China - Medical DevicesChina - Medical Devices

Overview

In 2018, China's health expenditure was $777 billion and accounted for 5.7% of China’s GDP, which is a far lower percentage than countries like the U.S. (17%), Germany (11%), Canada (10%), and Japan (10%).  Health expenditure, as a percentage of GDP, is expected to increase to between 6.5-7% by 2020.  Globally, the medical device market is approximately 42% of the size of the pharmaceuticals market.  In China, however, the percentage is much lower at approximately 14%. This demonstrates the significant growth potential of the sector.
 

Source: China Association for Medical Device Industry, Industry Estimate, BMI Research (Unit: USD billion)
 
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 2018, the medical device market reached $78.81 billion, an increase of 22% over 2017.  Over 70% of this growth was fueled by hospital procurement.  However, China’s medical device density (MDD) remains among the lowest in the world, at $6 per person, compared to developed countries where the MDD usually exceeds $100.
 
2016-2018 China’s Import of Medical Device from Top 3 Countries

Source: BMI Research
 
As of November 2018, China had approximately 32,000 hospitals, 12,072 of which are public hospitals.  Despite the number of private hospitals, which are typically small, healthcare product procurement is still driven by large public hospitals.  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 specialized health services, conducting medical education and scientific research, and serving as medical hubs providing care to multiple regions.

Chinese hospitals consider U.S. products to be of superior quality and the most technologically advanced. Thus, these hospitals welcome medical equipment and products with high-technology content.   U.S. firms garner nearly 75% of the 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.

Market Entry

Medical devices are regulated  by the National Medical Products Administration (NMPA). There are two departments dealing with medical devices: Department for Medical Device Registration, responsible for pre-market approvals, and Department for Medical Device Supervision, responsible for post-market supervision. The registration process depends on the classification of the device:

1. Class I devices are those with the lowest risk to the human body and are subject to lower controls

2. Class II devices have a higher degree of risk, such as electrotherapy equipment, and are subject to tighter controls

3. Class III devices comprise active implantable, such as pacemakers. This class is the most stringently controlled and requires very detailed documentation.

All imported Class I devices are subject to a notification process with NMPA.  Class II and Class III imported devices are required to undergo a registration process with the NMPA.  Applications for Class III devices must be supported by clinical trial data. 

Applications for imported Class II devices need to be supported by clinical trial data if the device is not included in an exemption list where the requirement is waived due to the existence of similar devices on the Chinese market or where the safety and efficacy of a device can be demonstrated through non-clinical assessment.  The review process incorporates a full technical and administrative review.  Innovative and high-risk products may also require review by an expert panel.  Approved devices will be issued with a registration certificate which is valid for five years.  Applications for registration renewals need to be submitted no later than six months before expiry to allow sufficient time for the renewal process.

On June 26, 2018, the Ministry of Justice issued a notification announcing draft changes to China’s medical device regulations under Decree No. 650.  The proposed changes intend to ease registration requirements as follows: 1) manufacturers will be able to submit their own product testing reports as an alternative to third-party test reports; 2) clinical evaluation reports will not be required for Class II devices in premarket applications; and 3) imported innovative medical devices will not require approval in the country of origin as a pre-requisite for market registration in China.

In an effort to further cut medical costs and standardize medical services, the newly-formed National Health Security Administration (NHSA), introduced the Diagnosis Related Groups (DRG) /100 single-disease payer system in some pilot provinces.  By the end of May 2018, 30 provinces successively issued DRG guidance documents.  Many foreign companies have concerns that once the medical devices/consumables are bundled in the medical package, they will be immediately replaced by much-cheaper domestically-manufactured equivalent and the overall healthcare quality will suffer.  The implementation of two cost control pilot projects in the pharmaceutical sector, the “4+7” policy and the Two Invoice System, are areas of concern in the medical device sector as well.  The “4+7” policy refers to the volume-based procurement policy in which a successful bidder on a specific drug receives the guaranteed purchase of the drug by all public hospitals in the 4 directly managed municipalities and 7 major cities in other provinces.  The Two Invoice System is a policy that allows for a maximum of two invoices between a manufacturer and a hospital.  Industry experts believe these policies may also be implemented in the medical device sector, which currently follows a different management system.

According to the State Council issued Opinions on the Reform of the Review & Approval System for Drugs and Medical Devices No. 4, major reforms proposed included accelerated review of any innovative medical devices.  There are currently two fast-track review processes besides the standard product registration route: 1) Emergency Approval Process for medical devices (CFDA No. 565, 2009) are applicable for emergency public health incidents and 2)Innovative Medical Device Special Review Procedure (Order 83, November 2018), which has replaced the Special Approval Process for Innovative Medical Devices (CFDA No. 13, 2014), which offers an expedited approval route for devices that are the first of their kind in China and for which an innovation patent has been obtained in China.  According to the 'Priority Approval Process for Medical Devices' (CFDA No.168, 2016), devices qualifying for the high-priority reviews will consist of devices that diagnose or treat cancer or rare disorders that show significant clinical advantages over existing treatments, devices that offer new treatment and diagnosis methods for diseases commonly affecting children or the elderly, and other devices that are urgently needed and for which there are currently no effective treatment options.

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

MEDTEC China 2019
September 25-27, 2019
Shanghai, China
 
DenTech China 2019
October 30-November 2, 2019
Shanghai, China
 
Dental Show Central China
November 30- December 2, 2019
Wuhan, China

2020 Dental South China
March 2-5, 2020
Guangzhou, China
 
2019 CAME Annual Meeting
July 19-22, 2019
Suzhou, China

Web Resources

State Administration for Market Regulation (SAMR):                                                      http://samr.saic.gov.cn/
National Healthcare Security Administration:                                                                  http://www.nhsa.gov.cn/
The National Health Commission (NHC):                                                                        http://www.nhfpc.gov.cn/ 
China Association of Medical Device Industry (CAMDI)                                                  http://en.camdi.org/
China Chamber of Commerce for Medicines and Health Products (CCCMHPIE)           http://en.cccmhpie.org.cn/

U.S. Commercial Service Contact for Medical Devices
Ming Yang, Commercial Specialist
(86 10) 8531-4006
Ming.Yang@trade.gov
 
U.S. Consulate in Chengdu
Mini Tian, Commercial Specialist
(86 28) 8558 3992 ext. 6567
Mini.Tian@trade.gov
 
U.S. Consulate in Shanghai
Xiaoli Pan, Commercial Specialist
(86 21) 6279-8750
Xiaoli.Pan@trade.gov
 
U.S. Consulate in Shenyang
Yang Liu, Commercial Specialist
(86 24) 2322 1198 – 8143
Yang.Liu@trade.gov
 
U.S. Consulate in Guangzhou
Jenesy Wang, Commercial Specialist
(86 20) 3814-5405
Jenesy.Wang@trade.gov
 
U.S. Consulate in Wuhan
Catherine Le, Commercial Specialist
(86 27) 8555 7791
Catherine.Le@trade.gov