Some Chinese device makers are creating headaches for U.S. medtech companies by stealing their intellectual property and using it to make knock-offs that look like American devices, but are not as safe, an Advamed official told the U.S.-China Economic and Security Review Commission April 3.

“We are very concerned about [Chinese] products that may look like company X’s product – but do not perform like company X’s product – because that means patient safety [is compromised],” Ralph Ives, executive VP, global strategy & analysis told the commission’s vice-chairman William Reinsch, during the hearing held on Capitol Hill.

Ives said Chinese authorities are “cooperative in the sense they say the right things,” but implementation of appropriate intellectual property protections has so far proved “difficult” for U.S. device makers, he explained, in response to questioning by Reinsch.

In his written testimony to the panel, Ives pointed out that device companies have historically had some built in protection against piracy because of the industry’s rapid, iterative innovation cycle. But, he cautioned, “as Chinese manufacturers move up the value chain and export more of these products overseas, our members’ concerns will intensify.”

When Chinese firms make forgeries of products based on American device makers’ IP, than they can skip the expense of research and development costs, Ives explained. Chinese manufacturers can then afford to sell the products at lower prices. And when these knock-offs make it to U.S. or other global markets “it creates a threat to public health, and a threat to our members’ global reputations,” Ives said.

China’s FDA has recently signaled it is trying to better police its manufacturers’ forgeries, which can range from submitting fake clinical data and undocumented manufacturing during product registration, to participating in illegal distribution, misleading advertising and use of uncertified products. (See [A#01140331009].)

The agency’s plan is to verify the authenticity of application materials, particularly clinical study data, and to inspect manufacturing sites for samples.

Trade Barriers Persist

Ives also highlighted to the panel two trade barriers for domestic firms trying to sell their devices to Chinese hospitals. One significant issue, he said, is China FDA’s practice of requiring excessive amounts of proprietary data from U.S. manufacturers that apply for registration of devices already approved in the U.S.

“In the regulatory/registration process in China, our companies are required to submit much more proprietary data to government and government-affiliated organizations than is required in other major markets,” Ives stated. He added that U.S. device makers “hope to gain greater clarity into … policies governing the collection and protection of this data.”

Another important barrier is the price ceilings imposed selectively on products made outside of China, rather than those produced domestically, Ives said. Concerns about this practice increase as bidding on devices becomes more centralized in the country. (See Also see "China’s Aim For Centralized Bidding Pressures Medical Device Industry" - Medtech Insight, 22 October, 2012..)

“As the Chinese government gets more and more involved in the purchase of medical devices, and word comes down from the government, we are concerned about discrimination,” Ives also told Commissioner Jeffrey Fielder. “We are concerned the Chinese government will find ways to favor domestic manufacturers.”

Ives stated that some provinces in China are requiring foreign manufacturers to provide an import price of the product as a condition for entering the tender, and these prices create a ceiling price.

“There is no such limitation placed on the prices of domestic medical technology, which can be sold at lower prices because of lower costs – including manufacturing, transportation, research and development expenses – and a lack of service,” Ives stated.

“In some cases, provincial officials are banning competition by foreign manufacturers for certain product lines,” Ives said. “This policy obviously places U.S. medical technology at a disadvantage to domestic firms.”

The U.S.-China Economic and Security Review Commission is an official body tasked by Congress to monitor the national security implications of the bilateral trade and economic relationship between the U.S. and China.

AdvaMed Tags China-Made Device Knock Offs As Concern At Federal Commission Hearing

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