Healthcare’s R&D and production base in China. 710 6. in which GE Healthcare owned more than 90 per cent stake. which is headquartered in Copenhagen. The company offers a full range of hearing aids and accessories under the ReSound. Philips holds 51 per cent of that capital share and Neusoft Digital Medical Company holds 49 per cent.TaBLE 8: EXampLES OF FOREIGN INVESTED ENTERpRISES IN THE mEDICaL DEVICE FIELD IN CHINa Foreign Invested Enterprises Omron (Dalian) Philips Neusoft Medical (Shenyang) Microport Medical (Shanghai) Resound Hearing Aids Technology (China) Siemens Hearing Instruments (Suzhou) Employees 2. GE is the current market leader in the medical equipment market in China. one was GE Medical Systems with a state-owned company in Wuxi. and other devices. GE Healthcare China later made these two wholly owned companies.105 727 562 507 OmRON (DaLIaN) Omron is a Japanese company with a large manufacturing plant in Dalian producing blood pressure meters. as well as stent grafts for use in surgical operations. By joining forces with a local industry leader. The plant assembles some hearing aids for world-wide distribution and domestic use.200 N/A 700 Annual revenue (million Rmb) 1. Moreover. Denmark. flexible stents used to facilitate blood flow in blood vessels in the brain. Through GN Otometrics. and also offers intracranial stents which are extremely small. a subordinate to China’s Ministry of Health. Beltone and Interton brand names.
8 per cent.463 1. 19 .697 669 291 243 MINDRay Mindray is a leading developer. sales and service of high- The People‘s Republic of China Market for Medical Devices. as well as others. and other orthopedic indications. Trauson utilizes its ties with various academic institutions and its ability to organize various forms of trauma and spine-related training classes all over China as a marketing tool. Trauson. OEM products accounted for 14. vaginal specula.500 hospitals in China. founded in 1986 and based in Changzhou. SHaNDONG WEIGaO GROUp Shandong tech interventional cardiology products. and 6. indicating that they are continuing to expand their share. The plant will also be providing a platform for the Group to expand its sales into the Chinese market where its hearing aids are not yet known.000 square meters with over 6. needles and catheters. In October 2009. spine products accounted for 14. Trauson is sixth in the PRC spine orthopedic products market with a market share of about 3 per cent.300 employees. The company has 704 million US$ in revenues and employs 6. Weigao Group is the largest domestic company in the manufacturing and marketing of singleuse medical devices such as syringes. 2010.400 6. They have a national sales network with representation in more than 110 cities in China. anesthetic products and occlusion devices. urine bags. respectively.8 per cent. manufactures more than 2. 2009 the company provided products to over 2. China.1 per cent all over a four year period from 2006 to 2009. spine.300 7. China in 2003. BEIJING LEpU TECHNOLOGy Established in 1999. in-vitro diagnostic products and medical imaging systems.7 per cent.787 2.9 million US$ in 2009 accounting for a CAGR of 26. umbilical cord clamps.000 square meters with GMP standard production facilities and clean workshops of 300. Trauson’s revenues have grown steadily over the past few years from 19.9 per cent. it covers over 666. Founded in 1988.8 per cent. hypodermic needles. Lepu successfully listed on the Shenzhen Stock Exchange market.3 per cent of revenue came from other sources. As of December 31.UNITRON HEaRING (SUZHOU) The Phonak Group established its manufacturing facility for hearing aids in Suzhou. The main products are disposable infusion sets. China and the company has worldwide distribution networks.1 per cent and the PRC joint orthopedic products market grew at a CAGR of 22. Furthermore. one with Medtronic for the distribution of their medical device products and another one with Nikkiso in the field of dialysis machines. SHaNDONG ZIBO SHaNCHUaN MEDICaL Shandong Zibo Shanchuan Medical is located in Zibo city. Synthes is the leading provider with a market share of 13. Management estimates that the company is second in the PRC trauma orthopedic products market with a market share of 8. The Chinese trauma orthopedic products market grew at a CAGR of 20.000 N/A 950 750 Annual revenue (million Rmb) 4.2 million US$ in 2007 to 30. It seems that once a Chinese company is internationally astute. blood transfusion sets. blood purification and orthopedic market.The three primary business segments are patient monitoring and life support products. the spine orthopedic products market grew at a CAGR of 24. The Group went public at the Hong Kong stock exchange in 2004. In 2009 trauma products accounted for 64 per cent of revenue. scalp vein sets. Mindray is listed at the New York Stock exchange since 2006 and has recently entered as one of the first medical device companies from China the US market. This will be a challenge because several major competitors are present since many years and have built solid market shares.000 devices for trauma. syringe sets. TRaUSON HOLDINGS Chinese orthopedic device manufacturer Trauson (Jiangsu) Holdings successfully listed on the Hong Kong stock exchange on June 14th. It has additionally entered the stent. The manufacturing and engineering base is in Shenzhen. The Chinese plant is an important move at the Phonak Group to reduce product costs and improving margins. production.000 employees. manufacturer and marketer of medical devices worldwide. Trauson believes that the recently announced healthcare reform in China and the resulting increase in investment in the healthcare sector will benefit the markets and producers such as Trauson. Their products are distributed in 30 domestic cities.4 per cent. The Group has also two joint ventures. Beijing Lepu Technology is a leading Chinese enterprise specialized in research & development. they look at the US and European market for expansion. TaBLE 9: EXampLES OF DOmESTIC CHINESE mEDICaL DEVICE COmpaNIES Domestic Enterprises Mindray Shandong Weigao Shandong Zibo Shanchuan Medical Beijing Lepu Technology Trauson Holdings Kanghui Holdings Employees 6.
2 per cent of the world-wide market. EXampLE OF THE ORTHOpEDIC maRKET IN CHINa According to GlobalData. the market for orthopedic products in China was approximately Renminbi 6.9 11. The mark-up in this business is mind-boggling.KaNGHUI HOLDINGS Kanghui Holdings listed on the Hong Kong stock exchange is a leading domestic developer.1 billion in 2009 and is expected to reach RMB16. Through the successful initial public offering in 2010. to access the market indirectly. hospitals and equipment departments and seems to falter. It remains to be seen how Trauson and Kanghui can damage the established foreign players Synthes and Medtronic.5 2010 (million US$) 74.7 13 12. reaching 2.8 16.3 78.7 In terms of procedures. manufacturer and marketer of orthopedic implants in China. According to Frost & Sullivan.7 43. distributors.1 128. was not liked by the existing distributors.8 4. In 2010. the Chinese orthopedic market has a size of 880 million US$ (see figure above from Frost & Sullivan) which is approximately 2.6 13 0. the domestic players are struggling because these products are more difficult to manufacture in terms of material challenge and survival in the human body. The domestic companies are coping well with coping trauma and spine products and the foreign suppliers are suffering from this trend.000 joint replacements. The leading company in trauma fixation is Synthes. Kanghui has obtained considerable resources to implement growth plans going forward in the fast-growing Chinese market.2 192. and in joint reconstruction DePuy.3 27. a domestic hip joint is functional for only 5 years. there were 104. Medtronic signed a joint venture with Shandong Weigao Group to distribute their spine products in China. This bidding / tender process is described in more detail in chapter 5.9 213. in spine surgery Medtronic. .000 trauma fixations in 2010.8 7. It can happen that operations are performed in patients who can afford the procedure even though there is no indication for the surgery. whereby artificial joint products are the lowest and orthopedic trauma products the highest.7 9.1 145. and has resulted in lower prices. particularly for joint reconstruction products. which is only 4 per cent of the imported value.2 0. TaBLE 10: ORTHOpEDIC DEVICE maRKET IN THE PEOpLE’S REpUBLIC OF CHINa Segment Arthroscopy Cranio-maxillofacial Joint reconstruction Orthobiologics Orthopedic accessories Orthopedic braces and supports Orthopedic prosthetics Orthopedic reamers Spinal surgery Trauma Fixation Source: GlobalData 2009 (million US$) 71.9 CAGR (%) 6.000 spinal procedures and 204. a trauma fixation and a spinal surgery. most foreign companies are afraid of the Foreign Corrupt Practices Act (FCPA) which prohibits briberies to Chinese officials done by their distributors on a daily basis with the knowledge of the senior management in China and at headquarters.5 to 3. The reason for doing so is that the orthopedic device market is corrupt because doctors 20 need additional incomes due to their low salaries paid by the government. 154.6 11. Chinese companies navigate much smoother in Chinese waters as compared to foreign manufacturers.250 US$.5.6 billion by 2015. doctors.3 47 14. but the high commission paid to doctors.1 85 30. DePuy tried to change the business model by using logistics platforms providing the logistics services of instruments and implants to hospitals and engaging agents for operation room support and paying commissions.6 9. however.4 15. The reason is not customs duty. Undoubtedly. 950 US$ and 830 US$ per case for a joint replacement. All foreign companies have set-up wholly foreign owned enterprises or representative offices and use Chinese intermediaries.3. the surgery is not performed. 5. As far as artificial joints are concerned. The mark-ups result in higher prices to patients in China as compared to prices paid in Europe which is strange for a developing country.7 251. The People‘s Republic of China Market for Medical Devices.5 times the import price of the implant. respectively. Besides this. due to the Department of Justice Investigation in the USA. While an imported artificial hip survives 15 to 20 years after implantation. This model.7 This transforms into a price of approximately 2.8 Synthes has built a large distribution network on its own with coverage of major parts of China. The government has recognized that prices for orthopedic and cardiovascular products are too high and have implemented a tender process for many medical device products.3 10. while in cases with little resources but a clear indication.9 234.
foreign players often discover that a product which is undergoing product registration has been already copied and is sold by a domestic company. post-operative care is also poor. In the field of artificial joint replacement there are large differences between Western surgeons and Chinese surgeons. AQSIQ distributes the “China Compulsory Certification (CCC) mark. revision and promulgation of legal standards for medical equipment. which is established in most Western countries. extracorporeal blood circuits for blood purification equipment. Most foreign companies have invested large amounts to educate Chinese orthopedic surgeons. Most of their revenues are from the mainland market and it remains to be seen if they can expand internationally with little innovation and little support by reputed surgeons. 21 . The dental market. The CCC-mark applications are processed by the China Quality Certification Center (CQC). which has trained thousands of surgeons in trauma and spine fixation. implantable cardiac pacemakers. It is expected to grow substantially in the next couple of years. 5. the issuance of registration certificates and production permits and the certification of quality systems and product safety for medical equipment. most orthopedic surgeons do careful pre-operative planning while in China this is not done. Similarly. it is still not yet in tune with international practices and is undoubtedly a roadblock for foreign companies trying to enter the Chinese market. At exhibition. particularly SMEs are advised that it is worthwhile to engage a regulatory agent for the registration process. be it instruments. Two domestic companies. There are many small-sized domestic companies which have entered the market by copying products from the foreign players. hollow fiber dialyzers. inspection and supervision of certain devices. TaBLE 11: CLaSSIFICaTION OF mEDICaL DEVICES Class I II III Risk Low Medium High Example Bandage Syringes Orthopedic implants. REGULaTORy BODIES There are two bodies involved in the registration process of medical devices. or implants for the domestic and neighboring markets. In the West.Many of the foreign large players have also started to manufacture in China. is just about to take off in China. The flow chart of the registration process is outlined below: • Appoint legal agent & after-sales service agent in China (10 days) • Determine the medical device classification (class I to III) (5 days) • Original registration document. based in east China have successfully listed on the Hong Kong stock exchange and are the current successful domestic players. translation and preview (10 – 20 days) • Prepare legal and technical documents to be submitted to SFDA (20 – 40 days) • Prepare testing product samples and testing by Medical Device Testing Centre (3 – 6 months) • Clinical trial (All class III and some class II medical devices need to do clinical trials except those where The People‘s Republic of China Market for Medical Devices. clinical data or trial The SFDA has established national standards which define the minimal hurdle for domestic and foreign companies to get their products approved.4. cases. particularly the AO Foundation. For the time being it will be hard for the major orthopedic companies to have Western patients accept implants coming from China. The SFDA issued the Regulation for Medical Device Classification. mainly electrocardiographs. Even though the SFDA has streamlined the regulatory framework. The SDFA is responsible for formulating and revising laws and regulations on the administration of medicines and supervising their implementation. Foreign companies wishing to import or manufacture medical devices in China need to have approval of the device in their home country before submitting to register in China. one being the State Food and Drug Administration (SFDA) and the other being the Administration of Quality Supervision. and Quarantine (AQSIQ). medical X-ray diagnostic equipment and artificial heart-lung machines. Rehabilitation is an integral part of the treatment after a joint replacement with the intention to bring the patient quickly back to a normal lifestyle. Pre–operative planning is usually avoided due to the time requirements which become the limiting factor when doctors and hospital staff are overwhelmed by patient demand. In China. cardiovascular stents Authority Province Province SFDA Special requirements None Laboratory Laboratory. Manufacturers are required to submit technical documents and product samples for testing at a Chinese laboratory and to accept factory inspection by the CQC. The organization also takes care for the formulation. Foreign companies. Medical devices are classified into three categories depending on their risk level. Inspection. hemodialysis equipment. AQSIQ is in charge of guidelines. such patients are kept after the operation for several days in bed and there is no rehabilitation service available to teach the patient what to do and what not to do after the operation. Trauson and Kanghui. a document that provides general guidelines on determining product classification.
It appears that the Chinese government has no desire to harmonize with systems and protocols already available from the experience in the West. This tender focused on orthopedic and cardiovascular implants for the leading hospitals in eight cities (Beijing. local clinical trials with clinical data have to be performed. Most SMEs have adopted a policy to prepare Chinese labels and insert them 22 locally. In 2004. product features. key usage information and other needed warnings. On the one side. BIDDING / TENDER pROCESS Based on the initiative of the NDRC. In order to upgrade the standards in manufacturing. Medical Devices imported into China must be labeled in Chinese. In 2007. The requirements are stricter than most international standards and constitute a trade barrier since similar domestic devices are not under the same scrutiny. it is very hard to sell its products. labels and packages. This means that each company has to submit bidding documents on a regular basis. First time registration requires testing by a Chinese laboratory and for certain high risk products. the SFDA vigorously checks well-tested foreign medical device products imported into China. Sometimes. Domestic companies seem to adjust better in this administrative jungle. Usually it takes 2 years to get a class III product registered in China. the SFDA has increased the supervision of local manufacturers in terms of quality control. the SFDA issued Provisions Governing the Registration of in-vitro diagnostic reagents. bidding / tender processes for medical device products were introduced throughout China. There is no guarantee that if a company is included in a tender that the renewal will be guaranteed. the tender committee is not transparent. Upon approval. According to these regulations all reagents. a double standard which does not make sense to many foreigners and Chinese alike. 5. the bidding / tender process can take years to get access into the market. Intention was to reduce medical equipment prices by 30 to 50 per cent. This means that the registration process has to be renewed every four years. Guangdong. while on the other hand domestic companies achieve approval for medicines and technologies which result in serious health problems and even deaths. Testing has become an expensive part of the registration process because test samples have to be supplied and the tests at the laboratories are increasingly more expensive. The registration certificate is issued in the name of the device manufacturer and not in the name of the agent or distributor which is appropriate. bidding / tender processes are issued on provincial. Legislation and programs have been introduced to help improve this process such as the Eight City Centralized Tendering program introduced in 2005. The renewal application differs only marginally from the initial registration process and is a thorn in the side of all companies and not consistent with international standards. Waiting until a certificates expires can result in significant problems thus renewal should be submitted at least one year prior to that date. Chongqing. city and even hospital level and create a huge administrative workload for all companies competing in tenders. In the field of orthopedics. The regulation also indicates that the consumers should be informed of possible related symptoms. If a company is not listed on a tender. but in China the industry struggles to keep margins intact. the SFDA has given specific instructions about the information on inserts. and include the registration certificate number. It has also mandated that Chinese inserts. the SFDA issues the registration certificate which is valid for four years. the tenders are only valid for 1 to 2 years and need to be repeated again. except those used for blood selection and those that use radioisotope markers. The bidding / tender process has resulted for some medical device products in price declines and lower margins. labeling and packaging must be present on all medical equipment. The labeling regulations are a challenge for most medical device companies importing their products from abroad because the contents of the labels is different from the one used in US and European markets. particularly for foreign companies.5. Tianjin. Shanghai. This will lead to a consolidation and only the fittest of the domestic companies with enough financial resources will survive in upgrading their quality management system. Hubei. . and the scope of usage for the product. Medical device companies traditionally are able to maintain attractive margins. Several governmentappointed agencies were in charge of evaluating the prices of medical devices as submitted by domestic and foreign manufacturers. For new entrants. the bidding / tender process is a roadblock in entering the Chinese medical device market. Often. Zhejiang The People‘s Republic of China Market for Medical Devices. Undoubtedly. Importantly.similar products have been registered by the SFDA) (3 – 9 months) • Technical evaluation by Center of Medical Device Evaluation of SFDA (4 – 6 months) •Final approval by SFDA and issuance of certification (1 – 2 months) The registration process is not transparent and depends largely on local authorities. Post-marketing surveillance guidelines were drafted in 2005 but it seems that the implementation is difficult because neither hospitals nor doctors are inclined to report adverse events of medical devices to the authorities due to fears of retaliation. wellestablished foreign artificial joint products which last for 15 to 20 years are challenged by the SFDA while domestic companies are allowed to sell joint products which survive five years in a patient. are classified as medical devices.
6. single-use medical devices and materials. a vascular devices manufacturer based in Shanghai. inventiveness and the industrial applicability of the invention. There are literally speaking bidding / tender processes on a daily basis in different parts of China and the job title of tender manager has become an integral part of most medical device companies. Logistics services for medical devices remain entirely absent from the medical technologies infrastructure.6. claims that it owns 380 Chinese (CN) patents and 241 US patents The People‘s Republic of China Market for Medical Devices. Microport. i. 4 US patents and 23 PCT applications. are few and far between. After the second amendment in 2000. Utility model patents and design patents will be granted within approximately 6-8 months and only a preliminary examination but no substantial examination will be conducted. Generally. Lepu has also filed 2 EP patent applications. 5 PCT applications and 35 registered trademarks as of August 2010. the Chinese Patent Act has been amended three times so far. Hundreds of medical device companies compete to get their products listed in tenders. the Chinese based company HuaWei raised to worldwide 1st position of Patent Corporation Treaty (PCT) applications in 2008. Once listed. The infringement of intellectual property has been identified as one of the major barriers for conducting business in China. 2 US patent applications. 45 patent applications. as of January 2011. Another Chinese stents maker. Shandong Weigao which is focusing on manufacturing and selling of i. Unlike trademark registration.1 FILINGS Enacted in 1984. The bidding / tender process has become a source of income for provinces. It is widely believed that the significant changes of China’s economy since its entry into the World Trade Organization (WTO) in December 2001 have led to the sharp increase in patent filings. a preliminary examination on the formalities and a substantial examination of the novelty. Protecting Your Intellectual Property in China China remains an attractive investment location for European companies. The administrative paperwork is huge and the process inefficient and costly. As a solution to this problem distributors provide this type of logistics services on an improvised basis with little economies of scale. Microport also registered 62 trademarks in China. The proceeding of an invention patent takes around three years and the invention patent can only be granted after two stages of examinations.e. the number of patent applications filed with the Patent Office increased dramatically. no medical device company in orthopedic and cardiovascular operates without distributors. There is also uncertainty however about the future of the business. most logistics services are not developed with the exception of the automobile industry. etc. 6. utility model patent and design patent. Chinese companies are not only filing for national patents but also increasingly filing international patent applications. namely invention patent. optimism about sector growth is high. Reverse logistics services which demand that products are moved in and out of a hospital on a daily basis (as is the case for orthopedic products). chemistry analyzer and reagents as well as medical imaging systems. the 23 The Chinese medical device industry is also increasingly filing applications to protect its intellectual property. cities and hospitals. 5. According to the European Chamber Business Confidence Survey 2010.. orthopedic materials. the distributor starts price negotiations with the equipment department after the doctors have agreed to use the company’s products. . The problem of logistics should be well researched and understood before a company commences business activity in China. also claims to have 57 CN patents and patent applications. an invention patent will be protected for 20 years whereas the protection periods for utility model patents and design patents are only ten years. there are three kinds of patents.and Liaoning) and aimed at favoring companies operating without distributors. announces on its homepage that it has 50 uitility model patents.a. In China. According to the annual report of World Intellectual Property Organization (WIPO). 13 European (EP) patent patent and applications. To date however the program appears to have failed as. In 2009 the number of PCT applications in China grew by almost 30 per cent and had therefore the highest annual growth worldwide. The Shenzhen based Mindray. LOGISTICS aND DISTRIBUTION SERVICES The Western world has well- established logistics services which can provide all kinds of services and can cater to all kind of products from medical devices to perishable goods. Once granted. has also indicated on its homepage that it has 150 CN patents including 15 invention patents as of the end of 2009 and 106 registered trademarks in China. a major manufacturer of patient monitoring and life support products. Lepu and its subsidiaries.
the basic courts. all evidence collected abroad including the power of attorney issued by foreign companies has to be notarized and legalized in the original country. Jiangsu. About 25 years ago. the first instance proceedings in intellectual property cases take 18 to24 months on average.4. As in Germany. where the appeals are heard by the high courts. namely Beijing. The Chinese subsidiaries of foreign applicants may also take the advantage of the PCT system and file applications for PCT patents with the Chinese patent office.3. PRELImINaRy MEaSURES Under Chinese law. the intermediate courts. The applications for Chinese national patents have to be drafted in Chinese whereas the applications for PCT patents may be drafted either in Chinese or English. ADmINISTRaTIVE ENFORCEmENT aGaINST INTELLECTUaL PROpERTy INFRINGEmENT A special feature of the Chinese However. The number of foreign related IP cases was 1361. the 2nd instance court is the Supreme Court. In patent cases most travel first through the intermediate people’s courts which have established specialised IP divisions. According to the Supreme People’s Court. Shanghai.2. Patent owners always have to conduct test purchases of the infringing products with help of the local notaries to secure the evidence on the infringement in a form which can be accepted as evidence by the court. Shandong. The people’s courts do not have jurisdiction to decide on the validity of patents. in court proceedings foreign right owners have to appoint Chinese lawyers as their representatives. An application for an invention patent can usually only be granted several months after the publication of the application. destruction of the infringing goods and tools. The court may extend the proceeding by 6 months if necessary and upon the approval of the court at a higher level the proceeding can be extended again. The patent judicial system has been largely adopted from Germany. In contrast. Guangdong. However. the plaintiff has claims for injunction. On the one side. there are four levels of the people’s court .000 new IP cases in the first instance court. There is no general answer to which is the better option to target as each route of enforcement has its advantages and disadvantages. As the requirements of evidence in court proceedings are rather high. the number of foreign related cases is still relatively small. in 2009 there were more than 30. the patent owner must submit sufficient evidence on the ownership of the Intellectual Property (IP) rights and the infringing act. In practice. China established its IP law system. 6. In the first instance of the infringement proceeding. the applicant will have the right to claim for “reasonable fees” for the use of the invention after the patent has been granted. namely the interim injunction. they may initiate court proceedings. damages and public apologies. For example. In addition. 24 The People‘s Republic of China Market for Medical Devices. LITIGaTION Litigation is becoming more and more popular between domestic companies. On the other side of the structure. In this case. If the parties are not satisfied with the decision of the re-examination board. Approximately 90 per cent of the cases are infringement disputes. 6. you can see that invalidity challenges are put before the patent re-examination board of the SIPO. the people’s courts have jurisdiction over infringement cases. proceedings take much longer. it is relatively inexpensive. In case that a third party used the inventions during this period.protection periods of patents are not renewable. In the patent infringement court proceedings. About 85 per cent of the cases are concentrated in the six best developed regions of China. infringement proceedings and invalidity proceedings are separated. We recommend foreign applicants to have at least the Chinese claims translated back into English or other original language to check whether the wording of the Chinese claims are identical with the wording of the original claims. the basic duration of the proceeding is theoretically 6 months. To initiate an administrative enforcement proceeding or a judicial litigation. Foreign applicants have to entrust a Chinese patent attorney for filling. 6. the requirements of burden of proof are lower. . Zhejiang. the preliminary seizure of intellectual property enforcement system is that the courts and the local administrative authorities each have a parallel responsibility for the enforcement of intellectual property rights. the largest problems occur around translation of the claims and specifications from the original language into Chinese. The administrative authorities may be able to deal with rather simple cases. the disadvantage of administrative enforcement is that no damages but only administrative penalties are available. It must be noted that when filing a patent application for a national patent in China or when entering into the Chinese national phase of a PCT patent. Sometimes if the amount of damages in dispute is particularly high. three kinds of preliminary measures are available in patent infringement cases. the high courts and the Supreme Court. complicated technical questions are normally more suitable for judicial enforcement. Generally. The preparation for litigation against patent enforcement is one of the most challenging and time consuming tasks. The advantages of the administrative enforcement are: It can be done rapidly. the case will be put before the high court in the first instance.
To get an interim injunction. Such questions are: • Do you want to enter the Chinese domestic market? • Or do you want to use China as a manufacturing hub? • What legal entity best fits with your current and future plans for the Chinese market? • Do you want to enter the market through direct or indirect channels (i. it takes 2 years for a class III product! • Do you know that there are tender biddings necessary for most medical device products? • Do you want to employ an expatriate or a local talent? The People‘s Republic of China Market for Medical Devices. The Intellectual Property Rights (IPR) owner can request the court to conduct an official investigation and seizure of evidence even on site of the defendant’s location. The plaintiff should take it into consideration when choosing have invested a lot and have been significantly involved in China. However. The author highly recommends European companies to seek intellectual property protection. If a company simply wants to receive a favorable decision and does not care whether the decision can be executed effectively. Assets preservation can be granted if the plaintiff can prove that there is a high likelihood of infringement and the defendant might not be in the position to pay damages once if the case is lost. the plaintiff has to initiate a new proceeding to get a new decision rendered. is the window of opportunity open in the Chinese market? • Do your products demand sophisticated logistics and distribution services? • Do your products require education and trainings? • Are you ready to adjust your products to the market in China? • Is your product registered in China or not? If not start immediately. if a company is deeply concerned in the execution of the decision. as judges believe that disputes on complicated technical problems cannot be determined within the time limit of 48 hours. 25 . Once the application for interim injunction has been accepted by the court. Once the time limit is expired. It is rare that an interim injunction has been granted in patent infringement cases.6.5. 7. EXECUTION OF COURT DECISION the court to file a suit. it can choose the court which has most experiences with IP cases and is less influenced by the local government. the judge must render a decision with 48 hours. the right owner has to prove there is a high likelihood of infringement of his IP right. 6. What to do when entering the Chinese market as an SME? Every SME which enters the Chinese market must plan it well. distributors)? • If you come with an innovative product.e. i.e. In addition. Much more popular are the measures of evidence preservation and preservation of assets.evidence and the preliminary seizure of assets. the destruction of the infringing goods. file applications and consistently act against intellectual property infringement in China. 6. the plaintiff shall pay a deposit for all three types of preliminary measures. SUmmaRy Many European companies The local intermediate people’s court has the responsibility to execute the decisions. it may choose the court at the place where the infringing act is conducted and choose a lawyer who has good connection with the local authorities. However. Statistic shows that IP litigations are becoming more and more popular between Chinese companies whereas foreign IPR owners in China are still relatively reluctant to litigate in China. if he can prove that there is a high likelihood of infringement but it is difficult for him to collect evidence. The time limit for application for a court execution is two years. infringement of intellectual property rights has been identified as one of the biggest challenges they encounter. There are important questions which need to be addressed prior to the market entry.
A late entrant with a me-too product portfolio is facing an uphill battle. 26 The People‘s Republic of China Market for Medical Devices. manufacturing. accounting for about 4. either as a wholly foreign-owned enterprise or as part of a joint venture. In China. have already invested in China and achieved more than 20 per cent sales growth in recent years. In general.e. With China´s growth the legal structures have become more transparent and easier to register. the trend is such that the Western world must downscale healthcare due to high costs while China needs to upgrade its healthcare system. China as manufacturing base 8. a foreign investor must have a legal presence in China. 8. Except for the production of non-self-destructive disposable syringes.1 OVERVIEW Considering the vast market potential and low-cost labor in China. Merck.2 USING CHINa aS a maNUFaCTURING BaSE FOR EVENTUaL DOmESTIC SaLES SETTING Up a maNUFaCTURING SITE – OVERVIEW NEW ENTITy In order to set up a business engaged in medical device manufacturing in China.000 billion yuan. 8. not only against foreign competitors but also domestic companies.0 per cent of the global market. including expatriates. The world’s top 20 big pharmaceutical companies including Pfizer. multinational companies (MNCs) have been moving hundreds of manufacturing plants to China since the 1980s. There is a Chinese proverb which says that the early bird eats the worms. It’s very important for medical device companies to be familiar with the relative regulations in China to be able to secure upcoming opportunities. Novartis and Bayer. A company has the option to begin business as an independent foreigner in a Foreign Invested Commercial Enterprise (FICE) or engage in a Joint Venture (JV) with a Chinese partner. restricted business and prohibited business. With the increased difficulty in establishing a presence in the high-end market. . the production and distribution of all other medical devices are currently classified within the encouraged categories for foreign investment. The share is expected to rise to 6 per cent in 2015. Although the Chinese government has imposed stricter regulations and incentive policies on the medical device industry. Companies may also register as a Representative Office which allows for market research without performing any commercial activities such as invoicing. Roche. products which are neither low nor high-end. These categories are encouraged business. recent healthcare reform has had a positive impact on the growth of the medical device industry development in China. For developing countries such as China. blood transfusion instruments or blood bags (such production is within the restricted category).• Do you have enough financial resources to survive if you are behind the business plan? • Or do you have an exit strategy if the worst case scenario strikes? • Do you accept that there is a lot of bribery in the market? • Are you ready to have your headquarters values challenged by the China manager? • And please be aware that China is a high tax country! Conquering the domestic market requires presence at an early stage of the particular market or the selling of an innovative product. Before beginning business in China it is important to seek out a good law firm and tax expert as China is a high tax country. The output value of China’s medical device industry in 2010 reached 1. but affordable for a larger segment of the Chinese market and also an option for export to other parts of Asia. leveraging cost advantages and technological upgrading is helping constantly increasing market share. Latin America and Africa). infusion instruments. Successful innovative products in Western markets may not do well in the Chinese market. an increasingly interesting strategy for many companies is to develop products in the mid-segment (i. all foreign investments are classified into one of three categories according to the Guidance Catalogue for Foreign Investment Industries (2007). not only for enterprises but also employees.
as well as tax rates and investment incentives. such assets are nontransferable and remain proprietary to the company that applied for such licenses and certificates. 27 POST FORMALITIES Tax. Therefore. In addition. Customs. foreign investors definitely need to consider various factors when selecting a location for their manufacturing plant in China. Under Chinese law. Since the late 1970s. tariff exemptions. including state- owned. all but the most vital assets of the target company can be purchased and transferred. such licenses and certificates remain with the acquired target company and the purchaser can take advantage of the licenses and certificates through its control over the target company. Jiangsu. probably the most vital assets of a medical device company are its medical device manufacturing licenses and relevant registration certificates. Electronics Industry. Moreover. Major ports help facilitate trading. Finance. partners and suppliers. GOVERNmENT REGULaTIONS In China the primary medical device regulation agencies are the State Food and Drug Administration (SFDA) and the Ministry of Commerce. Administration of Foreign Exchange * Please find the details about the manufacturing license obtaining procedure in the “Government regulations”. In 2008. Meanwhile. a large number of top Chinese universities are in these areas which bring a fresh supply of highly trained employees to the companies operating in the clusters. A majority of China’s top hospitals operate in the regions. Shanghai. mechanical manufacturing and chemical industry are well established in these regions. Either approach has its pros and cons. their combined revenue accounted for 66. SFDA is the medical device regulation agency. Pearl River Delta and Central Bohai Gulf Cities Group. several clusters have been formed at the Yangtze River Delta. which bring outstanding facilities for clinical trials and evaluations. and a modern infrastructure. under an equity acquisition. • Extensive sources of capital. China has established various priority investment zones offering foreign investors favorable terms such as tax concessions.The flow chart below illustrates the general establishment process for a medical device COMPANY NAME PRE-REGISTRATION Administration of Industry and Commerce acquisition of a medical device company. Beijing and Shandong. proximity to potential clients. in conducting an asset .7 per cent of the whole market revenue. the top 5 provinces with the highest medical device sector revenues were Guangdong . technically skilled people will tend to concentrate in these areas. administrative support. There are two options under the M&A model. • Cluster effect in the labor market. • Convenient means of transportations. raw materials and resources. These factors may include availability and cost of land. MERGERS& ACQUISITIONS (M&A) Another way to enter the Chinese market for medical devices is through a merger or acquisition. Apart from its intellectual property rights. making the intended acquisition of the target company’s business much less attractive. which is responsible for approval in manufacturing by issuing Good The People‘s Republic of China Market for Medical Devices. private and foreign capital. namely equity acquisition and asset acquisition. In terms of medical device industry. As an increasing number of companies started up in the clusters. • Superior medical R&D compared with the rest of the country. Similarities of the three clusters: MANUFACTURING LICENSE SFDA or Local FDAs APPROVAL FOR FOREIGN INVESTMENT Ministry of Commerce COMPANY REGISTRATION Administration of Industry and Commerce • Strong presence of supporting industries.
extracorporeal blood circuits for blood purification equipment. market access by mandatory registration.4. The approval process requires an on-site visit by the SFDA or provincial FDA in which they evaluate numerous criteria. FORmULaTE aND SUBmIT FORmaL STaNDaRDS FOR mEDICaL DEVICE 2. implantable cardiac pacemakers. The Medical Devices Division is responsible for medical device research. There are 10 SFDA designated testing centers and formal written testing clearance from one of these centers is required. a company needs to obtain a Medical Device Manufacturing Enterprise License from SFDA. A product registration system has been implemented for medical devices manufacturing company. Testing for quality at these points must be done according to statistical requirements and be carefully recorded. hemodialysis equipment. or used for life support or sustenance. The results of the clinical trials must demonstrate the safety and efficacy of the medical device. medical X-ray diagnostic equipment and artificial heart/lung machines. Class III represents the highest level of risks when applying to patients. 28 The People‘s Republic of China Market for Medical Devices. There are seven medical devices requiring CCC: electrocardiographs. hollow fiber dialyzers. the applicant must formulate and submit standards for the to-be. In practice. so medical device manufacturers need to build a plan according to the specific SFDA regulations. regulatory bodies. approval for a medical device quality control evaluation report. This approval must be in writing and provided under seal of the relevant authorities. The plan must be detailed and identify clear critical quality control points. Specifically: • Class I Medical Devices are those for which safety and effectiveness can be ensured through routine administration. • Class II Medical Devices are those for which further control is required to ensure their safety and effectiveness • Class III Medical Devices are those which are implanted into the human body. the CCC process is supervised by the State General Administration of Quality and Supervision (AQSIQ).Manufacturing Practice (GMP) certificates. To start an operation manufacturing medical device/ equipment for the Chinese market. The Ministry of Commerce is responsible for the macroeconomic control and implementation of the medical device industry policy. FILE FOR mEDICaL DEVICE TESTING appROVaL The applicant must have a nationally “designated organization” test the product according to the standards formulated above. the manufacturer of the raw materials used in the production of the medical device must often present a formal quality document. 3) CCC TESTING FOR SpECIaLIZED mEDICaL DEVICES In China. “New” medical devices are those that have not yet entered China’s market or whose safety. In addition. which oversees the inspection and quarantine of goods and establishes the technical standards for their inspection. According to Article 15 of the Method. The seven aforementioned medical devices must successfully complete the CCC procedure with the AQSIQ before obtaining product registration as a medical device. approved by seal and recorded by the appropriate level of SFDA. and regulating production processes. certain medical devices must be certified with China Compulsory Certification (CCC). also apply for SFDA. Critical steps for medical device registration are described below: 1. and post market surveillance/recall rules by the recall regulation posted in July 2011. there are 10 Divisions. Medical devices in China are classified into three categories based on risks. 4) AppLy FOR CLINICaL TRIaLS appROVaL Under China’s medical device regime. efficacy and performance have not been recognized within the territory of China. the applicant must clearly specify its manufacturing process along with a blueprint of its manufacturing site. Of those Divisions.registered products when registering a medical device. new medical devices falling within Class II and III require clinical trials before the submission of a product registration to SFDA or Local FDAs. In the application. premarket approvals. The Pharmaceutical Market Oversight Division is responsible for regulation of medical device operations and also includes investigating and punishing manufacturing and selling counterfeits and inferior medical devices. or pose potential risk to the human body and thus must be strictly controlled in respect to safety and effectiveness. standards formulated by the applicant must be ratified. 5) AppLy FOR mEDICaL DEVICE maNUFaCTURING QUaLITy CONTROL EVaLUaTION REpORT The applicant must According to Article 14 of the Medical Device Standards Administration Method (the Method). . More information can be found on this in section 5. Each of the three categories has specific registration requirements. two are related to medical devices: Medical Devices Division and Pharmaceutical Market Oversight Division. Under the SFDA. or the applicable provincial FDA. distribution by issuing distribution license. The entities qualified to conduct clinical trials for medical devices are only those medical institutions jointly designated by the SFDA and the Ministry of Health (MOH).
The validity term of the Medical Device Manufacturing Enterprise License is 5 years. particularly those of the average worker. or the employer proposes a termination and the parties agree. R&D system and customer services system requirements. • Trade Unions: Under the LCL the role of trade unions in safeguarding the legitimate rights and interests of employees has been strengthened by allowing them to assist in the formulation of corporate rules. Although the impact of the labor reform varies depending on the type and size of the company. Companies may consider outsourcing solutions in order to lower their risks. ImpaCT ON FOREIGN COmpaNIES law passed in 1994.From Jan 1st 2011. anti-harassment and business conduct which could protect the company should the actual employment contract be terminated. Prior to the new law’s passage. Fixed-term contracts would then no longer be permitted. • Labor Service Companies: Representative offices and Limited Companies using the labor service companies must play their part in upholding worker’s rights. employer-dictated contracts. the employer would be required to pay a penalty. Severance payment is also required to be paid in situations where the employer does not renew the fixed term labor contract. The GMP is very similar to the pharmaceutical GMP with very detailed management system. A well drafted labor contract in English and Chinese is a necessity to avoid misunderstandings and misinterpretations. Upon expiration. One of the first essential steps should be the training of the Human Resource department as well as other Senior and Executive personnel in terms of future employment and termination procedures. re-inspection and license renewal shall be conducted. sign all contracts whether for full or part-time positions and create new strategies for the future composition of their workforce. non-competition. employee representatives and / or trade union officials regarding the internal labor rules. • Training Agreements: The LCL permits a training agreement clause stipulating a loyalty period after training is provided with special funding. starting from medical device companies producing sterile and implantable products. most Chinese employees in small. the employee must pay the agreed liquidated damages. The intention of the new Labor Contract Law (LCL) is to provide a more effective protection of employees by offering an “employer-friendly” environment which must be accepted by all Foreign Invested Enterprises (FIEs) and domestic companies in China. The mandatory term cannot exceed 2 years. Where the employer fails to sign a written labor contract with the employee. unless the employee has rejected an extension despite being offered the same or better terms. • Impact on General Management Policies It is necessary for upper management personnel to review cost implications for current and future employees. and provide opinions on mass layoffs and the termination of labor contracts. The People‘s Republic of China Market for Medical Devices. • Internal Company Rules: The LCL clarifies that companies must negotiate with employees. and publishes the agreed rules for all employees. Labor contracts between employees and labor service companies hiring on the behalf of the employer must have fixed-term contracts with a minimum length of 2 years. • Impact on Human Resource Policies Human resource departments have to structure their employment arrangements. In case of termination before the expiry of this period. the Medical Device GMP has been mandatory for the China medical device/equipment manufacturers. quality system. All companies should create their company handbooks with all internal regulations based on the new labor law. LaBOR LaW After the first comprehensive labor • Severance Payment: The LCL stipulates the punishment of an illegal termination of labor contract. negotiate on collective contracts. territory and term of a non-competition clause. discuss appropriate accruals with auditors and calculate outsourcing options. THE maJOR FOCUS OF NEW LaWS: • Written employment contract: The LCL stipulates that employers are requested to enter into written labor contracts within one month of the commencement date of the employee. • Duration of the Employment Contract: Starting from 1st January 2008. The laws seek to address some of the poor working conditions found in China. new Chinese labor laws took effect on January 1st 2008. An open- ended contract must be signed if the employee has been working for the employer for a period of over ten years or if he has already completed two fixed- term contracts.and medium-sized firms lacked employment contracts or only had short-termed. • Non-Competition Clauses: The new law requires the parties to define the scope. 29 . Implementation details shall be formulated by the regulatory authority under the State Council. nondisclosure. labor contract can agree on either a fixed or open-ended contract. Subject to the size of the company it may be advisable to create supplemental contracts for anti-corruption.
China has enacted a preliminary regulatory framework for M&A transactions. “the Anti-monopoly Law” and “the Catalogue on the Guidance for Foreign Investment in Industries” are a few of the main regulations a company must understand. differences in risk appetite & tolerance level with that of headquarters) • Harmonization of standard operating procedures that fit into the Chinese operating environment. operations and the associated challenges (e. a company should first obtain the qualification of independent international trading after the approval of relative departments. . Generally in the state level.generally foreign companies will lose some competitive advantage. sales. the larger issue is government enforceability and making the Chinese employees and workers aware of the new working changes. as is common in China. the following regulations --“Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors ”. surplus the exporter when the export refund rate is lower employee settlement and environmental than the input VAT rate incurred in the domestic conservation. The attitude and preferential policies from the local government should be taken into consideration. The VAT rate could be 17 per cent. and refunded according to the specific calculation method. The export sales would be VAT exempt. labeling. including banding of bundles. • Fully grasp regulation and laws of different levels. grade stamping. are not clearly identified. However. 8. legislation and confidentiality issues more specifically. To some extent the M&A’s success is largely depended on the involved company’s understanding on these regulations. the exporter would apply the export VAT refund under the method of • Litigation potential exposure which is arising from “Exempt. During the M&A. Credit and Refund”. It is also quite important for receiving the tax refund after the sales.g. • Due to some features of the Chinese regulation and legislation system. the corresponding risks should be fully considered and prevented. There could be an export VAT leakage for Other risks include the asset evaluation. complexity and the inconformity between the central and local regulations. respectively depending on VATable sales/activities the above risks when setting up a new overseas and location of taxpayers. • Establish a system of early warning with precautionary measures to analyze and monitor the potential risks continuously.4 USING CHINa aS a maNUFaCTURING BaSE FOR EVENTUaL INTERNaTIONaL SaLES • Unique political and economic mechanism in China. the companies often do not thoroughly vet on their partner’s holding for true ownership. All the above factors also should be taken into consideration when the company deals with export shipping.6 per cent and 3 per cent. many different materials such as the customs declaration and specific time schedule are required by the Chinese tax bureau. such as the land use right and intellectual property right. the exporter is not subject to export customs duty unless the exported goods fall within the dutiable category. 11 per cent . including the standardization of process & controls post merger/acquisition • Business partner relationship management • Transfer pricing and indirect taxes • Difficulties in monitoring operations (culture and language barriers) 8. • Key challenges of multinational company´s daily operations in China: • Localization of the management team. SHIppING CONSIDERaTIONS aND paRTNERSHIpS The mechanics of shipping include: (1) attention to packaging. Under general trade export. companies should still be familiar with the new laws in order to reduce negative impacts. • Involve different agencies to perform investigation on the M&A transaction. RISK CONSIDERaTION DURING THE mERGER/aCQUISITION: • Consider potential taxes. EXpORT TaXING Generally. The input VAT incurred on the Chinese companies’ mutual guarantee and purchase could be credited against its domestic sales management deficiencies. • Property ownership. The People‘s Republic of China Market for Medical Devices. 13 A few key principles have emerged that may address per cent . operation. 30 For international sales. Over the past few years. During the tax refund declaration. As these concerns about the practical implementation are speculative. such as the lack of transparency.3 OVERSEaS maNaGEmENT In terms of the overseas management be reviewed from two perspectives: the risk consideration during the merger & acquisition and the key challenges post merger & acquisition.
Despite these encouragements however. the other main regulations or rules which differ from domestic sales are as followings: • It is not mandatory for a foreign medical device/ equipment company to obtain manufacturing license when setting up an offshore plant manufacturing medical device/equipment product As part of global strategy. the processes involved in overseas ventures have not improved much and remain difficult and complicated. A government held company may have problems establishing successful business abroad as Western governments and consumers may have a more negative perception of the products. All companies seeking to make the leap overseas are first required to obtain approval for the venture from the many state owned agencies on the provincial and national level. and handling costs. In addition to assuring that the goods arrive overseas in good condition. The challenges for companies seeking to go abroad start before a company can establish a definitive plan of action. • Given the different exporting countries. (3) scheduling the best shipping routes and carriers. there are different quality certification requirements such as the ISO 13485 and CE Certification. many MNCs also established a large-scale R&D center. (2) proper documentation. port charges. After shipment. Next. 31 . Due to the widely publicized manufacturing problems that occur from time to time in products intended for the West. The validity term of the Export Certification is 2 years. regulations. Government run companies seeking to establish businesses abroad however have their own set of problems. Chinese medtech companies go abroad In order to better understand the motives and challenges of Chinese companies who are interested going abroad. and health or sanitary requirements. the forwarder will send all documents to the paying bank to confirm the export of the commodity. for local market. They may advise the exporter regarding freight costs. tariff rates. a privately held company exposes itself to risks when sharing all its financial information with the government. deeply involved and widely distributed. GMP to keep a positive communication with the SFDA In addition of setting up a manufacturing site in China. Nowadays the number of joint venture and wholly foreign owned enterprises accounted for about 30 per cent of the life sciences companies in China. The companies best positioned for success will be those that develop new models and solutions well adapted to this unique Chinese environment. tax regulation mentioned above. four general points need to be mentioned about the economic and political environment they are settled in.and color coding. In 2011 Chinese companies were for the first time officially encouraged to seek for opportunities abroad through China´s 12th Five Year plan9. except when it is indicated to be one-off. especially if the products are generated from a government controlled company which is perceived to have less oversight and internal regulation when compared to privately held companies. Until recently the Chinese government placed heavy restrictions on Chinese companies going abroad. documentation fees. consular fees. 9. a company must be willing to expose all internal financial and accounting information to these government agencies. and (4) an understanding of foreign customs. they review the letter of credit and other necessary documentation and may prepare the ocean bill of lading. for for markets outside China. but it is recommended bypassing high customs duties. Freight forwarders are licensed by the Federal Maritime Administration to facilitate the movement of goods. the reputation of Chinese productions may have the reputation for being untrustworthy. The investment of international players in China is becoming more frequent. Medical companies should have a good understanding on the regulations and incentives. The People‘s Republic of China Market for Medical Devices. the company should apply for and obtain an Export Certification from the SFDA. SUmmING-Up It is generally believed that the Chinese medical device market will grow even faster in the coming years. Due to complications in the Chinese system. insurance. with sales accounted for about 26 per cent to 27 per cent of the related market. • Before exporting. The details of export shipping are often handled by a freight forwarder who acts as an exporter’s agent when shipping goods overseas. thus the perceived benefit of seeking business abroad must outweigh these risks. GOVERNmENT REGULaTIONS --DIFFERENT FROm DOmESTIC SaLES Besides the export if the products are in the high risk category.
2010 Corruption Perception Index Ranking: Switzerland 8. February 2011. Lepu Medical or Mindray have the needed capital and advanced skills to go abroad. Ma G. Zhu WX: The effect of China’s One-Child family policy after 25 years. China Medical Devices Review. A location with an already established network. Information: Ministry of Health P. Taiwan 33.. References 1. Furthermore the cost and difficulties with entering other BRIC counties do not outweigh the benefits for most Chinese companies. Western taxes and Anti-Dumping duties on Chinese products may be unaffordable for the company while the handling of legal problems and pricing transfer pose further challenges.And then there is the issue of market competition. 2005 5. 1171-1176. Due to favorable treatment of Chinese companies over foreign companies on Chinese soil. Cui Z. Mattes Urs. 32 The People‘s Republic of China Market for Medical Devices. will become a preferential choice. July-September 2009 9.transparency.R China 4. . Li X. the majority of Chinese medtech companies face the challenge of being relatively inexperienced in international business and its many facets. Li Y.clearstate.org/policy_research/surveys_indices/cpi/2010. Volume 11. If the 12th Five year Plan is successful. New England Journal of Medicine 2005: 353. et al. 10. Liu Yang’s book: 3. Issue 116 7.. Many Chinese people have connections in the US and Europe through relatives or through various companies. Hu Y. Shinva Medical. Finally there is the issue of location.. Verification and approval procedures will be simplified in order to boost the success of Chinese medtech enterprises going abroad. Huang Frank. especially near ports (Rotterdam / Hamburg). If a company decides to enter one of the Western markets they often chose a location where they can capitalize on an already established Chinese business or personal relationship. Some Chinese medtech companies suffer from a lack of innovation and intellectual resources thus causing them to seek activity abroad to bolster their R&D capabilities. Still. Despite the many challenges Chinese companies face in overseas investments. International Journal of Health Science. Quality control and differences in standards between the West and China can be a roadblock that is difficult to overcome. Chinese medtech companies will for the first time glean supported by the government in overseas investment credit and income taxation. China 78: http://www. Volume II. September 15.. Number 2. it is often more lucrative for Chinese companies to focus on gaining domestic market share rather than going though the expensive and competitive process of entering an oversaturated market like that in the US or Europe. Issue 3. Starting in 1953 the People’s Republic of China created the Five Year Plan whereby every five years a new set of initiatives aimed at advancing industrial growth and socialization was introduced. Information: www. Additional costs to Chinese companies going abroad encompass the different structure in clinical trial and regulatory elements. Hong Kong 13. Following the promises of China’s 12th Five Years plan it is expected that the administration and supervision mechanism of overseas investment in the medtech industry will be improved. Li L. WHy mEDTECH COmpaNIES GO aBROaD: MOTIVES aND CHaLLENGES Only a few Chinese medtech companies such as Weigao.. Since the birth of the plan 12 five year plans have been established. Wu Y. Bulmer Glenn: Healthcare and the Orthopedic Market in the People’s Republic of China. some do attempt the process as there may be important benefits stemming from different needs within a company. In other instances businesses which have depended on low labor and raw materials costs for survival have lost their advantage due to an increase in pricing and now seek new business models for successful reorganization.com 8. The five-year plans of People’s Republic of China are a series of social and economic development initiatives. T Hesketh.: The current prevalence status of body overweight and obesity in China: data from the China nutrition and health survey: Chin J Prev Med 2005: 39: 316-20 with English abstract 6. 2.
Osec and the Medical Cluster to promote the export of medical technology to key world markets.medtech-switzerland.com Medtech Switzerland is an initiative of the Swiss government.com www. .Partners: Medtech Switzerland Wankdorffeldstrasse 102 Postfach 261 CH-3000 Berne 22 Phone +41 31 335 62 41 Fax +41 31 335 62 63 contact@medtech-switzerland.