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Ted Kucklick, Cannuflow Incorporated - Speaker at the marcus evans Medical Device Manufacturing Summit Fall 2012, held in Colorado Springs, delivered his presentation entitled Medical Devices Going Global! Gaining a Foothold in Emerging Markets
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Going GlobalGoing GlobalGoing GlobalGoing Global
Navigating the new Navigating the new newnew worldworld
Ted Kucklick CEO CannuflowTed Kucklick CEO Cannuflow IncIncTed Kucklick CEO, Cannuflow Ted Kucklick CEO, Cannuflow IncIncAuthor, The Medical Device R&D HandbookAuthor, The Medical Device R&D Handbook
Meanwhile back at the ranch:Meanwhile back at the ranch:Meanwhile back at the ranch:Meanwhile back at the ranch:
•• For better or worseFor better or worse ObamacareObamacare is now the lawis now the lawFor better or worse, For better or worse, ObamacareObamacare is now the lawis now the law•• The medical device tax still loomingThe medical device tax still looming•• Comparative effectivenessComparative effectiveness•• Comparative effectivenessComparative effectiveness•• Medicare quality incentives and penaltiesMedicare quality incentives and penaltiesP ibl i d l hP ibl i d l h•• Possible continued slow growthPossible continued slow growth
•• Slow FDA market approvalsSlow FDA market approvals•• Makes the grass on the other side of the (global) Makes the grass on the other side of the (global) fence look greener doesn’t it?fence look greener doesn’t it?
USA: Successful Products Going dForward
• “CO+EO”• Incremental improvements, bells and whistles for more
d “ i h fill ”money and “niche fillers” won’t cut it (Kevin Lobo, CEO, Stryker at CCF meeting)y g)
• “No outcomes, no income”• What investors look for: 3X better for the same price or same performance for ½ priceprice
Greener Pastures?Greener Pastures?
F l ?Faster approvals?
Lower margins?
Reimbursements challenges OUS
tootoo
World population 1800 2050World population 1800‐205095% of your potential customers don’t live in the USA
200 Years that changed the world200 Years that changed the world
The new, new worldThe new, new world
• Hans Rosling KarolinskaHans Rosling, KarolinskaInstitute, Division of Global Health
• The idea of “The Third World” of 1948 is obsoleteWorld of 1948 is obsolete
• The concept of “the emerging markets” isemerging markets is nearly obsolete
• www gapminder orgwww.gapminder.org
WW2 marked the end of 600 years of WW2 marked the end of 600 years of yycolonialism, one of the most profound colonialism, one of the most profound
changes in modern historychanges in modern historychanges in modern historychanges in modern history
Depositors withdrawing savings in p g gChina, 1948 by H.C.B.
The Great Leap Forward:The Great Leap Forward: Bigger! Better! Faster!
Cheaper!Cheaper!
"better to be poor under socialism than rich under capitalism."
Deng Xiaopeng: “To be rich is glorious”rich is glorious
China, 1958, by H.C.B.
Foxconn 2010
FP/McKinsey Top 75 most dynamic cities 2012FP/McKinsey Top 75 most dynamic cities 2012
#1 Shanghai #12 Los Angeles
#2 Beijing
#3 Taijin
#4 S P l
#14 Istanbul
#21 London
#22 H t#4 Sao Paulo
#5 Guangzhou
#6 Shenzhen (Foxconn)
#22 Houston
#33 Doha
#39 Delhi#6 Shenzhen (Foxconn)
#7 New York
#39 Delhi
#47 Sydney
#57 San Francisco
29 in China, 13 in US, 8 in L.A. 3 in EUhttp://www foreignpolicy com/articles/2012/08/13/the most dynamic cities of 2025http://www.foreignpolicy.com/articles/2012/08/13/the_most_dynamic_cities_of_2025
Dynamic=fastest growing in population and GDP
World Map Proportional to GDPWorld Map Proportional to GDP
Japan $5.8TJapan $5.8TChina $11.2TChina $11.2T
EU $17.5TEU $17.5TUSA $15TUSA $15TS. Korea $1.1TS. Korea $1.1T
India 4.5TIndia 4.5T
Asia zone $22.6TAsia zone $22.6T
http://www.worldmapper.orghttp://www.worldmapper.org
USA vs World GDP www.bigthink.com
The future world population will also be older andalso be older and
more active
The world market looks very attracti e! What co ld possibl oattractive! What could possibly go
wrong?
Going Global: The FCPAGoing Global: The FCPA
• “The Foreign Corrupt Practices• The Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§ 78dd‐1, et seq. ("FCPA"), was enacted for the
f ki i l f lpurpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials g gto assist in obtaining or retaining business. ”
• http://www.justice.gov/criminal/f d/f //fraud/fcpa/
International Corruption Index ( ’ )(BRIC’s)
RUS 2.4FIN 9.4
USA 7.1
IND 3 1CHI 3.6
BRA 3.8
IND 3.1
www.transparency.org
FCPAFCPA• 1977 law To prevent bribery, amended
in 1998• Follows a US citizen around the world• Spiffs not OK even if local laws and
customs allow itcustoms allow it• “Competitive necessity” definitely not
a defense“I did ’t k ” t d f (“Willf l• “I didn’t know” not a defense (“Willful blindness”)
• US subsidiaries of OUS companies li blliable
• Very broad definition of “government official”
• US FCPA paralleled by UK “SFO”
FCPA and the UK SFOFCPA and the UK SFO• US DOJ and UK SFO coordinate on cases• Medical device companies hit with hundreds of millions in fines
• Marketing samples given to government officials can be considered illegal bribesI t t HC t ( G ) l ll• In state‐run HC systems (e.g. Greece) nearly all HC workers may be considered “government officials”officials
• Fines, disgorgement of profits, jail time• For details see: http://www fcpablog com/• For details see: http://www.fcpablog.com/
Regulatory and IPRegulatory and IP
• Be careful who owns import license (e.g. first registrant in China, must be a national, may be hard or impossible to reclaim or transfer if problems)to reclaim or transfer if problems)
• Brazil increasingly difficult (ANVISA now requires site inspections, slow, expensive)
• Getting FDA CFG’s consularized can take some work• NDA’s: need “NNN” in China, non‐disclose, non‐
t i ti f bl i Chicompete, non‐circumvention, enforceable in China
Going Global: Reverse InnovationGoing Global: Reverse Innovation• Vijay Govindarajan and Chris
Trimble• “50% solution for 15% price”
(Alex Gorsky J+J)• NOT de‐featured or obsolete• NOT de‐featured or obsolete
tech• “ICFC” In‐country for country
D l d d l l li i l• Developed around local clinical, infrastructure, and affordability needsE l l GSI V i• Early example: GSI Vein Harvester
• Design for Extreme Affordability” h // f d d /http://extreme.stanford.edu/
Changing Investment LandscapeChanging Investment Landscape
• Angels supporting the sub $3M investments the g pp g $VC’s won’t do
• Angels are funding some of the life science deals that the VC’s used to dothat the VC’s used to do
• The “Superangels”• Angels crossing borders: K4 in US SPA FR CN TK• Angels crossing borders: K4 in US, SPA, FR, CN, TK• VC’s acting more like PE, fewer early stage, more late stage after valuations got smashedg g
• “Are we eating our seed corn?”• More reliance on grants and public money
Global IncubatorsGlobal Incubators
Is the “Universal Translator in our f ?future?
ConclusionsConclusions
• “Skate to where the puck will be” will never changep g• Small players can compete too• Significant historical changes in our lifetimes• May be looking at a “multipolar” future • The rich are getting richer but the poor are too• Cultural and legal challenges• Cultural and legal challenges• Unique local needs waiting to be met• These can generate unique solutions back home• Need firsthand understanding of local needs• New funding and development models emerging
Thank You