Advice You - Business

Foreign investment in China started with a trickle in the early 1980s and has increased to the extent that China is now siphoning off a significant percentage of the world’s available

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

foreign investment funding. With China’s accession to the WTO and the continuing vitality of its economy, this trend seems likely to continue for the foreseeable future. Nevertheless,

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

hina remains an unfamiliar and challenging place to do business for many small and medium sized enterprises (SMEs). A popular way for an SME to get its feet wet in the China market wit

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

out risking a lot of capital is through the establishment of a Representative Office (RO).

Before going into the “how” of establishing an RO in China, perhaps it would be best to ask

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

why?”. Most companies that establish ROs in China do so because they are much easier to establish than direct investment vehicles such as joint ventures and wholly foreign owned enterp

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ises, and generally require only about a tenth of the capital outlay. ROs are also permitted to operate in the shrinking list of industry sectors that are forbidden to direct investmen

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

t vehicles.

The downside is that there are some very limiting restrictions on the type of activities that an RO may engage in. For example, an RO may not:

Conduct direct business act

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

vities: An RO’s activities must be confined to product promotion, market research, liaison, and the like, and it may neither charge fees for its services nor engage in profitable activ

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ties such as direct sales or manufacturing (although they are subject to taxation under certain circumstances).

Directly invoice clients or sign contracts: These activities must be ha

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

dled by the parent company.

Directly hire employees: It must utilize an authorized human resources agency that will refer suitable candidates to the RO in exchange for a certain perce

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

tage of employee salaries. Some ROs make an end run around this system by directly recruiting and negotiating with employment candidates and sending their names to the authorized human

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

resources agency so that it can then ‘refer’ these candidates back to the RO. While this practice doesn’t seem to have caused many problems with the Chinese authorities so far, the fo

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

malities of referral and salary deduction must be complied with.

In light of these restrictions, why bother establishing an RO at all? 1. A company might want to conduct market resea

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ch in order to decide whether or not to make a future investment in China.

2. A company might wish to establish an RO in a business sector in which foreign investment is currently for

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

idden in anticipation of future liberalization of Chinese foreign investment law in line with its WTO commitments. In the meantime it can establish a presence, make local connections,

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

nd learn about the market.

3. A company might already be doing a modest amount of business with China from its home country but lack the market penetration or resources to justify a d

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

irect investment. Once the company attains greater market share it can always upgrade to a joint venture or wholly foreign owned enterprise.

4. Sectors of certain industries such as i

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

surance and finance require foreign investors to operate an RO for at least two years before making a direct investment.

5. A company might want to use an RO to hire local employees t

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

help them find Chinese suppliers.

6. A company might establish an RO with the aim of exceeding its legal restrictions, and thereby establish the functional equivalent of a joint vent

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

re or wholly foreign owned enterprise while avoiding much of the expense and inconvenience. This approach is not recommended, since it is likely to lead to trouble with the authorities

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

HTTP = HTML link (for blogs, profiles,phorums):
<a href="http://www.adviceyou.org.ua/article/32705/adviceyou-Investing-in-China--Establishing-a-Representative-Office.html">Investing in China - Establishing a Representative Office</a>

BB link (for phorums):
[url=http://www.adviceyou.org.ua/article/32705/adviceyou-Investing-in-China--Establishing-a-Representative-Office.html]Investing in China - Establishing a Representative Office[/url]

Creative grocery store marketing goes deeper than double coupons and customer cards. The most effective grocery store marketing plans start with the fixtures and layout of the store.

Networking!! It's a subject very close to my heart. I get a fair few clients from this method of marketing, which means that on average I attend between 5-8 networking events per month. But just what is networking and how can you make it work for you?

Tags

Links

Advice You - Investing in China - Establishing a Representative Office

Related Articles: