This is the final installment of a two-part series examining medical manufacturing in China.
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 steep global quality requirements.
Several of those European and North American plastics firms announced new investments in China at a recent medical-device trade fair in Shanghai, in what they said is a trend.
Local Chinese processors are developing rapidly as competitors for that business, and the global medical-device industry is increasingly interested in China as a way 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 foreign suppliers, at least according to interviews at the Medtec China show, held Sept. 7-8 in Shanghai.
An executive at German medical molder Gerresheimer Regensburg GmbH said that at least once a month a representative of a Chinese medical-device company or drug maker will come to its factory in South China with an inhaler or some device that the German firm also makes, and ask for help “optimizing” the product.
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 meets with them 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 clean rooms — it's about the processes,” said Pianigiani, arguing that strict adherence to manufacturing procedures is 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 U.S. 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 ensure 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 U.S. and is looking for a marketing partner in North America. But the firm also finds that the reputation of Chinese products can be tough to overcome, said Leon Rein, an international marketing executive at 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, as well as the Middle East and Latin America.
While export volumes are small now, Chinese firms making minimally invasive devices like catheters are rapidly improving their technology, said Larry Johnson, health-care marketing director at PolyOne Corp. in Avon Lake, Ohio.
“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 China's plan to spend US$120 billion to basic health care to most of the country by 2020 will help China develop its own medical-device industry.
The plan will provide 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 medical and pharmaceutical segment for Holden, Mass.-based Clariant Masterbatches.
“The Chinese government is sensitive to these things and is trying to clamp down,” he said.
Quality, he added, is a global problem and concerns about Chinese products can be overstated.
Rising consumer demand for health care in China is also becoming a big driver for quality, but the market remains price-focused, said Thomas Opielowski, international vice president 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 predicts the focus will move away from price over the next five years.