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CMC • YaYuan 2 • Xiang Jiang Bei Lu 2 • ChaoYang District • Beijing • 100103 • China
Entering the China Market, Part 2: Go-to-Market Strategies
GBI DEVINT continues with Part 2 of a series of articles looking at best practices for medical device
companies planning to enter the China market, exclusively authored by founder and CEO of China
MedConnect (CMC), Landon G. Lack. Having covered pre-market considerations and registration
options in Part 1, in Part 2 we explore to go-to-market (GTM) strategies and options for finding the
right distribution partner.
Established in Beijing in early 2009, CMC is an operating and advisory company focused on
introducing new medical device technologies to the China market, to date assisting over 50 medical
device firms with market entry and commercialization. CMC has also helped facilitate cross-border
investments in the medical device industry and is now bringing some of its own medical devices into
China.
Setting the scope
Given the size, diversity and complexity of China’s medical devices landscape, the task of providing
“best practices” for foreign firms operating within the market entails some degree of generalization.
The scope for this series of articles is limited to the medical and surgical consumables segment –
encompassing both high-value products and what might be classed as commodities, but generally
either class II or class III medical devices. Multinational companies (MNCs) already operating in this
segment in China include the large-scale players such as Medtronic, Johnson & Johnson (J&J), and
Stryker, alongside small- to medium-sized firms such as LeMaitre Vascular and Scion Biomedical.
Specifically excluded from the purview of this report is the segment related to MRI, CT and other
capital equipment.
Developing your GTM strategy
Having decided that China is a good market for a particular medical device or devices, the next task
is to carry out regulatory and commercial assessments in parallel. These should gauge the regulatory
approach that will result in a CFDA certificate with a product name that works well for the nuances of
the China market. The process of selecting a Regulatory Agent should be focused on an appointment
which can help to either serve as, or provide an introduction to, a neutral third party to act as After-
Sales Agent and Legal Agent in the China market. This then gives a window of approximately 15 to 18
months to develop a strategy and select partner(s) for distribution. It should be noted that there is no
need to select and negotiate with a distribution partner prior to initiating the regulatory process. In fact,
selecting a distribution partner for China may not be the right approach. Let’s discuss and consider.
Strategy considerations
In China, like the U.S. and other countries, there are a range of options for companies to evaluate
in terms of how to best segment and approach what is a huge and complex market. This will involve
determining the best price-to-volume strategy, consideration of KOL development, a review of marketing
and promotion strategies, choosing the optimal training and educational programs, and the best path

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in relation to clinical support, among others. Additional strategic factors for any company will include
whether the candidate product is “me too, but better”, or an entirely innovative product that will alter
the way clinical procedures are performed and therefore require extensive evangelization.
Other considerations that should feature in the decision-making process at this stage include
maintaining control, establishing accountability, and ensuring risk mitigation, as well as other
appropriate safeguards and protections. Risk-tolerance varies from one individual company to
another, and plays a determining role. Ensuring product traceability (at least to the hospital) is a key
requirement, alongside adherence to the U.S. Foreign Corrupt Practices Act (FCPA) and Chinese Anti-
Corruption laws. This stage would also be the time to address intellectual property and trademark
risks, a topic too broad to consider within the scope of this article.
Unlike most other foreign markets, in China there is no single player capable of providing truly
nationwide medical device distribution services. As a reference point, best practices for MNCs in
China generally require the use of many first-level distributors, expressly excluding any sub-distribution
activities. For example, one division of an MNC operating in China might have over 100 first-level
distributors to cover the top hospitals in China. Each distributor would cover anything from only one
hospital, to possibly several hospitals or a small geographic region at most.
This MNC model of selecting and managing a distribution partner or series of distribution partners
is one option, but may not necessarily be the best-fit for all companies. The good news is that given
the size and complexity of the market, a number of alternatives are possible, and have been proved
to be successful. These span a range from going alone with an entirely DIY (do-it-yourself) policy; to
establishing a local office to manage distribution partner(s); or choosing to mix-and-match partnering
strategies with domestic Chinese partners or MNCs with local presence or cross-border operations.
Looking solely at domestic partners, there is a broad scope of company types covering different
sectors, including manufacturers, investors, technology parks/incubators, and conglomerates or state-
owned enterprises (SOEs) with an interest in med-tech. Furthermore, the depth of partnerships are
also hugely varied, covering the whole spectrum from distribution-only deals, to manufacturing support,
to licensing or joint ventures (JVs), to investments and/or outright M&A deals.
DIY: Distributor selection
If this is the chosen path, building an intimate relationship with prospective partners is imperative.
This takes time and many face-to-face, on-site meetings with the partner in order to get to know,
understand, and build mutual trust with prospective counterparts. Ultimately, this process of building
mutual trust will be the most important factor for a long-term successful relationship.
MNC best practices in selecting distributors bear consideration, and these include:
• Many first-level distributors who provide coverage for a defined geography. This could be a region (e.g.
Northeast China), a province (e.g. Shandong), a city (e.g. Beijing), or even defined hospitals within
a city (e.g. PLA301 and Anzhen);

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• Generally, agreements are one year in length with defined responsibilities, quotas, and reporting
requirements;
• MNC channel managers work directly with multiple (6-10+) distributors to provide clinical education,
training, KOL development, etc.;
• Maintain strict accountability and traceability of all products sold into the market.
However, MNC practices in China are not necessarily practical without a significant on-the-ground
presence, and given the lack of device distributors with nationwide capabilities, alternative options
must be considered.
As mentioned above, the nature of the product being brought to market – in terms of whether it
requires ‘evangelization’ due to unique characteristics, materials, or indications for use – has an
impact on the decision-making process. If alternatives are already launched to market, partner
selection needs to take into account the need to differentiate the product, or selling strategies based
on some tangible or intangible value.
Partnering ideas:
Partner with a Manufacturer: Typically in China, there is a clear distinction between medical device
distributors and manufacturers, companies are either focused on one activity or the other, and rarely
both. However, if you can identify a trusted and interested medical device manufacturer who makes
complementary medical devices and has already established a distribution network with numerous
distributors focused on your specialty, this could represent a very fruitful collaboration path. A good
example of this type of partnership can be seen in the collaboration between GMT (Beijing) Co., Ltd,
a Chinese manufacturer of high-quality biopsy needles used in general surgery, and Insightra Medical
Inc., a U.S.-based manufacturer of hernia repair and other general surgery products. The partnership
sees GMT provide Insightra with access to the right call points in China by way of its existing
distribution network. Crucially, there are also likely opportunities to manufacture locally in China and
take advantage of some of the benefits of entering the market as a domestic product.
Partner with an Investor: There is a growing wave of interest from a broad variety of different investors
who may also be ideal partners for to support a China strategy. These may be strategic or financial
investors, all of whom may have an interest in making an investment and then helping to achieve
success in China. These partners may be active industry participants (i.e. manufacturers), venture
capital entities, or other investors who are focused on medical technologies and/or cross-border
licensing and investments. The Hong Kong-based Ally Bridge Group (ABG) is one example of a private
equity (PE) firm that has been actively investing in U.S. and China-based medical device companies.
Ally announced two separate PE investments in U.S. gastrointestinal-focused device manufacturer
EndoChoice Inc., in March and June 2015, and with strong relationships in mainland China has the
capability and incentive to help EndoChoice become successful in the China market.
Partner with Technology Park/Incubator: There are numerous technology parks and incubators who
are keenly interested in attracting foreign medical device technologies to China. Your product could
be welcomed as a source of additional employment opportunities, contributing to growth of med-tech

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ecosystems, and ultimately more prosperity and a higher profile for the park or incubator. Suzhou’s
BioBay is a prime example, the site offering incentive packages, technology platforms, human
resources and tenant services, as well as partnering and networking opportunities.
Partner with Chinese conglomerate or SOEs: Foreign medical device companies frequently take the
view that partnering with one of China’s major distribution giants, such as Shanghai Pharma, SinoMed
and others, represents a sensible option. However, care must be taken to distinguish between the
capabilities of true medical device distributors and mere logistics providers. Not to say that a Chinese
conglomerate or state-owned enterprise (SOE) would not make a great partner, but they suffer some of
the same issues as the MNCs in the next paragraph.
Partnering with MNCs: Partnering with an MNC for distribution in U.S., European, or other markets may
make perfect sense, but the same MNC may not be so suitable as a distribution partner in the China
market. The first issue is that MNCs are not selling their own products directly, but rather through
distributors who also need a margin – which equates to tighter margins for MNCs in China. For a
partner’s product in which there is already a lower margin, the proposition becomes even less viable.
Further, China-based operations of MNCs typically operate in a red-hot environment, faced with higher
growth targets applied by headquarters due to the natural growth of the market, but fierce competition
on the ground. Introducing a new partner’s product or products would therefore be unlikely to be their
priority, with no guarantee of revenues being generated immediately, and a potentially time-consuming
and costly path to market ahead with negligible impact to bottom line in the near-term. And as in any
country, how much attention will your one or two products receive from a sales team with hundreds or
thousands of their own products to sell?
Following development of a GTM strategy, additional activities and ongoing commercial operational
considerations would include:
• Localization of sales & marketing materials
• Pricing assessment and strategy
• Government & hospital affairs (pricing & reimbursement support)
• General management of sales and marketing operations
• Delivery of sales and clinical support training for products and procedures
• Marketing and promotion
• Distributor management, FCPA training and monitoring
• Bidding and tendering procedures; national, provincial, and specialty
• After-sales services
• IP and patent protection monitoring
• Trademark protection monitoring