For U.S. companies looking to conduct clinical trials of new drugs and medical devices, Brentwood resident Dr. R. Stephen Porter is pitching China as a lower-cost setting where the job can get done much more quickly.
His consulting company, Dragon Bio-Consultants Ltd., helps American drug companies license their products in China and Chinese companies to license products here by getting through the U.S. Food and Drug Administration process.
Porter partners with Chinese companies that can take a new drug through development, including testings. He cites as one example of success a U.S. company that was able to get five drug compounds approved for human study in two years, contrasting that with the U.S. pharmaceutical industry, where one compound takes eight years to develop through a process that on average can cost$25 million.
The American company paid $4 million in contract fees for the work one of Porter’s former joint venture partners did in China using 43 employees in Shanghai and a dozen others in Boston.
“That’s leveraging time and costs,” he said. “That’s what China is all about — half the money, twice the productivity and 10 times the value. That’s why I’m in China. They have more than2 trillion of our dollars they want to invest in pharmaceuticals and health care, and they want to access both the Chinese and the Western market.”
Other niches await
Drug development is only one of the health-care niches in which Porter sees opportunities in China. He’s also starting to consult with U.S. companies interested in running hospitals in China. One of his goals is to branch out into managing Western-style clinical research in hospitals there.
Ownership and operation of hospitals is one niche that is expected to see rapid growth because of China’s plans to spend $1 trillion over a decade to double to 40,000 the number of hospitals there and offer universal health care to 90 percent of its1.4 billion residents.
China Healthcare Corp., a company founded by members of Nashville’s Frist family, is among locals that have shown interest in such opportunities in China. It owns 70 percent of one hospital there and could benefit from a change in the law in China to allow for 100 percent foreign ownership.
Nashville eye surgeon Dr. Ming Wang is a co-owner and medical director of Aier Eye Hospital Group, which has 33 freestanding eye hospitals across 33 Chinese cities, each generating annual revenues of $10 million to $20 million.
Wang, president of the Tennessee Chinese Chamber of Commerce, also sees opportunities in senior housing such as nursing homes because of a cultural shift in China under which children aren’t as willing to care for their elderly parents.
“Everything we do here in this country — nursing homes, assisted living enterprises, Medicare and other social programs — China has to adopt or learn from it,” he said.
Despite the opportunities, getting a business to profitability in China can be difficult given the time required to build relationships and eventually gain market share, Porter said, adding that although his consulting business is profitable, his research and development company hasn’t made money.
“Approval to begin a clinical trial can go slow in China, but once you get the approval you can go very fast,” he said. “Here in the U.S., you can get started very quickly, but it takes longer to complete enrolling patients in a clinical trial.”
One of the biggest problems Porter sees in China is a lack of trained managers across industries including health care. He attributes that largely to an organizational culture in which there is often one leader overseeing hundreds of employees with no layers of managers between them. That’s why he sees opportunities for people from Nashville experienced in managing hospitals to improve health-care delivery in China.
In China, personal relationships also play a bigger role in how business is done. Written contracts are only a starting place for conversation as compared with in the United States, where they’re binding, Porter said, adding that contract law is rarely followed in China.
That’s why it is critical that American companies make sure they have the right partner even if100 percent foreign ownership is allowed, Wang said. An ideal partner in China would have connections and knowledge of the culture as well as the regulations that are still being developed, he said.
“It’s only in the last 20 years when the government began to allow private ownership, enterprises and entrepreneurs,” Wang said, adding that 80 percent of China’s industries are still under some government control. “As a result, laws and regulations governing private enterprises have not been fully established yet.”