CONFERENCE REPORT: Getting To Grips With China’s Medtech Market

With some research valuing China’s strongly growing medical devices market at already more than $16 billion, the fourth-largest in the world and the second in Asia behind Japan, serious consideration of the sector has become critical. Speakers at the recent AusBiotech conference in Melbourne provided valuable insight for medtech companies wanting to better understand or enter China’s medical devices market.

MELBOURNE - AusBiotech’s chief operating officer, Glenn Cross, started the ball rolling at the late April conference, chairing a session on understanding the China device market and announcing the launch of the Guide for Australian medical technology companies seeking to engage in China, published by AusBiotech and the Australian Trade Commission.

The report, which is available online free of charge, provides information for global medtech companies wanting to enter the China market, including on doing business in China, government provisions and support for companies, market access - regulatory / reimbursement, establishing commercial operations, manufacturing and customs regulations.

Australia’s Burnet Institute, a not-for-profit research organization focusing on communicable diseases, has already been active in China for 20 years in public health and medical research academic collaborations. Deputy director and head of its diagnostics development program, David Anderson, spoke on the practical lessons from the institute’s vehicle in China, Nanjing BioPoint Diagnostics Technology.

“We are in the early stage of tapping the Chinese market. To do business in China, you need to have a strategy for China. Learning about the Chinese regulatory systems and tackling the cultural and language barriers takes a long time,” he cautioned. Burnett’s strategy to expand its China presence has included setting up a commercial biotech venture.

In a case study also covered in the guide, Anderson said that the Australia-China Association for Biomedical Sciences helped Burnett find and apply for a Nanjing government grant aimed at attracting commercially viable projects to its life sciences park.

Burnett received a total of RMB1.3 million ($209,400) in April 2013, and later that year successfully registered a commercial company in China, Nanjing BioPoint. Anderson advised that Burnett invested AUD6 million ($4.6 million) for R&D in the project.

The Chinese grant provided the new venture with laboratory and office space in the Jiangsu Life Sciences & Technology Innovation Park on Nanjing’s outskirts, as in-kind support for three years. It also included an allowance for renting an apartment nearby, convenient for Burnett’s Australia-based staff when visiting the facility.

The new company will conduct R&D into novel diagnostic tools in unmet medical needs and Burnett also has an agreement with a Beijing-based investment group to provide Nanjing BioPoint with sufficient funds to complete R&D and manufacture the developed devices.

Anderson advised: “You need a long term commitment in China and to follow through on projects, personal connections and introductions by Chinese contacts.”

Dealing With Regulations

An Lui, China general manager of NAMSA, an international research services organization providing regulatory, laboratory, clinical and compliance services to medical device and health care product manufacturers, addressed the conference on the Chinese regulatory system, starting off by asking “Why China?”

A projected image of a large room filled with Chinese people at first resembled a train station platform with long queues. “This is a typical day in a Chinese hospital,” he then explained.

Lui spoke on the medical device product registration, noting that “The manufacturing documentation preparation and submission takes two to three months, while local product testing is done over a six to 12 month period.” China has over 1,000 medical devices standards, he noted.

A device may also need to go through a clinical trial, but if it is already on the China Food and Drug Administration’s (CFDA)’s active list, then it can be submitted to the CFDA’s Reviewing Center and the review takes five working days.

If the device is not on the active list, then it must be submitted for a local China clinical trial of 12 to 18 months duration, after which a clinical evaluation report is required for the CFDA. More detailed information on China medtech product registration is also given in the market access section of the AusBiotech guide.

Building A Sales Network

Speaking on building a China sales network, Phillip Nowell, Cook Medical’s vice-president, strategic developments APAC, revealed that selling in China starts with decisions you need to make a long time before you even receive regulatory approval.

“As China has 33 different provinces, it is important to know you are not dealing with China as a whole and healthcare is not the same in every area of China. Make decisions where you are going to start in China, as you will generally operate at a provincial level not nationally.

“Also you need to find out where your product fits in the tendering process and if it has not been through this process, you cannot sell it. “

The global medical devices manufacturer sells its products across 135 countries and set up an Asia-Pacific distribution center in Shanghai in early 2010, which is the initial local point of distribution for all the company’s medical products.

Nowell said that Cook operates through a distribution channel in China. “We have many of our own people in China working with GPs explaining our products. Also seven of our operation companies are in China so they have local advantages.”

He added that the premium medical devices market in China is dominated by multinational corporations and the value segment is covered by China domestic firms, moving up the value chain. These are often domestic start-up companies (Also see "Commercial Model Innovation Critical To Win China: McKinsey" - Scrip, 3 Mar, 2015.).

Nowell’s main tip for entering the China market was therefore to pay early attention to product positioning.

Device Driving Factors

CSIRO’s micro fluids and fluid dynamics team leader Dr. Yonggang Zhu told conference participants that China’s medical devices market had been driven by a fast economic growth in the past 20 years. There was also a rapid increase in disposable income, government investment in the sector and an aging population.

CSIRO is Australia’s national science agency and is conducting a diverse range of scientific projects with the Chinese government and scientific organizations.

Speaking on the current status of medical devices in China, Zhu revealed: “China mainly relies on imports for high tech devices such as CT [computer tomography] and MRI [magnetic resonance imaging] scanners, ultrasonic implants and diagnostic devices. In the past five years China has transformed from a world factory to a high-end R&D hub.

“R&D is driven by government expenditure and this accounted for $294 billion in 2012 and $454 billion currently. The R&D expenditure does not contribute much to high tech projects so this is a poor outcome of R&D investment, [so] local Chinese firms are hungry for innovations and technology.”

Providing guidance on how Australian medtech firms could succeed in the Chinese market, Zhu said: “You need to have novel materials, processes or innovations and leverage local support by setting up in China’s innovation hubs and getting support. Also seek guidance from the Australia-China Association for Biomedical Sciences.”

He added, “You need to know about Chinese culture and have good relationships with Chinese government officials. Intellectual property know-how is important so protect and trademark your IP before you go to China. A joint venture with a Chinese company is also a very good way to set up a business in China.

“If you want remain as a government official in China, you need to bring investment to the particular region you are working in,” Zhu explained.