5 Strategies for Success in the China Cancer Market

This article was also published in Medical Device Summit

INTRODUCTION

5 Strategies for Success in the China Cancer Market

Cancer is growing very quickly in China. At the same time, Chinese citizens are becoming wealthier and demanding higher quality medical products and services.  Thus, Western medical device companies marketing their cancer products in China are seeing rapidly increasing demand.

Western medical device companies control a majority of the high end cancer diagnostics and imaging market in China. For example, the Chinese diagnostic imaging market alone is worth approximately $600 million and is expected to almost double in size by the end of the decade.

To be successful in the Chinese cancer market, Western medical device companies should consider the 5 strategies outlined below.

STRATEGY #1: MAKE MORE BASIC VERSIONS OF CANCER DEVICES

While many Western device companies have successfully sold top of the line (triple A) cancer products in China, the larger market demands a more basic product at a reasonable cost — meaning fewer bells and whistles. Firms such as GE, Siemens, Covidien and Medtronic are focusing on developing more affordable cancer devices targeted towards the mainstream Chinese market. The vast majority of Chinese hospitals and clinics require medical devices that are easy to use, affordable and accurate.

For instance, GE Healthcare has developed a variety of cancer imaging equipment options for the Chinese market. GE’s “Brivo” line of affordable and portable diagnostic imaging products has been very successful in more rural Chinese healthcare facilities. Siemens has also created a line of simplified imaging products directed towards emerging markets like China. Dubbed “SMART” (simple, maintenance friendly, affordable, reliable and timely-to market), the devices — such as the MAGNETOM ESSENZA MRI — have seen great success in China.

Many hospitals have long waiting lists of patients seeking cancer treatment. Diagnostic imaging equipment is often used by doctors working in shifts, 24 hours a day. Therefore, medical equipment that provides faster, accurate diagnostics and treatment will be especially successful in the Chinese market. For example, Varian Medical Systems (Palo Alto, California) developed a RapidArc system that has allowed hospitals to treat approximately 35% more patients each day, compared with conventional linear accelerators — and this is one of the reasons that Varian has sold hundreds of linear accelerators to hospitals throughout China.

STRATEGY #2: PENETRATE THE SMALLER CITIES IN CHINA

Competition is already fierce among Western medical device companies trying to market their cancer products to top tier hospitals in large cities like Beijing and Shanghai. Therefore, companies planning to sell their cancer devices in China should consider marketing their products to other smaller cities and large towns, where demand is still high. For instance, GE has taken advantage of these opportunities in smaller Chinese cities and more rural areas by setting up local service and sales offices so that it can promote and service its products.

Similarly, Siemens has set up a Rural Center of Medical Excellence in Shaanxi Province to showcase equipment specifically designed for smaller, rural hospitals. This includes simpler and more affordable devices like their molecular imaging systems. Siemens has also entered into a strategic partnership with the private company, Weikang Medical Group (a pharmaceutical and hospital corporation based in northeast China), to upgrade hospital services and care. Through this partnership, Siemens is marketing its affordable radiation therapy equipment in China’s more rural northeast.

STRATEGY #3: CHOOSE YOUR CUSTOMERS CAREFULLY

It is important for Western medical device companies to sell their cancer products to Chinese hospitals that will be able to use and operate the devices. Some Chinese cancer facilities have invested heavily in the purchase of advanced treatment and diagnostic equipment. However, the hospital’s healthcare workers may not have the technical ability to operate the equipment. If the hospital does not purchase any follow-up services or support (which may happen due to a lack of budget resources), the product may eventually break down and develop a bad reputation in the marketplace.

Therefore, Western device companies should sell their cancer products to Chinese hospitals and clinics that are committed to utilizing their equipment and are willing to invest in training staff to use the products and maintain the devices in the future. This can also contribute to strengthening a Western company’s brand image in China, which is important for future sales.

STRATEGY #4: CAREFULLY CHOOSE YOUR CHINA DISTRIBUTOR

Western medical companies need to select well-connected and trustworthy distributors who can get their cancer devices into hospitals quickly. More due diligence upfront will help to ensure that the manufacturer is picking the right distributor.

Using good distributors that specialize in cancer devices will be key to expanding beyond the largest Chinese cities, where competition from local Chinese manufacturers and Western companies is already fierce. A good distributor will have connections to local and provincial hospitals and governments. The distributor should also know which hospitals are committed to starting or improving their cancer products.

For example, Misonix (Farmingdale, New York) entered the Chinese market in 2006 by signing a distribution agreement with China’s Acton Medical Device Corp. (Guangzhou) for Misonix’s HIFU kidney cancer device. Also, since 2005, BSD Medical (Salt Lake City, Utah) has had a long-term exclusive distributor agreement with Dalian Orientech (Dalian, Liaoning Province) to market BSD’s radiofrequency device that treats cancer tumors. The agreement was renewed in 2012 — for twice as many devices as in the original agreement.

STRATEGY #5: ACQUISITIONS, PARTNERING OR ESTABLISHING YOUR OWN LOCAL PRESENCE

Buying Chinese cancer device firms can both increase the Western company’s product range and also bring established relationships with Chinese doctors, hospitals and distributors.  For example, several years ago Sweden’s Elekta purchased China’s Beijing Medical Equipment Institute — which had a strong product portfolio as well as a 50% market share of China’s lower-end radiation therapy market.

Some Western cancer companies are partnering with local healthcare providers in order to get their products into smaller hospitals throughout China.  For instance, Siemens has strengthened its sales and support services in China by cooperating with and supporting Chinese hospitals, research institutes, academic societies and local healthcare facilities. In 2013, Illumina (San Diego, California) licensed its diagnostic sequencing technology — including tests for cancer — to China’s Kindstar Global (Wuhan, Hubei Province). Kindstar is using this technology in its network of more than 3,000 Chinese hospitals.

Many Western medical companies have established their own local manufacturing facilities, R&D facilities and regional or divisional headquarters in China. GE moved its x-ray headquarters from the U.S. to China several years ago, re-focusing on the lower-end and primary care sectors of the Chinese market. In June 2014, GE also opened a new, $100 million manufacturing plant in China that will produce imaging equipment targeted primarily to the Chinese market.

CONCLUSION

China’s cancer market is expected to show impressive growth for the next several decades. However, to be successful, Western medical firms should develop specific strategies for the Chinese cancer market.

Western cancer device companies will need to develop products that meet the needs of China’s hospitals and clinics. Simple to use, accurate and more affordable options for radiotherapy, chemotherapy, surgery, targeted therapies, diagnostic screening tests, immunotherapy and other treatments for cancer are likely to be the most successful in the Chinese cancer market.

Western firms should choose their Chinese customers carefully to ensure continued sales and a good brand image. Finding the right distributors is also important. Finally, Western device companies establishing strategic partnerships with Chinese cancer care providers or opening up their own facilities in China have proven to be successful strategies in China’s rapidly expanding cancer market.