In just four years, China could be the third-largest market in the world for medical technology products. But the market is vastly different from any other, and often it's a confounding one for companies to negotiate.

China, home to a quarter of the world's population, is projected to become the third-largest med-tech market by 2010 with $15 billion in sales, according to the investment firm Goldman Sachs. Estimates of the current market range from $2.6 billion to $10 billion.

It's a country that presents enormous opportunities for Minnesota companies such as Medtronic and St. Jude Medical Inc., and those with local ties, including Boston Scientific Corp. and Guidant Corp., which have set aggressive annual growth targets.

While China's aging population increasingly will need devices to pace their hearts and unclog their arteries, the companies that make them must ply a disorganized health care system, the threat of intellectual property theft, spotty government reimbursement for products and a lack of public awareness about device therapy.

Still, these manufacturers come. "As might be expected by its tremendous diversity and dramatic growth, China presents a remarkable mix of challenges and opportunities for the medical device industry," said Dr. Joseph Smith, chief medical officer and senior vice president for Guidant's cardiac rhythm management division, which is based in Arden Hills.

Since the Communist revolution in 1949, China has relied on socialized medicine. Collective farms and factory communes paid for health care. In rural areas, "barefoot doctors" provided medical services in a basic but efficient manner.

As the economy has boomed, China's health care system has imploded, creating a situation that is ripe for reform. Currently, patients must pay cash upfront for most medical services and for many devices.

"The average Chinese family's disposable income is increasing rapidly, so there is more money to spend," said Victor Tsui, vice president and general manager of Fridley-based Medtronic's operations in China. "China has one of the highest savings rates in the world, and culturally we spend it on our children's education and health care."

Only 20 to 25 percent of the estimated 1.3 billion Chinese have some form of health insurance -- mostly residents on the urban and relatively affluent east coast, according to the Goldman Sachs report. So that leaves more than 970 million people who pay for most health care themselves.

Which is just as well, because government reimbursement for drugs and devices is not terribly exhaustive and varies between provinces and cities. The labyrinth of regulations is difficult to negotiate, Tsui said.

In truth, many Chinese do not treat their illnesses simply because they can't afford to. In a study published by the World Health Organization last year, half of the patients surveyed said they had been ill but did not seek treatment because of cost. Among those who did go to a hospital, nearly half discharged themselves against a doctor's advice because they could not afford continuing care.

Wealth shifts focus on ailments

At the same time, the need for medical devices grows, particularly for those treating heart maladies. In recent years, public health priorities in China have shifted from the reduction in infant mortality and control of infectious diseases -- often the case in developing nations -- to chronic diseases, such as heart disease, according to the New England Journal of Medicine. This is particularly true among China's increasingly affluent middle class.

China's rapid economic development also has brought with it adverse changes in lifestyle that mimic problems in the West, such as a higher dietary fat intake and insufficient physical activity. It's easy to spot for even the casual observer: Beijing's broad boulevards, once a haven for bicycles, are now clogged with traffic. The air is seriously fouled throughout the country. And the Chinese are fervent smokers -- one published report estimates the country has 320 million of them.

The study of 20,033 Chinese adults recently published in the New England Journal indicated that diseases of the heart were among the top three causes of death among those 40 and older.

In 2004, more than 20 percent of the Chinese population was at least 50 -- a percentage that is predicted to double by 2040. This aging population will put more pressure on an already-creaking health care system.

"The problem isn't that we don't have enough patients," said Dr. Liu Zhigang, a top cardiologist in Shanghai, as he conducted a recent pacemaker clinic at Shanghai Chest Hospital. "It's that patients still cannot afford these therapies."

Cultural hurdles impede sales

Beyond cost, another challenge for med-tech companies involves marketing their products to such a vast population and to the physicians who implant the devices.

"Twenty years ago, people didn't know why they died," said Tsui, of Medtronic. " 'Just because,' was the reason. These days, everybody knows the cause of death. The next stage is how to treat people. Now the understanding of disease is greatly improved."

Educating the public about medical technology products is key, because many patients essentially diagnose themselves if they have a medical problem, Tsui said.

"The alarming thing in China is the almost total absence of primary care," said Travis, of AdvaMed. "Even in cities, there are no independent doctors' offices or neighborhood clinics, so people have to go to the hospital for every health care need."

Because there are no general practitioners to steer patients to the appropriate specialist, patients often misdiagnose themselves and are treated for the wrong problem as a result.

Medtronic operates about 25 websites in Chinese to market its products to patients and doctors.

In addition, patients often use China's vaunted web of relationships, called guanxi, to help select the best doctors and hospitals.

If patients have the money, they usually see the doctor of their choice. It also is quite common for them to pay a little extra under-the-table or "red envelopes" for better doctors and service in hospitals, a thinly veiled form of bribery.

The government frowns upon these arrangements. At Xin Hua Hospital, an electronic billboard in the hospital's lobby states: "Beware of the Red Envelope" -- a reference to money envelopes traditionally received by children on Chinese New Year.

Physician training a priority

In addition to patient education, training among doctors in China varies widely. "In some cases, a specialist may have only one day of pacemaker training in medical school," Tsui said. So if a doctor is not aware of a specific med-tech treatment, then it's unlikely he will prescribe it.

"Doctors and nurses are very poorly paid [in China]," Travis said. "Training for doctors ranges from a two-year course to programs that are equivalent to those offered by Western medical schools. Specialists are generally well-trained, but there is no national body that sets standards and assesses competency."

That means the companies themselves must educate doctors about their products. In that vein, Medtronic is setting up a training center on pacemaker implantation in Shanghai. And Boston Scientific, whose cardiovascular division is based in Maple Grove, is working with China's Ministry of Health to offer seminars on their products for doctors at key hospitals.

"We see ourselves as partners in part of the solution here," said Daniel Moore, president for Intercontinental at Boston Scientific. "Part of that is, 'How do you partner beyond merely providing the product to help train these physicians so they can treat patients?' "

Dr. Liu said pacemaker implantation at Shanghai Chest Hospital has been growing about 10 percent a year, but he's still frustrated that patients in need of the therapy are not receiving it. Beyond the cost issue, he says, "doctors are not so familiar with pacemakers. When patients come, often they are taking medicine prescribed for the problem," a method of treatment that doesn't always work.

Competitors still few

Despite China's massive population and the growing need for cardiac devices, the Goldman Sachs report says most medical device companies see little potential in China and do not consider early market entry a priority. These latecomers, the report concludes, could miss the boat.

The Chinese medical device market grew by 19 percent in 2003 and is expected to sustain annual growth of about 15 percent during the next decade, which would make it the third-largest medical device market in the world by 2010, behind Japan and the United States.

Most major device companies with Minnesota ties have been doing business in China for years and compete largely among themselves for business, a situation no different from the United States.

To date, serious domestic competition has not emerged, partly because Chinese products are perceived by consumers to be of lower quality than devices made in the West.

But that could be changing. Shanghai-based Microport Medical Corp., which makes interventional and minimally invasive cardiac devices, is determined to compete on equal footing against rivals such as Boston Scientific and Johnson & Johnson.

When CEO Michael Zhang took over the company in 2002, it was $3.5 million in debt and its products -- by his own admission -- were "really bad." Thanks to an undisclosed cash infusion by the privately held Japanese pharmaceutical concern Otsuka Pharmaceutical Group, Microport is now debt-free and has developed a drug-coated heart stent, already a blockbuster device in the West. The company, now China's largest med-tech firm, hopes to go public on the Nasdaq Stock Market this year.