As a consultant, I often have interesting discussions with potential medtech clients. For example, a company with a relatively new medical technology recently asked if I could help them in Japan and China. Initially, they wanted to determine the market opportunities and get information about the registration processes. These are typical questions that I receive nearly every day.
Before I addressed China and Japan, I asked the prospective client about his company’s presence in the smaller Asian markets, and the potential client sent me a list of their distributors in these countries. The company’s product could be used for two different indications—orthopedics and dental—so in some of the smaller Asian markets they had two different distributors. In others, the company had a distributor for orthopedics but was not selling in the dental sector, or vice versa.
Looking through the list of about 20 distributors in the smaller Asian countries, I was only familiar with one of the companies. While it is impossible to know all of the distributors in these countries, I had to assume that their current distributors were relatively small. Interestingly, in the smaller countries the company’s product had already been registered and was being sold. When I asked the company executive to send me the sales of each distributor, he told me he was only asking for help in Japan and China and had no interest in discussing the smaller Asian countries. I did not push the issue.
However, given the relatively new technology being used in the product, I knew it would not be easy to succeed in Japan and China. New technologies face high hurdles in both markets. I further conducted research on the markets in Japan and China and learned that related technology had not experienced much success in either country. At this point, I told the client that getting approval in either country would not be easy and may never occur. To succeed with product registration would surely require expensive local studies, which could lengthen approval times in each market to three to four years.
Given the novelty of the technology, I also pointed out other issues that could impact the product’s success. In Japan, medical products normally do not sell unless the government reimburses them, and many international device companies have found that getting higher reimbursement rates for new technology is not an easy process. In China, products risk being copied by local companies that would sell the lower quality copycat at a reduced price, thereby “stealing” a large part of the market.
To avoid the registration and reimbursement process in Japan, I suggested that we set up a Japanese website and call center. Non-registered devices can be ordered online and be imported by a Japanese physician for personal use on their own patients. I also discouraged the company from pursuing the Chinese market for fear that the product would never get registered or be copied.
Finally, I turned to the smaller Asian markets—the markets that were initially discounted—and outlined a strategy to increase sales. In some of these countries there was only one distributor selling the product into either the orthopedic or dental space, so I suggested adding a second new distributor as needed. I also evaluated the sales of the distributors they had in place and conducted due diligence on each distributor via our local people on the ground in Asia to ensure that their distributors were doing their job properly and making enough sales.
I suggested that we negotiate with the distributors that were not selling much and offer to buy back the registrations they held at a reasonable price. By doing this, we could transfer these registrations to new, better, and more motivated distributors without having to re-register the product from scratch. Many of the distributors in the smaller Asian markets who had sold only $25,000 of product in the previous year were happy to receive $20,000 in exchange for a friendly transfer of the registrations.
Shortly after implementing these new strategies, the sales in the smaller Asian countries grew quickly. This sales growth helped the medtech executive gain credibility internally while the company planned a long-term strategy for Japan.
Moral of the story: Be open to different strategies in Asia! There can be more than one path to success in the complex Asian markets.