July 20, 2012 12:55 pm by Arundhati Parmar Medical device companies are looking toward China tempted by the prospect of satisfying the demand of a huge, rising middle class, eager to access high-quality medical technology. But to do so effectively, there are certain market realities that need to be recognized. The advice comes from Pete Madson, a vice president at Worrell Inc. , an industrial design firm that works with many medical device companies to develop and design new products. Madson leads the company's operations in China out of Shanghai where he has moved to help Worrell and its customers understand the local market. Madson spoke to MedCity News Thursday when the company was celebrating its 35th anniversary at its Minneapolis headquarters. His recommendations include: Know which market you are chasing One of the biggest mistakes that companies make is that they take the most populous nation on earth to be a homogeneous entity. But it is important to know that there are different levels of sophistication in terms of education, training, need in different geographies of the market. "A hospital in a tier 1 city in China is very similar to a hospital in the U.S., but very different from a hospital in a tier 4 city," within that same country," Madson said. So understanding that is key to developing an effective China strategy.
Be "in China, for China" Madson cannot emphasize enough the importance of understanding the local market to make products that satisfy the local needs. The R&D team in middle America often takes certain things for granted – for instance the level of training that doctors have. "Training of surgeons and doctors is below the standards in the U.S.," Madson said. And if they design products with that assumption, they will not be successful. This philosophy is shared by Medtronic CEO Omar Ishrak who has spoken of doing more R&D in Asia to serve the local population. That is a marked shift from the 90s concept of seeing international markets as places to sell older version of new products. Cheaper does not necessarily mean poor quality There is no question that affordability is a top concern for consumers in emerging markets. While previously, they were happier with older, cheaper products, the same is not true any more "They want all the latest technology but it has to be affordable," Madson. Medtronic's Ishrak, when he was still at GE Healthcare, has spoken about the concept of 'frugal innovation.' Here's how Madson and his team re-engineered an expensive surgical stapler used routinely in Western hospitals and tossed after one use. Johnson & Johnson'e Ethicon Endo Surgery group were concerned when they realized that their single-use linear and circular surgical staplers made of stainless steel were being used repeatedly. "If it's possible for them to figure out if something can be re-used, they will do it," Madson said of China. "It's dangerous but extremely common." Ethicon Endo Surgey also realized the danger. That prompted a search to build a less expensive version. Madson and his team worked mainly on making a re-usable linear surgical stapler focusing on how to reduce "the cost per device." They landed with the concept of "cost per use" instead. In other words, instead of disposing the entire stapler, the team developed a way to throw out the parts that should not be re-used – in this case the cartridge. "You sell the cartridge as opposed to the device," he said. That brought down the cost per use to a few hundred dollars from several thousand, Madson said. Hecouldn't say exactly how the device, launched earlier this year, was being sold that would help to ascertain more specific cost savings. In other words, he didn't know whether Ethicon Endo Surgery was selling a single device with many cartridges bundled together. A call to an Ethicon spokesman was not immediately returned.Overall, Madson is very bullish on China, even though reports suggest that the the country's GDP growth is slowing down. "It's maturing, but there's still a lot of growth," he said.
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