5 Things You Need To Succeed on Chinese Medical Device Market

With the rise of China on the global economic stage, small and medium sized western medical device manufacturers can no longer ignore this very important market both for its current and future potential. Here are 5 things you will need to succeed: 

1 – Understanding the Market

Before investing in the process bringing your medical device into China make they actually have a need for it. Chinese medical practices often differ from Western ones and will require different or modified devices. China relies heavily on foreign imports for its medical supplies and devices and the market is already dominated by large foreign companies. Luckily for you foreign manufacturers benefit from a general perception among Chinese consumers that foreign products are of better quality and worth paying a premium for.

Economics

As it stands now, China has the second largest national economy in the world both in purchase power parity and real terms. This is the culmination of over 20 years of GDP growth which averaged over 9% per year starting with economic liberalizations that began in the late 70’s. At the current rate of growth, China should overtake the US by 2020 as the world largest economy. This economic growth has brought about significant changes in the lifestyles and diet of many Chinese. Specifically there have been huge increases in the per capita consumption of such things as meat, milk and oils leading to increasing obesity and other related problems.

Demographics

With a population of over 1.3 billion people, China is the largest country in the world. Of this large population a little less than half (47%) lives in the cities while the rest lives in the rural countryside. Since the Chinese government instituted its one child policy, the average age has been continuously growing. The median age in China is about 35.5 while about 8.9% of the population is above 65. This is expected to grow to 23% by 2050.

With the growing population, and increased prosperity, the prevalence of “lifestyle” diseases such as diabetes and heart disease has greatly increased. For instance, the diabetes prevalence increased almost 20 times since 1980 and with it all of the associated complications including heart disease have also dramatically increased.

2 – A Local Partner

Even if you offer an innovative and high-quality product it may not be enough! Because the market is already dominated by large foreign companies Chinese hospitals are also strongly encouraged to buy from local manufacturers and move away from imports. In an environment like that you stand little chance of succeeding without local boots on the ground.

In China to get trust in your product you need to show that you are committed to working with them. You will lose majority of your potential sales if you do not have local boots on the ground working for you. International companies have historically followed the strategy of leveraging existing distribution networks, establishing key partnerships with local suppliers, and founding or purchasing innovation centres to make inroads into the Chinese market. However, companies will need to be cognizant of each province’s guidelines on “local” manufacturers. In some districts, when a foreign company purchases a local manufacturer, the resulting domestic subsidiary may actually be considered a foreign entity by the provincial authority.  

Chinese Food and Drug Administration (CFDA) requires three local agents for introduction of a medical device:

1. Registration agent — The company that registers the product
2. After-sales agent —  Leads technical service and support for the product
3. Legal agent — Responsible for reporting any events regarding the device that occur inside or outside China, and for handling any recall issues or other regulatory matters

Although some distributors are qualified to act as local agents, as well, it is highly recommended to divide these two (legal and business) functions to avoid potentially difficult and costly entanglements. This is because a partner serving in both roles must sign and officially stamp documentation giving up their responsibilities if you decide the business arrangement with that distributor/agent is unsatisfying. Also, because of the size and fragmentation of the Chinese market, very few distributors offer nationwide coverage, meaning device manufacturers likely need to partner with several distributors, or cooperate with a partner that has access to a wider business network.

3 - Branding awareness

Brand awareness is very important in China; as noted earlier the high-end market is dominated by large foreign companies. It is therefore advisable and efficient to promote a brand through professional seminars and public platforms. For instance, companies and their local partners could consider attending trade shows in order to attract attention to their products.

4 – Comply with Chinese medical device requirements

This latter step is especially important, as medical device manufactures may discover Chinese procedures, and the overall registration process, to be more complicated and time-consuming than in other nations. Newcomers to the Chinese market should choose a reliable partner or consulting company to understand the rules to conduct business in China. Companies conducting business in China must complete a complicated registration process for importing medical devices; this requires a good understanding of the Chinese government’s culture and import policies. Working with a Chinese company to complete these processes shortens the time it takes to register with the CFDA, and can assist EU SMEs devise practical strategies for entering into the market.

• Chinese Food and Drug Administration (CFDA) — The most important ministerial-level institution when it comes to starting a medical business in China. It is responsible for registration of medical devices for the Chinese market, drafting new regulations and policy plans, and ensuring device safety.
• Center for Medical Device Evaluation (CMDE) — Responsible for conducting the dossier review of testing samples during the medical device registration process.
• General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) — Responsible for mandatory safety registration, certification, and inspection of certain devices.

Be sure to regularly check these organizations’ websites — CFDA in particular — for new updates and regulations.

Before applying to CFDA, a device maker must specify the class of its product. There are three classes of medical devices, graded according to their risk impact. Class I consists of low-risk, low-maintenance and non-electrical devices, while Class III includes high-risk devices, usually those implanted into the human body or used for life support.

Again, the registration process can be burdensome. The minimum time period to obtain product registration is about 14 months.  Advanced devices requiring clinical trials will take even longer, and approval in the country of origin is required before registration in China can take place.

However, in developing products for the Chinese market, it is important to correlate the design process with CFDA regulations from the start, since the whole process is integrated. CFDA registration, much like FDA or CE approval, requires the development process, as well as the end result, to meet specific certification requirements. That means that from the beginning, you have to develop and document the design in the design history file, and the usability process in the usability engineering file.

Remember that a properly documented process, decent graphical user interface (GUI) design, and usability are the vehicles to obtaining necessary certifications faster, avoiding application rejections and costly delays, and meeting customers’ expectations.

5 – Protect your Intellectual Property (IP)

Protecting Intellectual Property (IP) is becoming extremely important in China. Western companies should work with IP specialists in order to protect their IP in China, especially when working with a local distribution partner. Furthermore, western companies should conduct due diligence on any potential partner to understand their business and financial capabilities.

Craft and Implement a Corporate IP Strategy in China:

• Conduct an initial audit of the company’s China operations to determine IP assets, IP risks, and assign appropriate levels of protection to those assets based on the risk of infringement.
• Review the company’s internal IP controls to determine whether they provide sufficient protection. Make adjustments based on the IP audit, and dedicate resources in alliance with the company’s IP protection goals.
• Classify IP-relevant information according to its level of sensitivity, and integrate that classification into information control and operational procedures.
• Make IP protection a core responsibility of the entire China management team, not merely a function of the legal or brand protection teams, and adjust internal information flows and reporting structures to reflect those responsibilities.
• Regularly communicate the value of IP protection—and the appropriate ways to handle IP—to key stakeholders, including government officials, employees, contract manufacturers, business partners, and customers. While the level of IP consciousness among Chinese citizens is growing, regular communication of the importance of IP is critical to instill a sense of ownership of company IP among key stakeholders. 
• Take clear steps to document company IP protection policies and efforts as such documentation can play an important part in infringement disputes, particularly in areas like trade secrets.

For further guidance on IPR related issues, the China IPR SME Helpdesk can provide you with free of charge, confidential, business-focused IPR advice.

Reach their experts at: http://www.china-iprhelpdesk.eu/