10 min reading time

As originally asked by SONIA ZHAO.

10 Tips for doing medical device business in China

• Regulatory – if you have CE or FDA approvals you shall not have regulatory difficulties. However, the registration classification and procedure will be different here.
• Market Volume-how big can be the market for your product?
• Competitors- it is very essential for you to know who are in the market at present and how well your product is compared with theirs.
• Policy-whether there is the policy for selling the special field of products can help you make right promotion strategies.
• Reimbursement – whether your product is in the reimbursement list of all the hospitals is a key point for large sale volume.
• Cooperation mode-how to choose the right cooperation mode can be a question for most of the manufacturers.
• Partner- whether the partner has the ability as they told you?
• Import-whether there is some policy for prohibiting your product importing into Chinese market and how much is the import tax?
• Promotion-how can this product be promoted in Chinese market? Through which channel it can be known by more people?
• Procedures – how can everything goes on the right way and how can this be controlled?

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SONIA ZHAO
General Manager at Medical Workshop Co.,Ltd.
Dear Eduardo. I gues you have experienced or heard of some people who copied the products and became a competitor to the original products.

Same as I mentioned, and I will put more points and detailes here, for low technique products, such as the formation change or a little change to make it much easier to use, do not need to do the intellectual protection. All you need to do is quickly occupying the market and getting your expected profit. Donot worry about the copying coz they will be copies in a fast speed in chinese market.

For high technique products, such as chaning the way of treatment or breakthroughing a problem in clinical, they need to have patents, eg. PTC, if you want to do an international business. These products normally need a long education time to the doctors and thus a huge amount of money and time will be spent. Therefore, if you didnot have the patent and others copied it, it would be a disaster.

All in all, everything in your marketing strategy depends on what is your product like, how many markets you want to occupy and how much profit you want to get in a reasonable period of time. That is all about these!!

Eduardo Alvarez
Technical Sales Manager – Lighting Division at PLASKOLITE
Sonia: Did not see this thread earlier. What can you say about intellectual property protection? I have seen high turnover of personel and this could lead to competitors.

SONIA ZHAO
General Manager at Medical Workshop Co.,Ltd.
Thanks for all the comments.
For IP issue, as I mentioned , a good protection like PCT patent is essential for great technique although it takes time for the whole application process.
For Chinese court, just as Camilla stated, it respect the patent and patent law but also listen to the patent owner about what they want the court to protect.
For another suggestion, it is also very important for the contract between the Chinese partner and international manufacturers coz in the contract, you can put strict statements regarding to patent protection. Also, the judging court (arbitration place) can be chosen to be in another country except China. However, most of Chinese partners will agree on HongKong as it is not far away but still follow the international laws.

Barry Weinstein
Unique blend of technical knowledge, client-focused needs, and tactical and strategic business development.
Thanks Bill and Camilla for the interesting points. It turns out to be a much more complicated answer than the general impression, not to mention an evolving one. I have to admit that when I read Harvey’s article I was thinking of all the company executives I have met with whom have expressed significant concern about IP in China and, regardless of whether Harvey is correct or not, I think considerable damage has already been done, in that it will take many years, along with some well-publicized decisions against Chinese companies, before the impression of stealing IP is changed.

As I mentioned before, one factor that I think will rise to the top will be the number and quality of patents filed by Chinese companies (including Mindray, Camilla :). It won’t be long until the real problem Western companies have will be with Chinese competitors enforcing IP rights in their own backyard!

Bill Clemmons
Sr. Patent Attorney at Smith & Nephew
Barry, I think you are exactly right, but the government doesn’t go out on its own and enforce anyone’s patent, that is entirely up to the patent owner. When the owner of a Chinese patents chooses to enforce, the courts seem very willing to help.

Camilla, thanks for that link. That is consistent with what I’ve been told by several Chinese attorneys and US attorneys having experience in China.

Camilla Storaa
Project manager at Getinge
On IP and China I recommend reading Ian Harvey, probably one of the world’s best experts on the topic. He published a good report a year ago that is available here:
[http://www.intipsa.com/knowledge-hub/intellectual-property-china-in-the-global-economy-myth-and-reality|leo://plh/http%3A*3*3www%2Eintipsa%2Ecom*3knowledge-hub*3intellectual-property-china-in-the-global-economy-myth-and-reality/6NV8?_t=tracking_disc]

Quote:
“1. IP law in China is of a high quality by global standards.
2. The quality, cost and timeliness of the “rights” (patents and trademarks) granted to
foreign firms under Chinese law compare well with the rest of the world.
3. Enforcement of patent rights is much cheaper and faster than in most developed
countries. The courts, including the IP Tribunal of the Supreme Court, are handing down
some very sophisticated judgements. The ability to enforce varies in different localities in
China.”

Barry Weinstein
Unique blend of technical knowledge, client-focused needs, and tactical and strategic business development.
Bill, you bring up an interesting question that I hope you (or Sonia) can clarify for me. If Chinese courts are enforcing IP rights, relatively speaking (“they care” in other words), and the courts are mouthpieces for the Government (they are), then Chinese manufacturers are going against the Government? In other words, something is amiss if the Govt is enforcing it thru the courts, but it is still being widely practiced downstream. My guess is that there is just sporadic enforcement by the courts (Government) to appease the critics.

Bill Clemmons
Sr. Patent Attorney at Smith & Nephew
Thanks, David Speck.

David Sheets, my question is, when you say “they don’t care” who is the “they” you are talking about? If you mean the companies knocking off the products, I agree. If you mean the Chinese courts hearing infringement cases, I’m not so sure.

David Sheets
Global Distribution Sales Manager
HI Bill,

I’m not referring to that at all – I am painting more of a “broad stroke” – whether it be hot selling (read: high volume) technologies, luxury goods ,etc., they don’t care.

For instance, when they actually “knock off” an entire Apple Store – they don’t care about enforcement. When they “knock off” Cisco products they don’t care about ramifications.

When they “knock off” LV, Prada, etc., etc., hand bags, Rolex watches, Ping golf clubs, movie DVDs, Tiffany jewelry or Microsoft software – they just don’t care.

fortunately, for most medical devices, the industry is so small it isn’t worth them going after (though they do to some degree)

as far as taking precautions – puhlease, if Cisco and Micorsoft can’t do it, nobody on LinkedIn can!!

Dave Speck
International Sales Manager at The Elco Corporation
Bill,
I’ve heard the same rumors about increasing protection for IP, and it seems
that the climate for IP protection in China is improving. However it is
still incumbent upon the manufacturer to take precautions as have been
previously discussed here. Key among them being to choose the right
partner and establishing the right strategy. IP protection is NOT a
strategy, because it doesn’t get you to your goal. Develop a good
strategy, choose a good partner, and take reasonable steps along the way to
protect your IP. Now execute!

Dave Speck
M – (216) 802-8548
Dave0258@hotmail.com

[http://www.linkedin.com/in/dspeck|leo://plh/http%3A*3*3www%2Elinkedin%2Ecom*3in*3dspeck/BtU8?_t=tracking_disc]
[http://www.linkedin.com/in/dspeck|leo://plh/http%3A*3*3www%2Elinkedin%2Ecom*3in*3dspeck/BtU8?_t=tracking_disc]

Date: Fri, 31 Aug 2012 13:09:24 +0000

Bill Clemmons
Sr. Patent Attorney at Smith & Nephew
David, when you say there’s little regard for patents in China, are you referring only to the fact that small manufacturers pay little regard to third party patents? I don’t have any first hand experience in enforcing IP rights in China, but I keep hearing that the system is getting better all the time because the Chinese government is trying to lure US and European manufacturing companies into China and beefing up IP enforcement is essential.

David Sheets
Global Distribution Sales Manager
unfortunately there’s little regard for patents and IP in China….and Korea isn’t far better.

SONIA ZHAO
General Manager at Medical Workshop Co.,Ltd.
That is right , Bill. That is why I mentioned that a good product needs to have patent and the better to have the PCT one covering China at the beginning.

Bill Clemmons
Sr. Patent Attorney at Smith & Nephew
I am late joining this conversation but I would like to second Linc’s comment about obtaining IP protection, and add one more: conduct freedom to operate searches to make sure you won’t infringe Chinese patents. We have recently seen Chinese companies file patent applications on products we’ve been selling elsewhere for 10 years or more, then we have to deal with those patents when we decide to start selling the same products in China.

Thomas J. Czarnowski h. Lada
Auri Advector Ltd CEO
This is very interesting Sonia. I have a new global-by-design medical device project, which I want to patent and produce. The clinics can treat any neurological-orthopaedic ailments plus. Marketing will be done by partnering and franchising the whole clinical system as turn key operations. The buyers of the partnership and franchise could be anybody and not necessary in medical field as long as he/she can afford it. All figures in place. The question I have is: Is Chinese market able to accept this type of scenario?
Manufacturing, Marketing, Sale and Distribution will be done by the TBA Corporation in China as a part of Global Corporation registered in Europe, or N. America.
I shall appreciate your comment.
tjczarnowski@gmail.com

SONIA ZHAO
General Manager at Medical Workshop Co.,Ltd.
Thanks for all the valuable comments.

There are 14000 medical device manufacturers in China and most of their exporting products are low technique products and thus these products can cover or occupy the low-technique market abroad coz they have much lower price. However, what china lacks of is the high technique and thus now many Chinese manufacturers or distributors want to find products with novel innovation in a specific field. They also consider the patent as an important issue since no matter they distribute the product or technique cooperation with the inventor, they do not want anyone copy the product. Therefore, the issue Domingo mentioned can only happen in the OEM field.

For Domingo’s concern, my suggestion is that a good product should have PCT (the international patent and the covered area must include China) to protect itself if the technique needs to be protected. Then, when you want to cooperate with Chinese companies, you shall put strict statements regarding to confidential issue in the contract. I have worked with one US company and launched their product for distributing by my employer at that time. Then, we found their OEM company in China has copied their product and changed the name. The copied products were sold to anywhere with a much lower price since they did not need to pay importing tax and high cost of the product. Just because this company did not sign any contract regarding to this issue, then the OEM company could do anything to them.This is a good example to show that the importance of patent and confidential statements.

Also, I am not sure what kind of third party you have worked with, Domingo. Do you mean the OEM company? the registration institute? coz this kind of issue will never happen in the type of my company: the information provider. Firstly, we donot need confidential information from your company; we can provide the market information to you without knowing how the product made, but only its application and general clinical results. Secondly, we have confidential statements in the contract and if this thing happened, we would be sued. Therefore, this will never happen in the cooperation between the customers and us.

Barry Weinstein
Unique blend of technical knowledge, client-focused needs, and tactical and strategic business development.
Hi Domingo, not sure how many Chinese subs are around. I happened to work for a contract developer/manufacturer which had a Chinese subsidiary, and we felt very comfortable re: IP issues when discussing manufacturing in China to clients. In fact, their corporate office isn’t far from you (Leica). Chinese subs would be relatively easy to find, I imagine, by doing a ‘top-down’ search and looking at large Western contract companies and where their subs are located, if this is the direction a company chooses to go. This is something that I imagine Sonia’s company would be able to help with also.

As far as Chinese companies going after the export markets, I read that Chinese medical device exports increased by 50%+ per year in the past two years. They are selling first to emerging markets in Asia, Africa, S.Amer., and Eastern Europe. A few have ‘graduated’ to the more developed markets. For example, Neich Medical in Shenzhen makes PTCA balloon catheters that are ranked No. 1 in sales in Japan, which is the most difficult market to sell in the world. Chinese medical device exporters, from what I hear, are undercutting competitors by up to 30% in order to get foreign market share (which they can do as their costs are so much lower). It seems they are copying the Japanese automotive strategy of the 1970s by lowering their price to get market share.

In fact, this should be very disconcerting for U.S. medical device manufacturers but, unfortunately, it isn’t getting much attention. But I see this as being a game-changer in the near future, just as Japanese autos companies turned their industry upside down in the U.S., in the 70s.

Domingo Messerli
CEO Belimed Life Science (Interim) bei Belimed AG
Barry I fully agree with your comments. How many of these companies are around the market? In my opinion a mechanisms is missing when they undermining the IP rights of the owner. Most of the Chinese companies in the MedTech were I’m coming from are focussing after penetrating the national market to export their goods. Maybe they will understand that only companies with a proper track record/serious image are welcome in the western markets. Following the chines tradition of long lasting friendship before quick one side prosperity that might be the right way of corporation. No doubt that a close collaboration with fast growing Chinese multinationals is must for the western world. As alternative we could bring some competition into the discussion including Indian suppliers into the game ;-)!

Barry Weinstein
Unique blend of technical knowledge, client-focused needs, and tactical and strategic business development.
A significant motivator for Chinese companies and government doing a better job in protecting IP, in my opinion, is that Chinese companies are moving up the knowledge/technology curve, and becoming more interested in developing their own products, not only for the Chinese market, but for export. They will, presumably, become a larger player in the IP field, so will come to depend on IP protection as much as other companies do now.

On a side note, when dealing with Chinese companies where IP vulnerability may be an issue, I have found that, if possible, dealing with a Chinese branch/subsidiary of a Western company may give your company a bit more protection. Not only do they typically have similar operating procedures/values as their parent, but it forces them to enforce these values as much as possible when they are working with their domestic suppliers.

Peter Rolfe
Director of S & T, Oxford BioHorizons Ltd
Sonia, the points made by Domingo are very important ones, that is, the protection of all forms of intellectual property – IP. Sunwei He made a similar point. But this issue is not only applicable to China, it can happen in many regions of the world. My company has often been involved in advising on IP issues, and it requires a lot of effort and expense to achieve a safe secure position. However, Domingo, I have personally seen steady improvements in China in the area of IP management and some Chinese companies and provincial government offices are more and more interested in purchasing patents/copyright licence, which demonstrates their good intentions. We must all work together on this issue to improve matters for all parties. One step is to identify, through direct experience, those companies/ agencies who are professional, honest people. Sonia, you will no doubt know some.