Looking East for R&D and Clinical Trials
R&D in Asia has the potential to significantly improve the global performance of medical device companies by cutting costs and speeding product development—but extensive due diligence is required for success.
Ames Gross and John Minot
Today, medical device companies are focusing on two crucial measures. The first is cost-cutting. The
Several large medical device companies, including Boston Scientific and Johnson & Johnson, are doing trials in several Asian countries.
As is the case with the rest of the world, Asia is being hit hard by the global recession. The Chinese and Indian economies are quite resilient, but their growth rates still are likely to drop significantly in the near future. Although this may be a problem for immediate sales prospects in Asia, it actually can improve the business case for outsourcing R&D, since the cost of talent and materials is dropping.
R&D Facilities in Asia
A large number of Western medical device firms now have sizable R&D centers in Asian countries, with China being the most popular location. The business justifications for such operations mostly center on the relatively low cost of well-trained science and engineering staff.
The following are examples of major firms locating or expanding their R&D operations in Asia:
• Stryker opened a Global Technology Center in Gurgaon, India (near New Delhi) in March 2007 to research and develop products in all of its business lines, including joint, spine, neurology, endoscopy and imaging.
• GE Healthcare, which has had significant medical device R&D operations in China for some time, announced in October 2008 that it was increasing its R&D for products geared to the rural Chinese market. Specifically, the company is expanding the R&D capabilities of its branch in Wuxi, China, with the goal of putting out five new medical devices for the rural Chinese market by 2010.
• Qiagen, the Netherlands-based in-vitro diagnostic firm, has formed a joint venture with Bio*One, a biotech investment company affiliated with the Singapore government. The joint venture’s purpose is developing new molecular assays. It opened its doors in September last year with 16 employees and plans to expand.
• Siemens has a medical research hub in Korea developing ultrasound and other diagnostic technologies. The hub was expanded in 2007; it now has 400 employees in four locations.
• Hill-Rom opened the Asia-Pacific Innovation Center in August 2008 in Singapore—its first R&D center in Asia. The company initially planned to employ about 17 engineers and quickly ramp up to about 60, with R&D efforts focused on micro-electronics, embedded software and electromechanical systems.
Human Resource Costs
Although most Asian countries (except Japan) have lower overall labor costs than the United States and Europe due to differences in the cost of living, India and China stand out. Both countries have extremely large, well-educated populations; several hundred thousand science and engineering university graduates are turned out annually in each country. Fresh graduates in these disciplines (without experience) can cost only $2,000 to $10,000 a year (varying widely by school and location). Qualified and experienced staff can earn a quarter of the salaries they would require in the United States or Europe.
Although the number of Asians trained in science and engineering fields is quite large, some of them may adapt poorly to working in a Western corporate environment. Thus, R&D personnel in Asia who have experience in Western firms are in high demand, and poaching is a significant risk. It is possible to get good results out of fresh graduates if your company finds good prospects and trains them comprehensively over time. However, if selection, training and retention programs are not well thought out, the cost savings may not pan out.
The Westernized R&D talent available in Asia also is growing as Asians who have studied in Western universities return to their home countries to work there. Some help local medical device companies grow. Some also return to their home countries to start their own companies—creating stronger Asian competition to Western companies.
As can be seen from the list of examples above, many medical device companies try to have Asian R&D centers align their product offerings with the goal of also increasing penetration of Asian medical device markets. Asian medical device patients sometimes have unique physical requirements that call for tailored medical devices. An Asian R&D center can address such issues by developing and altering products to meet Asian needs.
Governments in Asia are directly encouraging the influx of R&D, which offers added advantages to the global medical device industry. There are a number of R&D parks and industrial development zones established by governments across Asia. Depending on the specific location, these come with various financial incentives, such as exemption from tariffs and lower or no income taxes for a period of time. Some of these are focused on biomedical science and technology, and have more experienced talent and related service companies (such as laboratory services) in the area as well.
Some parks that are particularly well-adapted to medical R&D include Singapore’s Biopolis; Taiwan’s Kaohsiung Science Park, which contains a Medical Device Special Zone; and China’s Zhangjiang High-Tech Park near Shanghai.
Asia is not just a place for building new R&D sites. The region also has a small but growing number of startup companies innovating on their own, as opposed to just commodity manufacturers. For Western
Some global firms have operations designed to foster such innovation and create new opportunities. In Singapore, for example, Becton Dickinson and Johns Hopkins University jointly founded the BioVenture Centre, which incubates and assists medical device and biotechnology startups there.
When conducting R&D in Asia, intellectual property (IP) protection is one of the most important concerns. In China and India particularly, copying is rampant. IP protection is at or near Western levels in places such as Singapore. In the other Asian countries, it often is somewhere in between. However, these countries’ patent laws are now in accordance with World Trade Organization standards. Actual enforcement is improving, but still is not fully implemented in the region. For example, in some parts of China, judicial IP enforcement is growing stronger and more usable. Still, it is necessary to closely manage any IP developed in or brought into Asia, including limiting who has access to critical information. To combat IP theft from the ground up, some companies have chosen to move only less-critical R&D functions to Asia so that Asian offices do not need to handle critical information at all. Other Western firms have split up their R&D into distinct parts in different geographical locations in the region.
Clinical Trials in Asia
Another piece of the research and development puzzle that sometimes can be moved to Asia is clinical trials. For clinical trials, in addition to cost savings through lower salaries, lower hospital fees, etc., the ease of subject recruitment is a key draw.
A number of global medical device companies have incorporated Asia into their global clinical trial strategy. Notable companies with products undergoing trials in Asia include:
• Novo Nordisk. The company’s next-generation of NovoPen pen insulin injection system currently is being studied in 500 patients in multiple centers in China. The trial began in November 2008.
• Abbott Vascular. The new Xience drug-eluting stent is being studied in Asia. In July 2008, Abbott began a post-marketing registry for Xience in India, covering a projected 1,000 patients across 16 hospitals in 10 major cities.
• Johnson & Johnson’s Ethicon division. Ethicon started a new clinical trial for its Coated VICRYL Plus Suture in China in October 2008, to compare it with silk sutures in breast cancer surgery. The trial includes 100 patients at six sites in the cities of Beijing, Shanghai, Changchun, Dalian and Guangzhou.
• Boston Scientific. The company’s TAXUS Liberté drug-eluting stent is involved in an ongoing clinical trial scheduled to run until 2010. The product is being tested in 871 patients for use in de novo coronary artery lesions. Most of the clinical sites are in the United States and Canada, but there are two sites in Singapore, one in Hong Kong and six in Taiwan.
• Light Science Oncology. The company’s interstitial light-emitting diodes recently completed a clinical trial started in 2006. The trial tested the safety and efficacy of a surgical procedure for hepatocellular carcinoma involving both devices and drugs from Light Science Oncology. It involved 200 patients in 41 hospitals. Of those, 32 hospitals were located in Hong Kong, India, Korea, Malaysia, the Philippines, Singapore, or Thailand.
Difficulty finding the necessary amount of qualified patients often is a major factor slowing clinical trials and, therefore, delays the product development cycle. The Asia-Pacific population has more than 4 billion people (two-thirds of the world’s population), and many of these people are concentrated in large metropolitan areas. As a result, finding subjects with specific or rare diseases in populous countries such as China and India tends to take a significantly shorter amount of time than in the United States and Europe. Speeding up the product pipeline can be just as useful to the sponsoring company as lowering other overhead expenses.
Modern medical care only recently has become accessible to some of Asia’s population. For many lower-income people in China and India, it remains out of reach. Thus, Asian subjects are more likely to be treatment-naïve (i.e., they have less history of other medical treatments), another factor that makes the recruiting process simpler and can make the results of treatments more meaningful.
Costs and Quality
China and India typically provide the most cost savings; clinical trials there cost roughly one-third of what they would in Western countries. Countries such as Malaysia, Singapore, Taiwan, and Korea offer a lower level of savings than China and India, but generally have more sophisticated facilities and more experience with advanced medical devices.
The quality of clinical data is still a significant issue in the region, where good clinical practice standards are not yet fully adopted. Hiring staff or using service providers that are not experienced could lead to significant problems later on. Still, even when balancing cost with quality concerns, significant savings are achievable in Asia today.
It should be noted that Japan offers virtually no cost savings (due to the high cost of living there), and often can be more expensive than doing clinical trials in the United States or Europe. When global medical device companies conduct clinical trials in Japan, it is usually only to get the product approved for the Japanese market.
There are many capable contract research organizations (CROs) in Asia that can organize trials locally. CROs can be local operations or branches of multinational companies; different types may be appro-priate to different situations. India has a large number of local CROs. However, most Asian CROs are focused on pharmaceuticals rather than devices. Therefore, it is important to conduct proper due diligence to verify potential CROs’ expertise and experience in medical device trials.
Some established local Asian CROs that have device experience include:
• ECRON AcuNova Ltd., based in Bangalore, India. This company is owned partially the Manipal Healthcare Group, a private healthcare company and, therefore, has access to their chain of hospitals. It purchased ECRON, a German CRO, in 2007, and, after merging their operations, has access to a number of Eastern European sites as well.
• China Clinical Trials Centre, based in Beijing, China. A subsidiary of China HealthCare Holdings Ltd., a Hong Kong healthcare conglomerate, the company provides clinical research services and also has a strategic alliance with an academic research organization.
• Tigermed Consulting, based in Shanghai, China. The firm has 12 branch offices across China and more than 100 employees. It is in the process of forming a global clinical trial network, starting with partners in Russia and Korea.
• Excel PharmaStudies, based in Beijing, China. Excel has seven satellite offices across China, and its roughly 300 employees include 130 clinical research associates. It has completed more than 125 trials in total. In 2006, the company won Frost & Sullivan’s Asian CRO of the Year award.
R&D in Asia has the potential to significantly improve the global performance of medical device companies by reducing costs and speeding up the R&D process, as well as allowing better adaptation of products to the Asian markets. However, a medical device company must do extensive due diligence, protect its intellectual property and recruit the right human resources in order to succeed in conducting these activities in Asia.