How Medtech Firms Can Manage Risk When Doing Business in ChinaHow Medtech Firms Can Manage Risk When Doing Business in China

We recently received helpful advice from a reader, who provides some commonsense advice to medical device companies that plan on doing business with Chinese firms. Writing in response to “The High Cost of Outsourcing to China,” David Scott Lewis first recommends looking for a Western firm that happens to have a location in China—as opposed to an outsourcing company with headquarters there. As an example of such a company, he cites Canadian electronics firm Maple Tree, which maintains operations in China.

He then advises using caution when outsourcing proprietary projects that could be reverse engineered or knocked off. However, he adds: “there is not likely going to be the potential for a lot of IP leakage specific to what may be uniquely learned by the contract manufacturer.”

Next, he offers readers a phrase to remember: “In China you never get what you expect; instead, you get what you inspect.”

Other advice from Lewis: 

While the Chinese manufacturing sector has slowed, the country will be increasingly important for medtech companies, as I explained last week in a post titled "India, China, and the Future of the Medical Device Industry."

About two months ago, I spoke with Sparton CEO Cary Wood about China's evolving role—both in terms as a marketplace for medical devices and a producer of them. Wood said that China has begun to lose some of its luster as a low-cost manufacturing destination but stressed the importance of the market there for medical products. Between 2009 and 2011, the country spent approximately $133.2 billion to improve its healthcare system, according to a report from China Daily.

—Brian Buntz