High-growth overseas partners often lack ethics codes, and rules change without notice.
Even though the World Bank ranks the country 16th for ease of doing business, no code of ethics governs professional conduct. Rules for selling products can be opaque and shifting.
In Asian countries “it is pretty common to have regulations change overnight,” said Elise Owen, vice president of global affairs for the Washington, D.C.-based trade group Advanced Medical Technology Association, better known as AdvaMed.
With America’s device industry umbilically linked to Asia and Europe for its growth, favorable business cultures in foreign countries are no longer a matter of convenience. They are a matter of survival.
But U.S. companies often discover that their most indispensable future markets, markets potentially worth billions of dollars in added annual sales, lack openness and consistency.
That is why Medtronic, St. Jude and 3M were among 18 companies that formed the Taiwan Advanced Medical Technology Association last summer and why that association, known as TAMTA, signed a memo of understanding with AdvaMed this month.
Taiwan was a $2 billion export market for U.S. medical device companies in 2011. With that kind of money on the line each year, TAMTA and AdvaMed aim to persuade Taiwanese government and business leaders to adopt regulations that more closely match those of the United States, as well as a code of ethics based on a U.S. model.
“Changing business culture occurs over time,” explained Nancy Travis, AdvaMed’s vice president of legal affairs. “The best way to do it is through associations.”
Progress can be glacial.
“What’s a questionable business practice in the U.S. is not a questionable business practice in another country,” said Myles Shaver, who teaches about international business at the University of Minnesota.
The World Bank ranks India 134th out of the 189 economies it reviewed for ease of doing business. Communist mainland China, like India a must-have market for U.S. companies that want to grow, ranks 96th.
A trade association similar to TAMTA has been operating in the People’s Republic of China for years. But it was only recently that the country stopped forcing U.S. businesses to have their products approved for sale by undergoing identical tests by two separate government agencies, Owen said.
By comparison, Taiwan is much more business-friendly. Still, product testing ahead of sales can be a problem. Like China, Taiwan employs “type testing,” a product-by-product examination, Owen said. That can add as much as 18 months to the time it takes to get products on the market. The delays discourage some companies from offering devices for sale, Owen added.
“We stress process-wide approval [for foreign markets],” she said.
That means clearing an entire class of devices for sale based on a single regulatory regimen, which is how it is done in the United States.
Beyond product-by-product testing protocols that American companies believe slow patient access to medical technology, many foreign markets leave financial relationships between medical consultants and device manufacturers unregulated.
One of TAMTA’s official priorities in 2014 is to adopt a Taiwanese version of the AdvaMed Code of Ethics that governs financial relationships between device manufacturers and doctors in the United States. The aim, said Travis, is to make sure that Taiwanese consulting agreements do not involve “inappropriate compensation.”
“You don’t want prescribing decisions to be based on compensation,” she said. “You want operations in Asia to mirror the U.S.”
Along with TAMTA, several Minnesota med-tech companies, as well as Cargill and some of the state’s other major multinational corporations support the Asia-Pacific Economic Cooperation forum, known as APEC.
The group exists to promote economic cooperation, free markets and standardized practices among the countries of Asia and the Pacific Rim. These include many of the world’s most heavily populated new markets — China, the United States, Russia, the Philippines, Mexico, Canada, Australia, Indonesia and Vietnam.
Looking at their ease-of-business rankings, the problem for U.S. companies becomes clear. Indonesia ranks 120th, the Philippines 108th, Vietnam 99th, China 96th and Russia 92nd.
At the same time, the U’s Shaver warned, dictating changes is not an option.
“The only way this is going to happen is if the countries involved decide it has to happen,” he explained. “It’s almost neocolonialism to come in and tell other countries what to do. Ultimately, foreign governments decide what the laws are and how they are enforced.”
Jim Spencer • 202-383-6123