SHANGHAI (Oct. 3, 2 p.m. ET) — China can be a challenging market to crack, but foreign plastics firms active in the country's medical device industry believe they have an advantage — a solid understanding of the steep quality requirements of the global medical device industry.
Several of those European and North American plastics firms announced new investments in China at a recent medical device trade fair in Shanghai, in response to what they said was global medical device companies themselves adding manufacturing in China.
Local Chinese molders and other processors are developing rapidly as competitors for that business, and the global medical device industry is increasingly interested in China to both reduce manufacturing costs and serve the growing local market.
But quality concerns — think of the mismanagement surrounding the high-speed train crash in Wenzhou that killed 40 people or the melamine-contaminated milk powder that poisoned children — are creating an opening for the foreign suppliers, at least according to interviews at the Medtec China show, held Sept. 7-8 in Shanghai.
An executive at German medical molding company Gerresheimer Regensburg GmbH said that at least once a month a Chinese medical device or drug maker will come into its factory in South China with an inhaler or some device that the German firm also makes, and ask for help “optimizing” the Chinese models because of some problems in performance.
Some of the devices look to be reverse-engineered from Gerresheimer designs, although the Chinese firms always claim it is their design, said Stephane Pianigiani, managing director of Gerresheimer Medical Plastics Systems Dongguan Co. Ltd.
He tells them “optimizing” the designs of others is not how Gerresheimer, based in Regensburg, Germany, makes money.
But Pianigiani said he takes the meetings to explain his point of view, that the detailed process controls, procedures and documentation the global industry requires are just as important as the equipment used to make it.
Some of the companies coming to his office do not understand that “they can't just set up a plant and buy the equipment,” he said.
“They still don't realize it's not about injection molding and cleanrooms — it's about the processes,” said Pianigiani, arguing that strict adherence to manufacturing procedures are essential to producing a safe device. “If the dose of the insulin pen is off 10 percent, the patient dies.”
It's a point echoed by Tom Fang, engineering manager at American molder Tessy Plastics Corp.'s facility in Shanghai, who said that when Chinese companies ask if the injection molding company can make a medical component or device for them, they often ask first about the price.
“They will say ‘The part is simple, why do you charge so much?'” — not understanding the costs involved in controls like documentation to trace problems and insure good manufacturing, Fang said. Tessy is based in Elbridge, N.Y.
International medical firms first ask about the manufacturing processes, Fang said.
One Chinese catheter maker, Lepu Medical Technology (Beijing) Co. Ltd., has been exhibiting at medical device trade shows in the United States and is looking for a marketing partner in North America.
But the Beijing-based firm also finds the reputation of Chinese products can be tough to overcome, said Leon Rein, marketing executive in the international sales and marketing department of the Beijing-based firm.
“It's not very easy to convince a U.S. doctor to buy a Chinese medical product, to be honest,” he said.
The 700-person company only started its international marketing department two years ago. Right now, 10 percent of its sales are outside China, to other Asian markets like the Philippines, Indonesia, Malaysia and India, as well as the Middle East and Latin America.
While export volumes are small now, Chinese companies making minimally-invasive medical devices like catheters are rapidly improving their technology, said Larry Johnson, marketing director for healthcare at Avon Lake, Ohio-based PolyOne Corp.
“A couple of years ago, [Chinese] companies were not extruding some of the materials for catheters but now that is changing,” said Johnson. “It is more home-grown than companies coming from North America.”
He said the Chinese government's plan to spend US$120 billion to provide a basic level of healthcare to most of the country by 2020 will help China develop its own medical device industry.
Lepu's Rein agreed that the Chinese government plans will be a big help because it will mean more money for hospitals, 90 percent of which are government-run.
The Chinese demand for medical materials is significant, as companies want to upgrade and the government is moving to address quality concerns, said Stephen Duckworth, head of the global market segment for medical and pharmaceutical for the masterbatch business unit of Clariant International Ltd.
“The Chinese government is sensitive to these things and is trying to clamp down,” he said, although he said he thinks quality is a global problem and concerns about Chinese products can be overstated.
Several companies interviewed said the Chinese government's State Food and Drug Administration has gotten tougher on regulatory and quality issues in the last few years. A former head of the SFDA was executed in 2007 for reportedly taking bribes.
Rising consumer demand for healthcare in China is also becoming a big driver for improved quality, but the market remains very price focused, said Thomas Opielowski, vice president-international for Oak Brook, Ill.-based molder UPG Inc., and president of Suzhou-based UPG China.
“From a UPG standpoint, we always run up against the price in the domestic market [and] some of our customers run up against the same thing,” he said, although he predicted the focus would move away from price over the next five years.
This article is second of a two-part series. Click here to see the earlier coverage.