With med-tech companies pondering the best ways to tap into the potentially huge market in China, the Chinese government this week approved sales of a new pacemaker that will be manufactured in China but distributed by Minnesota-run Medtronic.
China-based Lifetech Scientific Corp. announced on Monday that the China Food and Drug Administration (CFDA) has approved sales of five models of its HeartTone pacemaker that will be made and sold in that country, along with pacemaker leads that were already approved by the CFDA. The first commercial HeartTone implant is expected by July.
"This milestone is significant, as Lifetech Scientific has a strategic collaboration with Medtronic, which has provided technical, manufacturing, quality and regulatory support to Lifetech," Medtronic spokeswoman Kathleen Janasz said via e-mail. The device "makes Lifetech the first Chinese domestic manufacturer with an implantable cardiac pacing system with world-class pacemaker technology and features."
China has a population of more than 1.3 billion, and the incidence of slow heartbeat problems called bradycardia is comparable to that in the United States. Yet in China, about 31 people per 1 million have a pacemaker, compared to about 1,000 pacemaker patients per 1 million people in the U.S.
The Chinese market "is perhaps going to be, at some time in the future, the biggest market in med-tech," Medtronic Chief Executive Omar Ishrak told investors in a quarterly earnings call last month. "We expect to participate and work with stakeholders there and are confident that we can continue our performance there of delivering double-digit revenue growth."
But the potential size of the opportunity for Western med-tech companies in China is offset by the challenges in getting their products to market there.
There's a perception that the Chinese government prefers domestically produced medical devices over imports, noted Joseph Hale, director of the innovation fellows program at the University of Minnesota's Earl E. Bakken Medical Devices Center.
Yet until this week, Lifetech Scientific said there hadn't been a domestic producer of pacemakers that have the product features and underlying manufacturing quality controls of devices made by Western companies. Not only is Medtronic a 25 percent owner of Lifetech Scientific, it also contributed the technology that Lifetech used to design and build its first pacemaker manufacturing line that meets Chinese regulatory standards.
"Because Chinese local manufacturers lack core technology and related industry experience, in the past only multinational companies have provided pacemaker products to Chinese physicians and patients, with less than 80,000 pacemaker implantations per year," Lifetech Scientific said in its statement. (The company didn't respond to e-mails for comment.)
Hale also noted that though China is the world's most populous nation, much of that population is spread across a wide geography, making it difficult for many Chinese to access even diagnostic care, let alone high-tech treatments like pacemakers.
"There's a lot of potential there, but I think there are other hurdles [beyond] just simply introducing technology," Hale said.
Pricing is also an issue.
Just as India recently imposed price caps on basic imported medical devices like heart stents and knee implants, Chinese officials this year proposed what Wells Fargo stock analyst Larry Biegelsen called "price cuts" on heart stents and implantable heart defibrillators. And there's concern that such pricing controls could spread to other devices.
"Access to health care for patients in China is a big priority for the government and a big priority for us," Ishrak said in response to Biegelsen's question on last month's investor call. "We feel that our ability to demonstrate value and our experience with value-based models will give us the right pricing in those markets, and the right trade-off between price and volume."
Although Lifetech Scientific didn't publish prices for its HeartTone pacemakers, the Dec. 18 announcement about the CFDA approval noted that the company plans to make "safe, reliable and cost-effective domestic-manufactured pacemakers."