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The worlds most populous country, China has been registering double-digit growth in healthcare for

several years, even as the markets in developed economies have slowed. It is projected to grow to

$11.4 billion by 2015, according to UBM Canon research. This is still small in absolute numbers

compared with the United States ($160 billion) and Europe ($115 billion), but China will continue to

outpace other countries and reach near parity with the developed nations of Europe by 2020,

according to PwC China. Medtech market growth is forecast to be in the region of 20% through2018, according to BMI Espicom

(Figure 1).

A $120 billion healthcare

stimulus initiated in 2009 has

spurred investment in the

countrys healthcare

infrastructure, creating

tremendous business

opportunities for manufacturers

of everything from consumables

to imaging systems. The

overarching objective of the

stimulus and associated

programs is to achieve universal

healthcare for Chinas citizens

by 2020.

Long regarded as the worlds

factory, China is wrestling with rising labor and shipping costs that have eroded some of itscompetitive edge in international markets. Consequently, the medtech industry has been

encouraged to move up the value chain and invest in R&D. Chinese medical device companies such

as Mindray and Time Medical Systems, which have performed well in the international marketplace,

are held up as examples to follow.

A Copycat Business Culture

Up until recently most local medical device companies developed their product portfolio by imitating

and even blindly copying existing products from multinational product portfolios. This was often

done with limited knowledge of how the products work and the reasoning behind the design

specifications.

This had a lot to do with the market situation in the past. A lack of talent, lax IP laws as well as

limited local competition made this strategy feasible up until a few years ago. However, now with

more competition, a stricter IP regime and a much broader talent base, local companies realize that

they must find new sources of innovation in order to compete.

What china is doing to promote medical device industry?

Figure 1. Shown is the percent change in the Chinese medical

device market from 2009 to 2018. Source:BMI Espicom

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The Chinese government has made it a priority to help develop the domestic medical device industry

by supporting innovation. In its 12th Five-Year Plan, the government set local innovation in the

Medical Device industry as a key initiative with ambitious development goals set for 2015 including

issuing of 200 new patents, development of 50-80 key medical device products, setting up 10 new

national engineering technology research centers and labs and establishing of 8 to 10 nationalscientific industrial bases.

Supporting this plan, the CFDA in March of this year issued a request for comment draft of a new

regulation that is supposed to expedite the regulatory process for domestic innovative medical

devices.

Typical of the Chinese government, they are putting money where its mouth is with a RMB 1.5

billion (~$250M) special supporting fund for the medical device industry whereby companies can

receive over RMB 10 million (~$1.7M) from the government. This is only the start as the government

has announced plans of RMB 10 billion (~$1.7B) to support domestic innovations in the medical

device sector by 2020.

Jumping on the bandwagon, many multinational companies have been setting up or accelerating

their local innovation center investments, especially in the last two to three years. These include

companies like J&J, Fresenius, GE, Medtronic, Boston and Covidien who all recently set up new R&D

centers. Some of these R&D centers, like Covidien were set up not just to create innovative products

for China but also for the rest of the world.

There are many benefits for foreign companies to set up local R&D centers and manufacturing,

including access to talent, access to government subsidies, as well as enjoying the benefits of

improved reimbursement and sometimes an easier regulatory path.

Already, there are already many examples of local innovation in China both developed by local

companies and in the China R&D centers of multinational companies. For instance, Microport,

though originally started by imitating multinational companies bare metal stents, went on to

develop its own IP for Drug Eluting Stents (DES) among other new product lines and now is already in

its third generation DES with unique design innovations that give the Microport product a

competitive edge. GE developed an innovative portable ultrasound in its research centers in China

made for rural areas and eventually even found applications in the US and other developed markets.

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Regulatory Climate

Chinas State Food and Drug Administration(SFDA) regulates the medical device industry and isroughly equivalent to FDA. All imported devices must be registered by the agency. The Ministry of

Health is responsible for public health policies, laws, and regulations.

According to consultant Sonia Zhao, companies that have CE or FDA approval should not have

regulatory difficulties in placing their products on the market in China. However, other industry

observers have characterized SFDA as being unnecessarily complicated and opaque. Recent

developments suggest that regulators are seeking to make the approval process in China less

burdensome, says Bryan Gilburg, vice president of business development at Emergo Group. He cites

as examples the exemption of a large number of devices from the China Compulsory Certification

Mark program, the elimination of a step in the registration process, and a proposed expedited

review process for innovative medical devices.

New Guidelines for Medical Device Adverse Events

In September 2011, the SFDA issued Tentative Guidance for the Monitory of Adverse Device

Events, a notice about new guidelines for adverse events concerning medical devices.

The new guidelines lay out the process that medical device manufacturers, suppliers and distributors

should follow to report and monitor adverse events. This includes the timeframes for reporting

adverse events. Under the new guidelines, medical device emergencies must be reported within

twenty four hours; suspicious deaths within five working days; and serious injuries that may cause

death within fifteen days. After reporting the incident, an internal investigation must be conducted

by the medical device manufacturer. The report must then be submitted to the SFDA within twenty

working days in the SFDAs Medical Device Adverse Event Reporting Form.

Annual summary reports are also required for all other medical device adverse events in the past

year. Class II and Class III medical devices manufacturers need to submit this report to the SFDA bythe end of January each year. Manufacturers of Class I medical devices need not submit their annual

report to the SFDA. Instead, they must keep the report in their own internal records.

All device manufacturers are also required to implement central monitoring systems that can trace

their products. The system must also have formal archives to monitor and record adverse events

related to their products. The companys personnel are also required to undergo training to learn

the process of monitoring and reporting adverse events.

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Effect of Chinese import of Medical device on Indian medical device industry

Impact of the Surge in Chinese Import on Indian Manufacturing Sector

Impact of the Surge in Chinese Import on Indian Manufacturing Sector Abstract Indian import trend

reported a surge in recent past few years, possibly because of cheap import of Chinese

manufacturing goods. The trade deficit with China is also rising along with rising request for

introducing antidumping measures against Chinese import. These trend points the need to check the

profile of import from China and its relation with our domestic manufacturing production structure.

There is also enough evidence to suspect that import to India from countries other than China arenow increasingly been replaced by cheap Chinese import. Therefore the import to India is

progressively concentrating with China. Broadly the Basic Good s and the Intermediate Goods

sectors seem to be negatively affected from the cheap Chinese import. However, across industry

sub-group there are number of products having negatively impacted by Chinese import. The large

import from China are noticed in industry sub-group of radio, television and communication

equipment , followed by Machinery and equipment , office accounting and computing machinery ,

other transport equipment , electrical machinery and apparatus , Basic Metals , Fabricated metal

products, except machinery , Chemical and chemical products , motor vehicles, trailers and semi-

trailers , and rubber and plastic products.

Chinese products have a huge cost advantage over our products. To compete with Chinese products,

some manufacturers do compromise on the quality.

Due to adverse regulatory policy the $3.5 billion worth of medical industry in India is facing stiff

completion and challenges of of inadequate quality standards coupled with huge reliance on

imports, time delays and other related hassles resulting in hindrance for new product development

thereby making the business non-viable and non-lucrative for the industry

The high import duty on raw material than finished goods has led to an import-export anomaly also

due to high raw material costs medical devices manufactured in India is facing stiff completion from

low priced Chinese goods.To reduce our high dependence on exports thus boosting the domestic medical device industry our

country needs to provide incentive on setting up device production bases to encourage medical

device manufacturing in perhaps the same manner in which China has been doing.

The medical device consumer base is constituted by approximately 90 million people (middle class

and richer social classes). This segment of the population is expected to grow by 17 percent annually

for the next seven years, to exceed 268 million, by 2015. Even though, there are about 700 medical

device makers in the country, India imports approximately 75 percent of devices. Many domestic

manufactures are turning into traders since it is more profitable for them to import devices fromChina to India.

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Major industry products in China

Computerized tomography (CT) equipment

X-ray equipment

Ultrasound equipment

Magnetic resonance imaging (MRI) equipment

Endoscopes and medical nuclear equipment

Laser medical equipment and electronic medical equipment

Gamma-ray medical equipment

Chinas impact on cardiac surgery device market

The cardiac surgery device market encompasses devices that are used during heart procedures.

These procedures include correcting heart defects and treating cardiovascular disease. One of the

main factors driving the overall growth of this market in Asia is the growing elderly population, an

age demographic that is associated with higher rates of heart conditions.

In 2011, the combined cardiac surgery device markets of Japan, Australia, South Korea and China

was valued at $443.3 million U.S. dollars. The market for cardiac surgery devices is growing in the

Asia-Pacific region. The country with the fastest growing market for these devices is China. Their

market will grow at a CAGR of 13% between 2011 and 2018. Chinas rapid growth for cardiac surgery

devices is attributed in part to its rapidly expanding economy. Another factor, which is driving the

Chinese market, is the growing access of the public to medical professionals. This greater access is

attributed to continuing improvements to the Chinese transportation infrastructure, which includes

more roads and vehicles. Thus, those living in rural areas who have previously had limited access to

healthcare options, are now within serviceable distances of hospitals.

Tissue and Mechanical Heart Valve Markets are Growing Rapidly in China

China is experiencing rapid growth in almost all medical device markets. The cardiac surgery device

market is no exception, with many segments within this market growing at double-digit rates. The

rapid growth is a combined function of increasing prosperity, awareness, and access to healthcare

facilities. Despite these driving factors, the Chinese government is aware that the market growth

cannot be sustained in the long run. This is due to limited healthcare budgets.

In an attempt to counter their rapidly rising market, the government is entertaining the idea of

implementing cost control for medical devices. Nevertheless, it is expected that the markets for both

tissue heart valves and mechanical heart valves will grow. Tissue heart valves, which are also known

as bio prosthetic valves, are harvested from human or animal donors. For the most part, animal

donor valves which are referred to as allograft valves are used because they are vastly more

plentiful. Tissue heart valves have significant advantages over mechanical valves including higher

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biocompatibility. Because of this advantage, the market for tissue heart valves is growing faster than

for mechanical valves. However, tissue valves are much more expensive than their mechanical

counterparts. This price discrepancy is driving the market for mechanical valves.

A drawback of mechanical valves is that implantation of these devices necessitates long-term follow-

up therapy in the form of anticoagulants. The anticoagulants are required to prevent the formationof emboli, which could lead to death. A side-effect of the anticoagulant therapy is an increased

propensity to bleed. Mechanical valves are also facing price erosion as a result of the growing

market shares of domestic Chinese manufacturers who are able to produce high-quality variants of

these devices. Moreover, the domestic players are able to market their devices at a lower price than

the global market leaders for mechanical heart valves. Because of their lower price, accessibility and

promise of long service, mechanical heart valves are more popular in terms of unit sales than tissue

heart valves. In fact, the unit sales for mechanical heart valves are expected to grow at about 15%

year over year from 2012 onwards.

Disposable medical equipment market in china

Chinas disposable medical equipment market is worth US$10.3 billion, with year-on-year

growth of 9.4% in 2010. The segment accounted for 42% of the domestic healthcare equipment &

supplies available in the market-space. Moreover, China is the largest exporter of low technology

based medical device equipment (including disposable product portfolio) globally. Its exports are

valued at US$1 billion, with year-on-year growth of 15% in 2010. Syringes constitute the largest and

fastest growing export product, registering an annual growth of 21%.

The disposable medical equipment segment is price sensitive and highly fragmented with

approximately 2,450 manufacturers. Zhejiang is the flagship production hub, with Hangzhou, Ningbo

and Wenzhou functioning as core cities hosting 95% of disposable medical equipment

manufacturers. The negative outlook of the anti-dumping lawsuits filed by India, Russia and Ukraine

will further hamper the competitiveness of domestic syringes and other disposable medical

equipment manufacturers enhancing OPEX by 30% in form of taxation.

One of the biggest barriers for international manufacturers in the domestic market-space is the

highly unstructured and fragmented distribution network for low-end technology centric disposable

medical equipment. A majority of hospitals have non-centralized purchase programs (slightly

changing due to new reforms related to the Healthy China 2020 initiative). Agents and sole-

proprietor based distributors are the standalone option, with a high breach of contract and poor

code of conduct.

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Sources:

http://www.mddionline.com/article/medical-device-market-china

http://www.massmedic.com/wp-content/uploads/2011/10/Updates-on-the-Chinese-Medical-

Device-Industry.pdf

http://www.ibisworld.com/industry/china/medical-supplies-manufacturing.html

http://medtechinsider.com/archives/27753

http://www.mddionline.com/article/cardiology-china%E2%80%99s-impact-market-demand

http://medtechinsider.com/archives/27753

http://eaindustry.nic.in/Research_Studies/Impact%20of%20the%20Surge%20in%20%20Chinese%20

Import%20on%20Indian%20Manufacturing%20Sector.pdf

http://www.neuvomedica.com/2013/11/clinica-article-inside-china-from-knockoffs-to-knockouts/

http://articles.economictimes.indiatimes.com/2012-04-23/news/31387063_1_input-cost-medical-

tourism-power-crunch

http://dahuachina.com.cn/?p=182

http://www.kpmg.com/IN/en/IssuesAndInsights/ThoughtLeadership/Excellence_in_Diagnostic_Care

.pdf

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