Medical Device Daily Washington Editor
WASHINGTON — The annual meeting of the Medical Device Manufacturer's Association (MDMA; Washington) commenced in the dark due to a power outage which was blamed on the area's subway system, but device makers soldiered on. Even in the dim light in the lower level of the Marriott Metro Center Hotel, the speakers were able to shine some light on a number of issues facing the device industry.
Ames Gross, president of Pacific Bridge Medical (Bethesda, Maryland), reminded attendees that the markets in Asia are sizeable, but cautioned that "one of the things you want to keep in mind is that you have to be very street-smart" in those markets. He also pointed out that "each market is very different."
Gross said that two out of every three members of the human race live in Asia, but that only about 400 million to 500 million live in Central and South America.
Of the residents of Asian nations, he said "[t]hese people are getting richer by the day," and in the case of some smaller countries "their per-capita incomes are exactly that of the U.S." He also said that citizens in China are making as much as five times for some occupations as five years ago.
The contrasts between some of the regulatory and reimbursement systems remain stark, however. "I look at the Asian market as sort of a triangle," Gross said, adding that in the U.S. "everything is allowed but for that which is prohibited by law." On the other hand, Japan is a nation where "everything is not allowed but for that which is permitted by law" while China has been closer to a Wild West model to the extent that "everything that is allowed is allowed and everything that is not allowed is allowed."
Japan "is a fairly closed market," Gross said, although a few companies are doing well. For some firms, Japan represented a greater proportion of net profits than of gross receipts, but the nation's authorities caught on. In 2005, Japan's Pharmaceutical Affairs Law trimmed spending on devices, and Gross made the case that the government is worried about the fact that its citizenry is aging faster than that of any nation on the planet. The government, he said, "is not necessarily looking to prolong these lives for $350,000 because they already have a lot of old people walking around."
Consequently, a unique device "may not be appropriate for the Japanese market," Gross said, adding that authorities there may "ask for more documents than were ever required by FDA."
As for China, it's "the world's biggest boom" economy, with annual GDP growth of nearly 10% per annum over the past decade and a half, Gross observed, but "there are no more bribes" and the recent execution of the chief of the State Food and Drug Administration over bribery charges shows that corruption is the object of a lot of ire in Beijing.
Gross said that device companies will want to account for cultural differences in the East, and these vary even between nations in the Far East, let alone when comparing India to China and Japan. He said there are more lawyers just in the metro Washington area than in all of Japan, and "relationships are everything" in the latter nation because the culture demands greater familiarity whereas a contract is the binding agent of choice in the U.S.
Gross said that device makers should not be too distracted by the fact that Japan's device market seems to dwarf that of China by $25 billion to $5 billion annually. The Chinese market is growing and while setting up shop involves signing distributors which has been a notoriously difficult task "some foreign companies have been successful," and recent regulations promulgated by the World Trade Organization have opened the market more. However, distributorship is still a regional affair.
Gross also warned companies not to set up shop in one nation and expect to do business in a number of others from that base. He said many in China do not trust Japanese citizens and vice-versa, hence advising companies "don't have Japan operations manage other offices in Asia," a not-uncommon practice.
As is commonly understood, clinical trials in Asian nations can be a lot cheaper, but scientists are not paid as well as in the West. Gross said some scientists in Asia "make only $20,000-$30,000 a year," a sharp drop from the six-figure salaries earned in the West. He said a number of device makers "have set up shop" in Asian nations for such cost differences.
However, the poor protections for intellectual property in many Asian nations hint at the need to break up the labs used to develop a new device in order to avoid IP piracy.