China - Medical Devices

Overview
The medical device market is one of the fastest growing market sectors in China with the industry maintaining double-digit growth for over a decade. In 2016, the medical device market reached $53.62 billion, an increase of 20.1 percent compared to 2015. 72.7% of this growth is fueled by hospital procurements.
 

Source: Industry Estimate (Unit: USD billion)

In 2016, China’s total health expenditure was USD 663 billion, and accounted for 6 percent of China’s GDP, which is a far lower percentage than countries like the U.S. (17 percent), Germany (11 percent), Canada (10 percent), and Japan (10 percent). Health expenditure is expected to increase to between 6.5-7 percent by 2020. Globally, the medical device market is approximately 42 percent the size of the pharmaceuticals market. In China, however, the percentage is much lower at approximately 14 percent. This demonstrates the significant growth potential of the sector. In 2016, the medical device market in China reached 53.62 billion USDs, an increase of 20.1 percent compared to 2015. 72.7% of this growth is fueled by hospital procurement.

Market size of the Chinese medical device sector (unit: USD100 million)
Source: 2016 China Medical Device Blue Book

In 2016, China renewed efforts to deepen its healthcare system reform and set the ambitious goal of ensuring that all citizens have access to basic healthcare services by 2020.

The State Council released an outline for its “Healthy China 2030” initiative - placing health at the center of China’s policy formulation mechanism, aiming to address health in all relevant government policy areas.  China also published the “13th Five-Year Plan for Medical and Healthcare System Reform”, which emphasize breakthroughs in the hierarchical medical treatment system, modern hospital management, universal healthcare, drug supply assurance, all covered by comprehensive supervision during the 13th Five-Year Plan.

Currently China’s medical device market has two distinct categories. The first of these are the domestic manufacturers who supply low to mid-range products. Over 80 percent of the domestic manufacturers belong to this category.  The second category includes foreign-sourced, high-end products supplied by large companies like GE, J&J, Philips, and Siemens. According to the Annual Report of China’s healthcare Industry issued by China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMHPIE), China had approximately 16,000 domestic medical device and equipment manufacturing companies in 2017. The United States ranks as the #1 foreign supplier of medical devices in China, followed by Germany and Japan. These three countries represent the majority share of China’s imports.

2014-2016 China’s Import of Medical Device by HS code from the Top 3 Countries
(USD millions)

In 2016, China had approximately 27,360 hospitals, of which 23,900 were public and 3460 were private. Foreign-invested medical institutions are facing challenges of high corporate tax rates, a cap on foreign ownership and eligibility requirements for Social Health Insurance. All hospitals are classed into three levels (Tier one, two and three) based on hospital size and capability. Tier three is the most comprehensive of general hospitals with a bed capacity exceeding 500. They are responsible for providing specialist health services, perform a bigger role with regard to medical education and scientific research and they serve as medical hubs providing care to multiple regions.

Chinese hospitals consider U.S. products to be of superior quality and the most technologically advanced; and welcome medical equipment and products with high-technology content.  U.S. firms garner nearly three-quarters of their local revenues from tier three hospitals and the remainder from tier two hospitals. In an effort to capitalize on China’s burgeoning medical device market, U.S. firms have expanded their local presence in China while also targeting the country’s rural population.  At the same time, Chinese domestic medical device companies are consolidating, upgrading quality, and beginning to compete in medium-level technology niches.  With the government policy of supporting and encouraging domestic medical device innovation, some local manufacturers are growing stronger and competing with foreign suppliers. In addition, the government’s “Made in China 2025” initiative to improve industry efficiency, product quality, and brand reputation will further spur the development of domestic medical device manufactures and will increase the competiveness of Chinese medical device brands in the long term.

Significant potential exists for U.S. companies interested in entry or expansion in the Chinese market. China continues to deepen public hospital reform at all levels.  However, Medical device companies will still face the pressure to cut prices from the public hospitals. The procurement process, price limits, and secondary bargaining are remaining issues relating to the centralized procurement and bidding process in China.
 
Market Entry
Companies interested in entering the Chinese market must overcome existing barriers and navigate an uncertain and changing regulatory environment. The “Management Standard for Technical Review and Consulting for Medical Devices,” (Management Standard) released in October 2016 has essentially closed the existing channel for pre-submission consultation prior to submission of product registration documents.  Industry is concerned that this will delay the overall registration process.

In May 2015, The CFDA issued the “Technical Guidelines for Clinical Evaluation of Medical Devices” (Technical Guidelines); requiring medical device producers to provide comprehensive evaluations of clinical effectiveness and product safety based on equivalent devices already on the market. This is especially onerous for new and innovative products.

The Implementation of “Good Clinical Practices for Medical Devices” in June 2016 has created a number of challenges for foreign companies regarding clinical trials. In addition, many of China’s medical device standards are not in compliance with related international standards. This may cause difficulties and delays in bringing an existing product into the Chinese market.

Significant progress to improve market access for U.S. medical device manufacturers was made at the 2016 U.S.-China Joint Commission on Commerce and Trade (JCCT) on Medical Devices. Chinese commitments include:
Strengthening oversight on government procurement of medical devices and to treat overseas brands and products manufactured overseas in a transparent, fair and equitable manner, and both sides stand ready to further communicate with parties concerned.

China has issued two batches of Class II Medical Device Clinical Trial Exemption Catalogues and Class III Medical Device Clinical Trial Exemption Catalogues.   China will take into account opinions from industry and relevant stakeholders as it continues to develop and work on this area.

Adjust its medical device classification system based on commonly recognized and risk based principles, appropriately downgrading device classes.  Industry comments will also be solicited.

During the drafting of China’s identification number regulations and implementing plans, it will fully consider relying on international standards and to harmonize with globally accredited unique device identification (UDI) issuing agencies.  China will also offer a phased-in and risk-based implementation approach, a transitional period, and an exemption for all devices manufactured or labeled prior to the rule’s effective date.
 
Opportunities
The best-selling prospects in the medical device sector include:

• In vitro diagnostic equipment and reagents: clinical and diagnostic analysis equipment, diagnostic reagents, medical test and basic equipment instruments, and point of care testing (POCT).

Orthopedics

• Implantable and intervention materials and artificial organs: Interventional materials, implantable artificial organs, contact artificial organs, stent, implantable materials, and artificial organ assisting equipment.

Therapeutic products: Tri-dimensional ultrasonic-focused therapeutic systems, body rotary gamma knife, simulator, linear accelerator, laser diagnostic and surgical equipment, nuclide treatment equipment, physical and rehabilitation equipment.

• Medical diagnostic and imaging equipment: black & white and colored supersonic diagnostic units, sleeping monitor, digital X-ray system, MRI, CT, DR, and ultrasound equipment.
• Surgical and emergency appliances: anesthesia ventilation systems and components: high frequency surgical equipment, high frequency and voltage generators.
• Healthcare Information Technology related equipment and products: medical software, computer-aided diagnostic equipment, and hospital information systems (HIS, CIS, and HLT).
• Medical equipment parts and accessories.

 
Trade Shows & Events
2017 Dental South China
Date: March 21-25, 2017
Venue: Pazhou Exhibition Center
Contact: Ms. Christine Su
Tel: +020-83549150
Fax: +020-83549078
Email: Christine@ste.cn
 
Healthcare Expo China West 2017
Date: March 2017
Venue: New International Convention & Exhibition Center, Chengdu Century City
Organizer: Tarsus Hope Exhibition
Contact: Ms. Mikeo Wang
Tel: + 86-21-6427 9089
Fax: +86-21-6427 9169
Email: mwang@tarsus.co.uk
 
The 16th Dental Show West China 2017 (Certified by ufi)
Date: April 25-28, 2017
Venue: New International Convention & Exhibition Center, Chengdu Century City
Organizer: Tarsus Exhibition & Huaxi Hospital
Contact: Ms. Mikeo Wang
Tel: + 86-21-6427 9089
Fax: +86-21-6427 9169
Email:mwang@tarsus.co.uk
 
The 77th China International Medical Equipment Fair (CMEF)
The 24nd International Component Manufacturing & Design Show
Date: May 15-18, 2017
Venue: Shanghai National Exhibition and Convention Center
Contact: Mr. Gu Ying
Tel: + 86-10-84556603
Fax: +86-10-82022922
Email: ying.gu@reedsinopharm.com
 
MEDTEC China 2017
September 20-22, 2017
Venue: Shanghai World Expo Exhibition & Convention Center
Sponsored by: UBM
Contact: Mr. Alston Tian
Tel: + 86-10-57652822
Fax: +86-10-57652999
Email: Alston.Tian@ubm.com
 
Dentech China 2017
October 25-28, 2017
Venue: Shanghai World Expo Exhibition & Convention Center
Sponsored by: UBM
Contact: Ms. Sandra Shen
Tel: + 86-21-61573953
Fax: +86-21-61577272
Email: Sandra.shen@ubm.com
 
Web Resources
China Food and Drug Administration (CFDA)
The National Health and Family Planning Commission (NHFPC)
China Association of Medical Device Industry (CAMDI)
China Chamber of Commerce for Medicines and Health Products (CCCMHPIE)