Staying Competitive Amid Rapid R&D Growth in Asia
From 1970 to 2000, the United States, Europe and, to an extent, Japan dominated the medtech research and development (R&D) world. During this time period, the medical devices made in China, South Korea, Taiwan and other Asian countries were simple products like TENS units, rubber gloves, blood pressure monitors, etc. Today, local Asian medtech companies and Asian countries are spending more on medtech R&D and developing more sophisticated and higher risk medical device products.
For example, today Chinese-made drug eluting stents (DES), while not as good as those made by Abbott, Medtronic and other large Western companies, are rapidly improving and generally less expensive than their Western counterparts. Chinese DES are often deemed acceptable for hospitals in Russia, Brazil, India and other developing markets.
Western medtech companies with R&D shops in Asia include GE, Medtronic and Johnson & Johnson. Covidien’s R&D center opened in Shanghai in 2012 and focused on developing products tailored for China and other developing markets, along with research on breakthrough technologies. According to a December 2015 report on the Asia-Pacific medtech market by McKinsey and Company, the top 11 medtech companies have research centers in Asia with more than 250,000 employees.
Western companies that perform R&D in Asia still have significant intellectual property risks. It is astounding how few Western medtech companies explain to their local employees in Asia the importance of protecting IP and the consequences if it is not protected. Many Asian educational systems are heavily geared towards precise copying of authoritative materials, so copying medtech IP products is not a huge leap from how people were trained in school. And of course in China and many Asian markets, your local employees will always have brothers-in-law looking to get into medical device manufacturing by making copies of your product.
Last summer, I had a bright Chinese intern who was born in the United States and working for my company (Pacific Bridge Medical). Her parents did high-level medtech research for the National Institutes of Health (NIH). She told me that her parents (who were born and raised in China, along with receiving their B.S. degrees in the country) were constantly being inundated by requests from their former classmates and colleagues still living in China to steal valuable intellectual property in exchange for generous compensation. One can only imagine how often other Chinese medtech researchers at the NIH or other Western research centers and think tanks get the same sort of propositions from people in China.
One of the ways to reduce the changes of your medtech products getting copied is for regulatory assurance (RA) executives to camouflage key facts when they submit the regulatory documents to their local Asian distributors or partners. If an RA executive fails to do so, your IP is at risk of be copied. We always advise our clients to leave out a key step in the manufacturing process or a key component/ingredient when registering their medtech products in China, Korea, Taiwan and other Asian countries. It still amazes me how few RA professionals fail to do this and continue to send sensitive information to Asian regulatory agencies. Some Western RA executives may think that it will not matter if their device is copied in three years, in the event they have joined another medtech company.
One of the most counterproductive policies in America is not giving work visas to highly trained Indians, Chinese and other who get Ph.D.’s from our top universities in the medical area (engineering, chemistry, etc.). Today, only 65,000 H-1B visas are given out to keep these highly educated talents in the United States. If these people cannot get jobs here, they have no choice but to return to their home country and bring their knowledge and expertise to foreign medtech companies who are quickly learning how to compete with Western medtech products. Until Congress increases the number of visas for excellent foreign students getting advanced technical degrees in the United States, we are training large numbers of our future competitors.
There is little doubt that the United States and other Western countries will always be able to put out a better medtech mousetrap. There is more than enough technology, creativity and energy here to keep at least some of our medtech companies growing successfully. However, if we do not realize that Asian medtech companies are increasing their medtech R&D capacity (with Western-trained Asian senior executives) and producing more sophisticated devices, the overall United States and Western medtech business will inevitably shrink.
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