Waiting for A SupermanChina Could Save Medical Device Sales By John Jarowski
National Export Initiative The NEI is a major part of Obama’s economic recovery plan. Aimed at doubling US exports to developing markets over the next five years. The NEI targets “high growth, high potential sectors, like medical devices”
Medical Device Exports in Crisis? US Commerce Secretary Locke and Trade Representative Ron Kirk visit Memphis in October 2010 to promote NEI The medical device trade surplus has been reduced from $6 billion in 2005 to $3 billion in 2010.
Minnesota Resounds Alarm Minnesota is hub of medical device manufacturing (home of the medical device giant, Medtronic). Minnesota: Exports of medical and optical products decreased 10% to $723 million. This is the only sector in the Minnesota economy to register a decline.
Why Minnesota (Medtronic) Matters Medtronic’s headquarters: Site of a key speech by president Obama to promote NEI. 41% of Medtronic’s revenue ($15.8 billion) is generated by international sales. Medtronic CEO William Hawkins suggested in June 2010 that this percentage would rise to 53% by 2015.
Not All Bad Recent meetings between president Obama and Chinese president Hu Jintao renewed commitment to increasing trade relationship China is third-largest export market for US. Exports will exceed $100 billion dollars in 2011 Medtronic sales of spine products in China rose 20% in 2010
Why The Boom in China? China is one of the largest importer of goods. Access to the World Trade Organization (WTO) China fueling rapid growth. China second largest and the second fastest growing economy in world. Healthcare reform is top priority. China’s medical device market relies largely on imports.
Why China? Fast Facts China is spending $123 billion in medical through 2011 Preference for Western Technology Reduction of the tariff rate to 4% eases trade
Why China?: Fast Facts US medical device industry exports $1.23 billion per year to China. The market for medical devices in China is at $14 billion This number is projected to double by 2014.
Obstacles to China Device Registration (SFDA) Legal Protection-Intellectual Property Distribution Cultural Barriers Ethical Concerns
Device Registration (SFDA) Classification of devices is different in China Device needs FDA approval before obtaining SFDA approval Devices with electrical wiring require CE mark Class III device require clinical trials (lengthy and expensive)
Intellectual Property Protection China is one of the world’s largest offenders of IP violations In 2007, the office of the U.S. Trade Representative put China on watch list Shenzen: Progress in IP Protection Microsoft lawyer: Progress but still needs improvement
Rise in Patent Applications Over the last decade, patent applications in China grew by an average rate of 23% per year.
Distribution Channels Difficult to build Limited in resources Tend not to promote or advertise products
Cultural Barrier Yahoo vs. Baidu: Yahoo did not consider its audience. Baidu had a live messaging system that was considered more user friendly to the Chinese.
Ethical Concerns Bribery: Dept of Justice triples investigations. China ranks third in most bribery cases in the world. US Attorney General Eric Holder called the problem “one of the highest priorities of the Department of Justice.” Johnson and Johnson/Diagnostic Products
Resolution: Find all inclusive services that: Are reputable or have reputable partners. Know your audience! Provide legal assistance for product registration and IP protection. Will advertise your product and give it the best market exposure possible.
Why All Inclusive Services? Simplifies the process Reduces costs All the tools are available They are innovative
Conclusion: Stay the Course! China’s potential value to the medical device industry is alluring, but the obstacles related to entering the Chinese marketplace are considerable and the cause of much consternation. Nevertheless, there are tested methods available for medical device companies that want to enter this market that are affordable, efficient, and effective. China should not be taken off the radar for international sales projections. Rather, it should be approached with care and great anticipation of the opportunities presented by expanding markets there.