Chinese MRIs, Coming to Your Hospital

The heparin scare notwithstanding, multinationals are strengthening their ties with the Chinese medical industry

by Bruce Einhorn

In the U.S., people worried about the safety of Chinese-made toys, food, and other products have been focusing on pharmaceutical company Baxter International (BAX), which has recalled much of its blood thinner heparin after suspicions that a tainted ingredient in the drug from China caused illness and deaths among some patients. The U.S. Food & Drug Administration on Apr. 21 announced that the Chinese factory producing the ingredient continued to have problems meeting safety standards. Meanwhile, Chinese officials deny that the problem originated in China.

The heparin scare may be dominating the health news in the U.S. media, but that's not stopping multinationals from boosting their ties with the Chinese medical industry. Dutch conglomerate Philips (PHG), which is switching its focus away from electronics and semiconductors and toward higher-growth areas like medical equipment, is boosting its alliances with manufacturers, universities, and hospitals in China.

Philips recently formed a research alliance with a hospital and university in the western Chinese city of Chengdu and announced the acquisition of a company making patient-monitoring equipment in the southern city of Shenzhen. The industry "will start to see more companies moving their manufacturing to China," predicts David Jin, chief executive for Greater China for Philips Health Care, which also operates a joint venture with a Chinese company in northeastern China, the Neusoft Group, making MRI, CT scan, ultrasound, and X-ray equipment.

Siemens and GE Are in the Mix

Other companies are paying attention to China, too. Siemens last September opened a medical research and development, manufacturing, service, sales, and marketing center in Shanghai that the German conglomerate expects to employ 1,000 people this year. It's the largest facility of its kind for Siemens in Asia, the company boasts. And General Electric's (GE) health-care division last August announced a plan to work with Premier Diagnostic Health Services, a Vancouver company with a Hong Kong subsidiary, to sell and operate positron emission tomography (PET) scans to Chinese health providers such as the People's Liberation Army 101 Hospital in the eastern city of Wuxi.

One of the most aggressive companies is Medtronic (MDT), which in December announced it was investing $221 million to buy a 15% stake in Shandong Weigao Group Medical Polymer, a Hong Kong-listed manufacturer of medical equipment based in China's northeastern Shandong province. The two companies also formed a joint venture to produce instruments used in spinal surgery, with the goal of selling not only in China but abroad, says Jiang Qiang, Weigao vice-president and chief financial officer. Medtronic is likely to shift more manufacturing to China, says Jean-Luc Butel, president of Asia-Pacific for the U.S. company. "We have very genuine intentions to expand the collaboration to other businesses."