As China targets universal healthcare, a massive market emerges

The medical device sector in China is set for solid growth given the Mainland government’s pledge to provide essential healthcare.

China’s current healthcare system is two-tiered, with adequate and often world-standard healthcare available in urban areas, while many rural areas have very little provision. That’s about to change, in the midterm at least, with the recently announced government initiative to provide universal access to essential healthcare for all in China by 2020. The initial intent is to spend $124 billion between 2009 and 2011 to lay a solid foundation for this, and this is sure to boost demand for medical devices, a market that there was valued at $4 billion in 2008, or less than 2% of the global market for about 20% of the global population.

GW Plastics’ Riehl: Medical device manufacturers want trusted supply sources in China. Sunta Plastics’ Gao: Global-standard medical devices from China.

China’s government has its own plans to champion domestic high-tech medical device manufacturers and reduce its reliance on imported devices. Currently, it is home to an estimated 12,500 device manufacturers making everything from bandages to CT scanners. Numerous multinational device makers have a presence in China primarily to access the local market, typically in the form of joint ventures or technology licensing.

Processors speaking to MPW at the recent Medtec show in Shanghai, organized by the magazine’s owner Canon Communications, indicated that despite the strong growth prospects, potential players—be they local or foreign—need to be aware that the same stringent global standards apply to medical manufacturing when doing business in China.

Global standards
Nypro Inc. (Clinton, MA) operates four ISO 13485-certified plants in China (in Suzhou, Guangzhou, Shanghai, and Tianjin) and says that such certification is a must in order to sell back into the U.S. and European markets. “The focus of our customers is definitely risk mitigation,” notes Jason Durkin, director of market development. “They also want to work with known entities.”

While projects are often transferred from Europe and the U.S., there are some that start with development in China. Nypro, for example, has a joint venture design affiliate called Radius Product Development in Beijing that has worked on projects in oral healthcare and in developing a glucose meter.

Contract molder GW Plastics Inc. (Bethel, VT) says its clients in China are the same as those it serves in the U.S. “They have a sense of security by doing business with someone that they are familiar with. They know we have the quality systems and a strong management team in place,” says president and CEO Brenan Riehl. GW Plastics focuses its business development efforts on customers who require a high level of service quality and “on customers who know us, rather than being overly opportunistic.”

Currently, 75% of GW Plastics’ global business is for medical applications, and the aim is to raise the ratio to at least 50% in China from the current level of less than 20%. Two machines currently operate in the cleanroom at its Dongguan plant in southern China, and there will be four more within a year. “We don’t treat Dongguan as a separate factory,” says Riehl. “It’s fully integrated [with our U.S. plants], and customers don’t see a big difference except that there’s a lot of Chinese staff at our Chinese plant.”

GW Plastics’ technology transfer is not a one-way street; for instance, the Chinese side may come up with a simpler way of putting together a tool that is more cost effective. “Having said that, medical is a business where you just cannot make shortcuts,” emphasizes Riehl.

A newcomer to the device market in China is Rosti Integrated Manufacturing Solutions (Suzhou), which is in the process of rolling out medical molding services in China after having been active in the business for 15 years in Europe. The processor has just reached contractual agreement with a large European multinational to supply medical devices from its Chinese facility. The company has been in China since 2001 as a molder of business equipment and, more recently, automotive parts.

Rosti will be implementing ISO 13485 standards in China within the next 12 months. According to regional director of sales Karl Stillman, “At Rosti, we are running a good clean operation, and are operating to ISO 9001 and TS 16949 standards, and so have the capability required to reach ISO 13485 within 12 months. Our plan is well under way,” he says.
 
Stillman feels that global medical device manufacturers will ideally stick to a global sourcing approach when they come to China. He also notes that financial stability is highly sought after in processors these days given the turmoil the global processing industry has experienced of late. “We understand that some of our customers now run internal courses on how to detect potential bankruptcy in their supply chains. Being part of the AP Moller Maersk Group gives our customers and potential customers the confidence that they are dealing with a financially secure partner,” he adds.

Price right
While the medical device market may look attractive, Univac Precision Plastics (Shanghai) Co.’s Lee Oon Thai, business development manager, cautions that strong growth may not necessarily translate to strong profits. “Like any business, you need to run a lean operation to enjoy profits because you have higher costs associated with cleanrooms, quality control, and documentation,” he says. “Many processors diversifying into medical are not aware of these costs and may end up under-quoting jobs.”

“Sometimes the medical validation cost is higher than the total cost of producing the product,” says Brady Tong, Asia sales and marketing manager for Minnesota Precision Products (Su Zhou) Ltd. (Jiangsu Province). “For example, it might cost $170,000 for validation and you’re only making 4000 or 6000 pieces per year.” Minnesota Precision’s China facility insert molds surgical tools using liquid silicone rubber (LSR), and plans to introduce bi-component molding capability by the end of 2010.

Local lights
Recognizing bright prospects for the medical device sector, plastics supplier Bayer MaterialScience (Leverkusen, Germany) has experts located at its Shanghai tech center to support development and design, according to Marina Lee Chui Wa, marketing manager, Asia Pacific, for polycarbonate. The company is already assisting local device manufacturers to produce global-standard products. Foshan Nanhai Baihe Medical Tech Co. (Guangdong Province), for example, molds a three-way stopcock for fluid infusion control using a radiation-stabilized Makrolon PC grade that is also liquid stabilized and lipid resistant. “This ensures no blockages, even with a flow diameter of less than 1 mm,” says Lee. Another device from a local company is a blood segregation system from Xi An Zhengyuan (Shaanxi Province) molded from clear, impact-resistant Makrolon PC. “Impact resistance is required because the device is used in a centrifuge,” explains Lee.

A third local medical molder climbing up the technology tree is Sunta Plastics Enterprise Co. (Zhuhai, Guangdong Province), which has traditionally thermoformed housings for medical equipment from flame-retardant ABS resin. Sales manager Paul Guo says Sunta is now thermoforming sterilization trays for orthopedic equipment from polyphenylsulfone (PPSU) sheet supplied by Ensinger (Nufringen, Germany: Tecason P VF sheet) and Evonik Degussa (Essen, Germany: Europlex PPSU sheet). The base polymer is Radel from Solvay Advanced Polymers (Bergen op Zoom, the Netherlands).

These local lights and their foreign-invested peers have one thing in common. They see a bright future for the medical device segment in China and concur that only the best in product quality and reliability will do for both global and local markets. —Stephen Moore