Johnson & Johnson

Johnson & Johnson (J&J) has been in China for over 30 years, predating the country’s economic opening in 1979.The company entered China through a technology-transfer agreement to build a chemical factory in 1979. In 1985, J&J established its first joint venture in China, Xi’an-Janssen Pharmaceutical Ltd., and it is now beginning to retire its first generation of Chinese employees and leaders.

J&J companies employ roughly 6,000 people in China today and produce a wide range of consumer, pharmaceutical, and medical products. The companies use local market research, natural ingredients, and competitive prices to meet the needs of China’s emerging market. J&J is seen in many ways within China as a Chinese company—one that has grown with the nation.

William C. Weldon, chair and chief executive officer of J&J, recently discussed the company’s China operations with CBR Assistant Editor Daniel Strouhal.

What are the biggest challenges that foreign companies operating in the healthcare and pharmaceutical sectors face in China? What strategies does J&J use to manage these issues?

We face many of the same challenges as firms in other sectors, including stiff competition for talent, a highly competitive market, and the need to produce and distribute products in an efficient, cost-effective way. But our sector is unique because healthcare is such a critical, personal, and sensitive area. In addition to ensuring the quality and safety of our products, companies in our industry are inevitably part of the debate over how best to provide healthcare for all citizens. For this reason, our sector faces a significant level of regulatory oversight, covering everything from exacting product safety standards to price controls and extensive procedures for approval of new products in the market. All of these issues require a combination of technical expertise and government-relations capabilities to reach the right audiences and develop lasting solutions.

Our strategy is to be broadly based in healthcare and to provide comprehensive solutions in China that address the particular needs of patients throughout the country. We are working with the government on its major healthcare reform initiative.

J&J operates in an industry that involves complex quality and safety issues. How does the company ensure that its products made in China meet global standards and expectations?

Our first obligation is to ensure that the doctors, healthcare professionals, patients, customers, and families who use our products benefit from our high standards of quality, safety, and effectiveness. Our companies have standards and processes in place to ensure that products that come out of our facilities in China are equal in quality and safety to products we produce anywhere in the world. Quality and safety assessments and measures are followed throughout the manufacturing process, from raw-materials sourcing to manufacturing of components and finished products to delivery in the marketplace. Of course, working with regulatory authorities and other agencies worldwide is critical to our improvement of monitoring, testing, and processes.

In 2007, J&J opened the Emerging Markets Innovation Center in Shanghai. How do this and other J&J facilities help the company adapt product development and marketing to China?

Developments in information technology and transportation have facilitated the flow of products around the world. However, in this environment it is important to keep in mind that while it may be easy to take a product developed and marketed in one country and sell it in another, that product may not be suitable or embraced everywhere. This is especially so in a country like China, which has its own long history, strong traditions, cultural identity, and personal preferences. So it is critical that we be sensitive to the particular needs and preferences of our customers in China. Our researchers and product developers at the Emerging Markets Innovation Center focus on developing new and affordable products to address the consumer needs and preferences of customers in China and other emerging markets. One of the center’s first successes was the launch of Johnson’s Baby Long Protecting Cream, which was specifically designed, priced, and packaged to meet the needs of our Chinese customers.

Our acquisition of Beijing Dabao Cosmetics Co., Ltd. in 2008 is also an example of an approach we have taken to address local market preferences. This acquisition not only provided us with a brand that is well-known and respected in households across China but also expanded our presence in China and extended our commitment to build the country’s consumer healthcare sector. We hope to bring the Dabao brand to the rest of the world in the future.

J&J entered into a partnership with the Tianjin Medical University Cancer Institute and Hospital in 2008 to develop biomarker models for personalized medicine. What role does this partnership play in the company’s market strategy and its commitment to China?

By the end of 2010, cancer is expected to be the world’s leading cause of death, and by 2025, 50 percent of new patients with chronic diseases such as cancer are expected to come from developing countries such as China. Our goal is to transform cancer into a preventable, chronic, or curable disease through a better understanding of cancer biology that will lead us to innovative solutions such as predictive biomarkers. Biomarkers, which are used in all J&J oncology research and development programs, are essential to our ability to realize the promise of personalized medicine.

The partnership with Tianjin Medical University Cancer Institute and Hospital is part of our external innovation strategy to build a collaborative network with top research institutes to access and accelerate cancer therapies. It is also a cornerstone of our research and development strategy in China to build alliances with local research organizations to collaborate in research areas that maximize the strengths of both organizations. Through these joint programs, we will play a key role in encouraging scientific exchange from the best sciences around the world and will be a partner to the momentum of innovation from China. These kinds of collaborations will also serve to build platforms and foundations for innovation in disease areas that have high unmet needs in China and other Asian countries.

J&J was a top sponsor of the 2008 Beijing Olympics and will be a top sponsor of China’s Expo 2010 in Shanghai. How does the company’s participation in these events fit into its overall China strategy?

As a company that has grown together with China for the past 30 years, we share the excitement and pride that come with the Olympics and the 2010 Expo, and we are happy to do what we can to make sure that others have a chance to enjoy these historic events. Being the official healthcare sponsor of the Beijing 2008 Olympic and Paralympic Games not only helped to enhance our reputation in China but also helped us forge deeper relationships with the people of China. We conducted a variety of activities during the Olympic Games focused on providing education and information to improve the health and well-being of families and communities, including opening a professional training and education center. These activities have contributed to our growth in the market and, most important, have aided our ability to attract and retain top talent.

The Expo is expected to bring 70 million visitors, of which 50 million or so will be Chinese, and the companies of J&J are looking forward to opportunities to connect with these customers in meaningful ways that will extend beyond the event itself.

How does J&J protect its intellectual property rights (IPR) in China?

IPR violations, as well as the related issue of counterfeiting, are serious concerns for J&J as we expand into new markets. In particular, the global problem of counterfeit healthcare products puts the health and safety of patients at risk while undermining confidence in product safety and effectiveness. Over the past several years, we have been encouraged by the increased emphasis that the PRC government has put on IPR protection in China. Because there is no single step that can ensure IPR is protected, our collaboration with governments, regulators, and other stakeholders is critical to our ability to identify ways to strengthen and enforce existing laws to ensure the integrity of our patents is maintained. We have also worked with the PRC government and US business associations to support their efforts to protect IPR.

We use a diverse mix of strategies to reduce the risks from counterfeiting. These include monitoring markets and collaborating with regulatory and law-enforcement authorities and others to identify, seize, and destroy counterfeit goods and take legal action. Probably some of the most important work we do is to raise awareness among stakeholders on the dangers of counterfeit products and the role these stakeholders can play in eliminating a practice that puts our customers at risk.

How do you see the outlook for the pharmaceutical, medical device, and consumer products markets in China over the next 5 to 10 years? In what areas will J&J grow most in years to come?

Though we don’t make public sales forecasts that far out, the unmet needs of patients, consumers, and healthcare providers are more serious than ever, and the growth opportunities associated with them are significant, globally and in China. Our overall business is growing well in China despite the global economic downturn, and we view growth in emerging markets like China as essential to the overall health of our business.

Our strategy is to be well-positioned for growth in a variety of rapidly growing healthcare segments across consumer [health products], phramaceuticals, and medical devices and diagnostics. Some spaces where we have been making our most recent investments for growth include beauty and cosmetics, Alzheimer’s disease, vaccines, oncology, HIV, cardio-vascular disease, diabetes, and wellness and prevention.

China is undertaking major healthcare reforms. What is J&J’s role in these reforms, and how will the company adjust to change?

Countries around the world continue to wrestle with the issue of how best to ensure adequate healthcare for their citizens in a cost-effective way. Both the United States and China are undergoing major reassessments of their healthcare systems. As a leading global company in the healthcare area, J&J has much to offer China and other governments by way of experience and ideas.

One of China’s priorities has been to build a harmonious and innovative society. J&J has supported this effort by working to ensure that innovation is rewarded and that Chinese patients receive the best health treatment possible, including in rural areas. We have worked with the PRC government, including through strategic partnerships with the Ministry of Health and the State Food and Drug Administration, as well as with organizations like the China Association of Mayors and the All-China Women’s Federation, to share our experiences and best practices. Overall, China’s healthcare reform policymaking process has been extraordinarily open, with the government seeking public engagement from a variety of stakeholders, including business. As a result, we have had the opportunity to provide input on private insurance, hospital finance, pharmaceutical supply, and other major elements of reform. We believe that this unprecedented level of transparency and participation has been a critical factor in developing a sounder healthcare policy and that this experience can serve as a model for policy development in other areas in China.