If you are a medical device company looking to break into the growing Chinese market, don’t go it alone.
That’s the message from Crystal Global Information Technology, known as CGIT, which recently opened an office in Quincy designed to help companies in Massachusetts conquer the legal, regulatory, marketing and cultural challenges associated with doing business in China.
CGIT launched in 2007 in China and exists now as a profitable, 150-person company, with offices in Beijing and Guangzhou, specializing in translation and other services for American companies such as Coca-Cola.
But when the Chinese government last year enacted a health reform law that would invest $123 billion into the country’s health care system over the next five years, CGIT saw an opportunity to focus more on helping medical device companies sell their products in China or establish offices there.
“Exports of U.S. medical devices to China are expected to double from $14 billion to $28 billion, so it made a lot of sense to focus the new U.S. office on this industry,” said John Jarowski, one of the founders of the company. The Quincy office currently has eight workers, and Jarowski expects that to double by the end of the year.
CGIT helps connect medical device companies with distributors in China, as well as local lawyers who can operate in the difficult Chinese intellectual property landscape. CGIT also has a marketing operation that includes both a print and online magazine and a directory of clients that distributors can peruse.
Jarowski said that in China, one has to have a license to publish anything of a medical nature, so the multimedia magazine offerings are a value-add for companies that would not have access to publishing outlets otherwise. CGIT also helps companies navigate the regulatory environment in China.
“The SFDA (Sino Food and Drug Administration) classifies devices differently, and something which is considered a noninvasive device here, may be considered a low-level invasive device there,” Jarowski said.
Kirwan Surgical Products has recently engaged CGIT to help the 87-employee, Marshfield-based company sell its surgical forceps in China. The company has sold devices in both Canada and in Europe, and has licenses to sell in both regions. In Japan, it sells through a local distributor. But China, he said, is different.
“We have no knowledge of the distributors there, and we have no confidence about choosing one,” said Kevin Prario, Kirwan’s regulatory affairs manager. Prario said the company’s biggest concern is protecting IP.
“China is catching up to the current legal protections, but law enforcement is very weak, so companies need to work with local agencies. It’s difficult to settle down there if you don’t partner with a local company,” said Xylina Wu, director of business development for China at the Massachusetts Office of International Trade and Investment. For four years running, the state agency has organized a pavilion at the ChinaMed Equipment Fair.
The Massachusetts delegation usually includes six or seven local medical device companies looking to export their products, and Wu says the event has generated approximately $2 million in sales for the companies involved each year.
She said the state also helps companies looking to open physical offices in China. For instance, MOITI helped Zoll Medical to settle into the Zhang Jiang High Tech Park in 2008. The company established a representative office to support sales efforts by its distributors.
Wu said that the economic explosion in China — the company has just surpassed Japan to become the second largest economy in the world — has given rise to a burgeoning middle class that is pushing up demand for higher-end devices.
“Patients are offered choices: a Chinese product, a European product and a U.S. product, all at different prices. Many people are willing to pay extra for the U.S. product,” Wu said.
CGIT is banking on that newfound demand. The privately held company, which was initially funded by a private investor, is projecting revenue of $3.1 million for 2010 and net income of $1.51 million.