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SELLING IN THE CHINESE ELDERLY CARE AND REHABILITATIONSECTOR
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Sales and distribution in China’s Medical Device and
Rehabilitation Sector
2. Institutional overview
3. Protecting your IPR1. Key developments
4. Distributor and
stakeholder best practices
Outline
What you will learn
Key developments in related sectors
Hospitals and institutions
Medical device registration
IPR protection
Distributor management
Key developments
China has the world’s fastest growing
elderly population
2010: 140 million people over 65 years
2050: 350 million people over 65 years
One child policy causing population imbalance
Better living standards have raised life expectancy
Source: United Nations, 2010
Age structure of China’s population, 2010
Source: United Nations, 2010
Projections for 2050
1 child supporting 2 parents and 4 grandparents
Traditional cross-generational housing model increasingly challenging
Increasing demand for rehabilitation and long-term elderly care facilities
Public and private elderly care sectors are experiencing high growth
The 4-2-1 phenomenon
80% of them need assistive devices
The government is pushing for more rehabilitation clinics to support the
growing amount of people with physical disabilities
Increasing the demand for mobility aid and assistive devices
China is home to 83 million disabled people
Source: Export.gov
China’s annual income has almost doubled in 6 years
The rise in purchasing power is enabling more Chinese people to
purchase better quality care and equipment
This is fuelling higher demand for foreign rehab and assistive devices
Rising incomes in China
Institutional Overview
The sector is relatively new and still in its infancy
Lagging behind in specialized facilities and expertise
Currently China is reliant on foreign equipment and expertise
Total import value of rehab devices and orthopedics: 2011 $1.4 bn, 2013
$2.2bn
China lacks know-how and experience
The Chinese senior population prefer being cared for by the younger
generations (also known as filial piety or in 孝, xiào in Chinese)
The 4-2-1 phenomenon means this is no longer an option
Therefore the demand for long-term care facilities is surging
Traditional methods are no longer sustainable
Increasing demand fuelled by urban residents
Most facilities are located in rural areas, previously the centre of demand
Facilities are mostly low-end, demand has shifted to middle and high-end
Regional supply and demand imbalance
“74% of total elderly care facilities are
in rural areas, and are mostly low-end
public nursing homes”Jules Falzado, Engagement manager at SmithStreet
The government is encouraging private investors to set up elderly care
facilities and hospitals
A growing sector with favourable investment conditions
The ratio between private and public institutions is projected to change
resulting in a larger private sector
Private sector encouraged to provide solution
2012, China had 42,000 elderly care institutions
In these there were about 3.81 million aged care beds
20% of the institutions are privately owned
Supply of beds in government-owned facilities to increase to six million by
2015 (roughly double the number of 2010)
China’s elderly care institutions
Premium and mid-market private facilities emphasize the quality of care to
their clients
Public facilities often offer low/basic care and use lower quality equipment
Public and private facilities are very different
“Private senior care providers in China generally
provide better quality care than the majority of the
public institutions and mid-market private facilities
offer adequate care services and are acceptable
alternatives to the upscale government nursing
homes with longer waiting lines”
Jules Falzado, Engagement manager at SmithStreet
FDI regulations have been loosened, encouraging foreign companies to set
up elderly care facilities in China
The development is occurring throughout the country
Currently it’s mainly driven from richer coastal areas and 1-tier cities and
mostly by European and American investors
The number of foreign facilities is expected to continue rising
More foreign-owned institutions
Mainly focus on the top segment of the market
Bear a resemblance to luxury hotels
Provide a high quality of care to their tenants
Generally use foreign equipment
Source: China Senior Care Inc.
Most foreign facilities are high-end
“Our facility and most of the foreign-
operated facilities are using foreign
brands for all their rehabilitation
equipment.”
Mark Spitalnik, President & CEO of China Senior Care Inc.
Their classification is determined by their size and quality of care
There are approximately 21,000 hospitals in China
Some hospitals are ungraded and unclassified
3-tier Chinese hospital system
3-tier Chinese hospital system
Small hospitals Large hospitals
Tier-1 hospitals are usually located in
small townships and cities.
Provide a basic level of care and
generally do not enjoy a good reputation.
Their budgets are small, making them
more price-sensitive
Less likely to purchase foreign
equipment.
Tier-2 and tier-3 hospitals are usually located in
large or medium-sized cities.
Provide a high level of care and enjoys a good
reputation
Have access to large budgets
More likely to purchase foreign equipment
“It is not unusual for large public hospitals
to compete on who is having the most
sophisticated equipment”Jens Moth, former counselor of the Danish Trade Council in Beijing
Large tier-3 hospitals have large budgets but you are required to enter a
public tendering process
Entering a tender is often costly and time-consuming
Public senior care facilities are often low-end and therefore less inclined
to buy high quality equipment
In order to win a the tendering process you
“must”:
A. Have an innovative or high quality product. It is difficult for
hospitals to justify using a foreign brand instead of a domestic
brand if the foreign brand is not significantly better.
B. Be well connected to local decision-makers. The engineering
bureaus that draft the tender offers rely on outside experts to
provide them with knowledge and input.
Public sector is more difficult to target
“If your product is not a breakthrough product I
would suggest avoiding the costly tendering
process and instead focus on private hospitals
and senior care facilities”
Jens Moth, former counselor of the Danish Trade Council in Beijing
Government incentives have spurred growth
Middle and high-end care facilities use quality equipment
The absence of a tendering process makes them easier to target
More mid-range facilities are emerging in order to support the growing
middle-class
Private sector shows strong potential
Chinese facilities have limited in-house experience and know-how
Therefore they are much more reliant on after-sales service and support
compared to the public sector
Localizing sales and after-sales is crucial
Importance of support and service
Localized operations
and manufacturing
Experts say localization is key
Localized operations
and manufacturing
Makes you more competitive in the market
Experts say localization is key
Localized operations
and manufacturing
Makes you more competitive in the market
Enables you to easier support stakeholders and offer after-sales
service
Experts say localization is key
Localized operations
and manufacturing
Makes you more competitive in the market
Enables you to easier support stakeholders and offer after-sales
service
Lowers costs of your products and spare-parts
Experts say localization is key
IPR protection and medical device
registration
Our advice:
Adequately protect your IPR before
taking any actions in the Chinese
market.
Work together with a local law firm
that understands your products and
sector
Protecting your IPR
“It is essential to register your patents locally in
China – not from abroad – and to work with an
office that possesses experience in the sector you
are operating in. To safeguard your IPR in China
you require strategic protection and an office that
understands the local legal environment.”
- Michael Qu, Managing Partner at Law View Partners
Work with a network of trusted suppliers for manufacturing allowing you
to divide up production
Ensure that no single party has access to the final product
Assemble the final product in a separate secure location
Avoid IPR infringement in manufacturing
“We usually assemble our clients’ final products
within our own secured assembly facilities and
consequently decrease the risk of suppliers
attempting to copy the product. If your product
possesses highly advanced technologies, you
can also consider outsourcing basic component
manufacturing to China and importing your
advanced components.”
Gijsbert de Bruin, CEO of CHC Product Development and the CHC Group
In order to sell in the Chinese market your rehabilitation device(s) must
be registered, approved and classified
Medical device registration is done through China Food and Drug
Administration (CFDA)
If you do not have a legal entity in China you are required to appoint a
registered legal agent to handle your medical device registration
You are also required to appoint a local after-sales agent to manage
maintenance and device issues
How to register your devices in China
Our recommendation: We recommend not appointing
your distributor as your legal and after-sales agent. It will
require you to give your distributor the rights of
registration, which is risky because it gives the distributor
too much influence over your business in China.
Registering your products in China
Medical device classification
Distributor best practices
China is not one unified market
China is a collection of individual submarkets and one partner is often not
enough
We suggest working with multiple distributors instead of one countrywide
exclusive distributor
By doing so you also avoid giving all control over your sales and brand(s)
to one third-party, thereby lowering risk
Some distributors focus on the public sector, some on private
Trade fairs
Chambers of Commerce
Service Providers
There are an increasing number of water related trade fairs in China
Make sure to adequately protect intellectual property before attending
Distributors are often looking for a final product rather than a single component
Host industry-related events and trade missions
May be able to assist in the distributor search
Organize events and trade missions
Advice given may not be industry-specific
Using a service provider to find distributors provides the essential due diligence
Often have extensive distributor databases and local expertise
Use a service provider with specialist knowledge of your industry
Find out more about our solutions here
Finding your distributors
Lack sophisticated inventory and CRM systems resulting in inefficient
operations and high overhead costs
Many distributors lean towards whichever company provides the highest
commission
Good results in the short-term does not mean long-term success
They are accustomed to selling on price and are less equipped to sell your
product’s unique advantages
Characteristics of Chinese distributors
Provide continuous training, support and management on the ground to
avoid common mishaps and reach your sales potential in China
Essential if you want full control of your brand and direction
Constant management and supervision offers increased IPR protection
Benefit from first hand information and communication by having a
presence in China
Distributors need local support
Have a dedicated business development manager on the ground to aid your
distributors
Tie your distributors to performance-based contracts
Develop good relationships with your distributors (meet them on a regular
basis)
Visits key clients together with your distributor
End relationships with underperformers
Distributor best practices
“Be 100% sure that your distributor does not accept
your product only to add it to his portfolio in order to
show how local alternatives are a more cost--
efficient option. You must manage your distributors
with an iron fist and not be afraid of ending
relationships with underperforming partners”
Jens Moth, former counselor of the Danish Trade Council in Beijing
Helps you build relationships with your customers
Lets you exercise more control over your business in China
Makes you less dependent on your distributors
Gives you an understanding of the local market and your clients’ problems
Enables you to offer better service and customer support
Visiting key clients and stakeholders
Many of the new Chinese Continuing Retirement Communities (CCRC) have
product exhibition areas
Companies can use these exhibition areas to introduce and market their
products in the market
Displaying your products within facilities
“An interesting (and in my experience, unique)
feature of Chinese Continuing Retirement
Communities is that they tend to include an
exhibition area within their developments for the
display and marketing of medical equipment
and mobility aids”
Roger Battersby, managing partner of PRP Architects
Get the most out of your distributors with
our distribution support platform
Learn more about how we can make you more
competitive in the Chinese medical device and
rehabilitation market >>> contact us now
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About us
Launch Factory 88 supports industrial SMEs in the water technology
sector to increase their sales and become more competitive in the
Chinese market. We do so by offering two core services; a
distribution support platform and localized manufacturing and
assembly.
Launch Factory 88 is part of the CHC Group which was established
in 1998 by two Dutch entrepreneurs and has since then developed
multiple market leading companies in diverse industries in China. We
help your company succeed in China using the same careful
methods we employed to build our own businesses.
Contact us today to find out more
