Medical device companies are eager to tap the market potential of fast-growing markets in Asia, especially China. But there are real pitfalls in these markets and many times they involve Chinese partners - be it suppliers, distributors or other contractors.

Ames Gross, founder and CEO of consulting firm Pacific Bridge Medical, shared his experience of steering American companies in China over two decades, and the lessons to be learned from that experience.

Do Market Research in China But Hire Chinese Research Companies Carefully

Market research is key to succeeding in places like China. Whatever sells in the U.S. will not necessarily succeed there, so knowing the market by interviewing key physicians and purchasing managers in hospitals is very important, Gross said.

One company hired a Chinese market research firm and asked them to interview a 100 people and then create a report of the findings. Later, however, the company realized that the market research partner had only interviewed 10 people.

"We called some of the doctors and they said they hadn't been interviewed," Gross recalled, declining to name the companies involved. "Sometimes the Chinese firms say they did something when they actually didn't."

One way to ensure that the Chinese firm is interviewing the required number of people is asking for a summary of each interview with the doctor and/or purchasing manager and provide their name and contact information, Gross advised. 

But is not simply a matter of quantity of interviews that make a market research report robust. The quality of the interviewer is very important too. 

Don't Assume Understanding of Quality Assurance Is High

Chinese partners don't view issues surrounding quality in the same way that their Western counterparts do. Take the difficult experience of one company that found that the Chinese factory making a component for a product sold in the U.S. had no batch records, no written instructions - nothing that could allow validation.

"The Chinese factory was making components which wasn't FDA compliant," Gross said.

After a discussion with the Chinese factory manager, the company official came away feeling that the manager would not do much to rectify the situation. Even though the manager verbally said that these quality issues would be enforced at the factory level, the reality was that it was not in their best interests to make the investment needed to get them to be compliant. 

Train, Train and Do More Training Around Intellectual Property

In many parts of Asia, including China, students are encouraged to learn by copying. So many of them don't understand that sharing intellectual property is essentially stealing.

"Somebody is working at a company and has access to the manufacturing processes for a medical device and they may not think that giving a copy of that confidential information to a friend is wrong," Gross said. "They are used to copying and sharing information. Copying is encouraged when they are students."

Training your employees and even partners - distributors, suppliers - is key to minimize this threat, along with constantly staying ahead of the curve by introducing new products to the market.

"You need to train your employees about what intellectual property means, what the consequence of stealing it would be so they understand what the notion of Western intellectual property is and what is expected of them," Gross said. "Lot of companies don't tell them what intellectual property is and don't explain what is expected of them."

Things are getting better however when it comes to intellectual property theft because Chinese original equipment manufacturers are looking to protect their knowhow. 

"There are more Chinese companies now applying for patents, so hopefully that notion of intellectual property will be doing better in the future," Gross said. 

The issue of managing compliance with Asian suppliers and selling to emerging markets are topics of discussion at two conferences being organized by the publisher of MD+DI - Orthotec 2013, June 5-6, in Warsaw, Indiana and MD&M East, June17-20, in Philadelphia. 

-- By Arundhati Parmar, Senior Editor, MD+DI

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