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Waiting for A Waiting for A SupermanSuperman
China Could Save Medical China Could Save Medical Device SalesDevice Sales
By John JarowskiBy John Jarowski
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National Export InitiativeNational Export Initiative
The NEI is a major part of Obama’s The NEI is a major part of Obama’s economic recovery plan.economic recovery plan.
Aimed at doubling US exports to Aimed at doubling US exports to developing markets over the next developing markets over the next five years.five years.
The NEI targets “high growth, high The NEI targets “high growth, high potential sectors, like medical potential sectors, like medical devices”devices”
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Medical Device Exports Medical Device Exports in Crisis? in Crisis?
US Commerce Secretary Locke and US Commerce Secretary Locke and Trade Representative Ron Kirk visit Trade Representative Ron Kirk visit Memphis in October 2010 to promote Memphis in October 2010 to promote NEINEI
The medical device trade surplus has The medical device trade surplus has been been
reduced from $6 billion in 2005 to $3 reduced from $6 billion in 2005 to $3 billion billion
in 2010.in 2010.
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Minnesota Resounds Minnesota Resounds AlarmAlarm
Minnesota is hub of medical device Minnesota is hub of medical device manufacturing (home of the medical manufacturing (home of the medical device giant, Medtronic).device giant, Medtronic).
Minnesota: Exports of medical and Minnesota: Exports of medical and optical products decreased 10% to optical products decreased 10% to $723 million. $723 million.
This is the only sector in the This is the only sector in the Minnesota economy to register a Minnesota economy to register a decline.decline.
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Why Minnesota (Medtronic) Why Minnesota (Medtronic) MattersMatters
Medtronic’s headquarters: Site of a key Medtronic’s headquarters: Site of a key speech by president Obama to promote speech by president Obama to promote NEI.NEI.
41% of Medtronic’s revenue ($15.8 billion) 41% of Medtronic’s revenue ($15.8 billion) is generated by international sales. is generated by international sales.
Medtronic CEO William Hawkins Medtronic CEO William Hawkins suggested in June 2010 that this suggested in June 2010 that this percentage would rise to 53% by 2015.percentage would rise to 53% by 2015.
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Not All BadNot All Bad
Recent meetings between president Recent meetings between president Obama and Chinese president Hu Jintao Obama and Chinese president Hu Jintao renewed commitment to increasing trade renewed commitment to increasing trade relationshiprelationship
China is third-largest export market for China is third-largest export market for US. US.
Exports will exceed $100 billion dollars in Exports will exceed $100 billion dollars in 20112011
Medtronic sales of spine products in Medtronic sales of spine products in China rose 20% in 2010China rose 20% in 2010
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US Exports At A GlanceUS Exports At A Glance
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Why The Boom in China?Why The Boom in China?
China is one of the largest importer of China is one of the largest importer of goods.goods.
Access to the World Trade Organization Access to the World Trade Organization (WTO) China fueling rapid growth.(WTO) China fueling rapid growth.
China second largest and the second China second largest and the second fastest growing economy in world. fastest growing economy in world.
Healthcare reform is top priority.Healthcare reform is top priority. China’s medical device market relies China’s medical device market relies
largely on imports.largely on imports.
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Growth In US Exports to Growth In US Exports to ChinaChina
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Growth In US Exports To Growth In US Exports To ChinaChina
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Why China? Fast FactsWhy China? Fast Facts
China is spending $123 billion in China is spending $123 billion in medical through 2011medical through 2011
Preference for Western TechnologyPreference for Western Technology Reduction of the tariff rate to 4% Reduction of the tariff rate to 4%
eases tradeeases trade
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Why China?: Fast FactsWhy China?: Fast Facts
US medical device industry exports US medical device industry exports $1.23 billion per year to China.$1.23 billion per year to China.
The market for medical devices in The market for medical devices in China is at $14 billion China is at $14 billion
This number is projected to double This number is projected to double by 2014.by 2014.
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Obstacles to ChinaObstacles to China
Device Registration (SFDA)Device Registration (SFDA) Legal Protection-Intellectual Legal Protection-Intellectual
PropertyProperty DistributionDistribution Cultural BarriersCultural Barriers Ethical ConcernsEthical Concerns
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Device Registration Device Registration (SFDA)(SFDA)
Classification of devices is different Classification of devices is different in Chinain China
Device needs FDA approval before Device needs FDA approval before obtaining SFDA approvalobtaining SFDA approval
Devices with electrical wiring Devices with electrical wiring require CE markrequire CE mark
Class III device require clinical trials Class III device require clinical trials (lengthy and expensive)(lengthy and expensive)
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Intellectual Property Intellectual Property ProtectionProtection
China is one of the world’s largest China is one of the world’s largest offenders of IP violationsoffenders of IP violations
In 2007, the office of the U.S. Trade In 2007, the office of the U.S. Trade Representative put China on watch listRepresentative put China on watch list
Shenzen: Progress in IP ProtectionShenzen: Progress in IP Protection Microsoft lawyer: Progress but still needs Microsoft lawyer: Progress but still needs
improvementimprovement
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Rise in Patent Rise in Patent ApplicationsApplications
Over the last decade, patent applications Over the last decade, patent applications in China grew by an average rate of 23% in China grew by an average rate of 23% per year.per year.
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Distribution ChannelsDistribution Channels
Difficult to buildDifficult to build Limited in resourcesLimited in resources Tend not to promote or advertise Tend not to promote or advertise
productsproducts
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Cultural BarrierCultural Barrier
Yahoo vs. Baidu:Yahoo vs. Baidu: Yahoo did not consider its audience. Yahoo did not consider its audience. Baidu had a live messaging system Baidu had a live messaging system
that was considered more user that was considered more user friendly to the Chinese.friendly to the Chinese.
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Ethical ConcernsEthical Concerns
Bribery: Dept of Justice triples Bribery: Dept of Justice triples investigations.investigations.
China ranks third in most bribery cases China ranks third in most bribery cases in the world.in the world.
US Attorney General Eric Holder called US Attorney General Eric Holder called the problem “one of the highest the problem “one of the highest priorities of the Department of Justice.” priorities of the Department of Justice.”
Johnson and Johnson/Diagnostic Johnson and Johnson/Diagnostic ProductsProducts
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Resolution: Find all Resolution: Find all inclusive services that:inclusive services that:
Are reputable or have reputable Are reputable or have reputable partners.partners.
Know your audience!Know your audience! Provide legal assistance for product Provide legal assistance for product
registration and IP protection.registration and IP protection. Will advertise your product and give Will advertise your product and give
it the best market exposure possible.it the best market exposure possible.
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Why All Inclusive Why All Inclusive Services?Services?
Simplifies the processSimplifies the process Reduces costsReduces costs All the tools are availableAll the tools are available They are innovativeThey are innovative
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Conclusion: Stay the Conclusion: Stay the Course!Course!
China’s potential value to the medical device China’s potential value to the medical device industry is alluring, but the obstacles related to industry is alluring, but the obstacles related to entering the Chinese marketplace are entering the Chinese marketplace are considerable and the cause of much considerable and the cause of much consternation. Nevertheless, there are tested consternation. Nevertheless, there are tested methods available for medical device companies methods available for medical device companies that want to enter this market that are that want to enter this market that are affordable, efficient, and effective. China should affordable, efficient, and effective. China should not be taken off the radar for international sales not be taken off the radar for international sales projections. Rather, it should be approached with projections. Rather, it should be approached with care and great anticipation of the opportunities care and great anticipation of the opportunities presented by expanding markets there.presented by expanding markets there.