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As originally asked by Victor Yu, PgMP,PMP, MBA.
As we know , with the rapid growth of China’s economy , China maintain high rates of growth in spending on medical . Obviously there are huge unmet needs and this become the major driving factor of more global medical device companies to establish R&D center in China .
Appreciate your any comments on this topic.
DR. MICHAEL WARD
China’s government does not hesitate to show preference to domestic companies and to Chinese patients and the courts respond in similar fashion. The deck is thus stacked against the defending global company.
One defense pharma has used to support its efforts is to put a microchip on the packaging to separate what is brand name from what is counterfeit. Perhaps the medical device companies might consider something like that for their disposables. I have no idea of the cost implications of that measure though.
Alternately, the customer would reuse disposables way beyond the specified limits until they failed and then want compensation.
Bad customer behavior, but still, it puts your product’s reputation on the line. How you deal with such a situation needs to be considered.
Juan Carlos Medina
DR. MICHAEL WARD
– High level of difficulty selling to the multitude among China’s physicians who insist on brand name.
– High quality pre-sale or in-treatment expertise and training.
– The same high level R&D support provided for brand name devices when there are key problems (with device and/or mode of treatment).
– Quality medical affairs support to customers, including expertise for difficult medical cases or facilitating access to western KOLs or western collaborative research programs.
– Scientific, clinical, and financial support that would generate high quality/internationally recognized investigator initiated research programs.
– Publications support for western peer-reviewed journals.
There is far more to medical device development, manufacturing, sales, and product support than mere copying of design.
Victor Yu, PgMP,PMP, MBA
DR. MICHAEL WARD
The conditions set up in this document are inconsistent with China’s obligations under the WTO and with China’s Ministry of Health Guidelines on High-value Medical Device Purchasing Guideline, Article 5, which forbids any type of local protection.
a) The failure of the governing body, Drug Administration Division of Jiangsu Health Department, to understand the many differences between pharmaceuticals and medical devices, including the critical added costs of supporting medical device sales prior to (training physicians, individual hospital setup etc.) and after the device is used (oversight of outcomes and ongoing maintenance required for many implanted devices).
b) The lack of consideration given to quality by the medical establishment in China and its associated government agencies. One factor that keeps many physicians in China from adopting newer medical device technology is their deeply entrenched belief that quality = quantity. They reference doing thousands of patients with their current methods and see no reason to change. However, among these thousands of treated patients, follow up is non-existent so it is easy to assume that all cases are successful. Now, we have a new twist on the concept of quality being confused with quantification. This is embedded in the foundation of the above proposal to suggest that lowest price gives best value.
If this measure is adopted as it now stands, China will have the best of both worlds. It can copy western medical devices with little or no legal deterrent, manufacture these copied devices under the most economical of processes, and win preferential market placement (at least for now in Jiangsu Province) by offering their devices at the lowest prices.
There is no better time for solidarity among all western medical device manufacturers than now. The rationale for strong and decisive action is that if one were to totally remove western medical devices and the relevant intellectual and technical resources that currently work in China, there would be nothing to copy, no meaningful training of China’s physicians, and a large drop-off in healthcare to China’s patient populations. In terms of a global presence and recognition from western academia and medical societies, China would lose all it has sought in the past two decades and revert back to earlier days on anonymity. Perhaps the provincial and national governments in China would miss the point and boast of low-cost/high quality medical care but many physicians in China, who have relished international recognition and support, would realize very quickly that their ‘run was over’, without the many valued contributions of western medical device companies in terms of training, shared expertise, and other key exposures that have brought the standards of patient care and therapeutics to a much higher level.
To expand on that sentiment: China is most interested in selling foreign medical products that are innovative and provide high tech treatments for their domestic market. You are right, this will involve overcoming regulatory hurdles with the SFDA and the sharing of IP and confidential manufacturing/design data to the SFDA. As Camilla and Urs mentioned, copying will not be eliminated. Plan for this by designing a process that will separate as many of your systems as possible. There is incredible opportunity in China, but with large risk. If your company can afford the time and risk, selling, designing and manufacturing in China can work. Just make sure you have a trustworthy team of both Chinese and Westerners on your side.
Juan Carlos Medina
Thanks for keeping the group so informative. The Medical Devices Group thrives on your gifts of time and camaraderie.
Another thing on copying: I’d say copying is not merely culture, it is a virtue here in China. Art students can spend years on practicing creating an exact copy of a classic horse or shrimp painting, the Beijing (and other) opera’s choreography is exact set, and one can see elderly Chinese practicing these movements together in the parks. Children practice to write characters like the old calligraphers. The option of after school activities for my children are primarily ballet and kung fu, both of which have the focus of copying what the teacher does (there’s a depressing lack of joy, music and dance in ballet classes here).
Also, the one and only ultimate test (Gao Kao) for the high school student to qualify for university is multiple choice, and they spend all their efforts in school learning to tick the right box, not to think outside of it. Thanks to the mere quantity of Chinese researchers there will still be some who are really bright and innovative. Finding and particularly retaining these will be a challenge.
The rule of thumb is patent your product where you intend to R&D, manufacturer or market.
DR. MICHAEL WARD
If a company is contemplating setting up R&D in China, my belief is that the primary motive is cost savings rather than tapping into a rich core of creative potential. In a very generic sense (meaning there are exceptions), the Chinese are excellent at copying (case in point, the vast amount of effort put into creating exact replica counterfeit drugs); however, very few if any would take a copied design and expand upon it to create some improved feature or new indication. Perhaps the discussion of IP security ought to be to examine closely the overall economics of moving R&D to China. If a company’s decision is based solely upon comparative costs of salaries and overhead, perhaps the cost of lost IP ought to be in the calculations.
Global pharmaceutical companies still have a massive struggle with counterfeit drugs. However, this problem is not quite the same. The Chinese do not try to manufacture a generic of the same formulation as a brand name drug. They create an exact replica of the brand name pills and packaging – and could care less about actual content. One might wonder how this is allowed to happen. The national government devotes limited resources and effort toward attacking this problem. I have a good friend who spent 5 years chasing counterfeit drug operations in China for GSK. In almost all cases, the local Chinese military and local government were involved but very little was ever accomplished other than periodic token raids to shut down an operation – only to see it reappear within months somewhere else in the same region.
As to medical devices, undertaking all the careful strategies suggested in prior comments is a good idea; and, I also feel very careful selecting of hired personnel is critical. Local internal management is, perhaps, the most important element. Assuring the long-term commitment of local leadership is vital to at least partly addressing IP issues. The long-term employment of critical talent is only done in China by two approaches – high salaries (at least higher than elsewhere in China) and high titles. Inflated titles are easy to apply. Higher salaries will erode the whole effort of setting up an operation in China and clearly rubs against the grain of Western companies who focus on low salaries and the notion that anyone can be easily replaced at any level.
Intensive training programs – at least the usual industry efforts of taking a day for IP training, once or twice a year, will do very little to change mindsets and even internal culture. More effort….creative and diligent effort must be adopted to have any hope of changing internal culture in a meaningful way. Such an effort adds to the cost of doing R&D in China.
The central government in China is thought to be taking a more critical and harsh view of corruption, realizing it does compromise their potential dominance in world affairs. I very much doubt IP infringement is considered corruption. Besides, China is too huge to govern from Beijing. In the end, the true management of China rests with local powers and, considering the ever-continuing, multi-decade plight of pharmaceutical companies, I would not hold my breath on general improvements for IP laws and enforcement.
Where is the silver lining in all this? (1) If someone in China copies IP, the resultant product(s) can only be sold in China and where IP enforcement is weak. Thus there will be no impact on key Western markets. (2) Within China, physicians prefer Western brand name devices..
Victor Yu, PgMP,PMP, MBA
According to my understanding the team could work on strategies like developing local verification and validation capabilities that will help support regulatory aspect of the country as well as the compliance part of the company.
Once the company has the capability and competency the next step would be to start with the low risk products for development. This will give the team an experience running the project and also using the systems and process.
The best approach will be to have a mix of projects class 1 class 2 and class 3 project. Some of these can be independently run but it definitely would also require to be project that are run along with the other countries.
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