Page 154 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
a list that could be announced as soon as January 2018 for medical devices is expected to increase from second
(Jourdan and Marques). and third tier cities and villages in the coming five to ten
years. As of 2016, China had over 16,000 mostly privately
Additional changes to the market continued in May owned hospitals. China’s first comprehensive five-year
2017 when the China Food and Drug Administration’s blueprint for the healthcare sector, the National Planning
four new draft policies were released. The proposed Guideline for the Healthcare Service System, presented
changes to drug, medical device, and clinical testing clear targets for 2020 including one clinic and one medical
regulations could herald an exciting new era by opening service center for each community with a population of
up the floodgates for drug and device development. If over 30,000 and 1.2 hospital beds for every 1,000 residents
implemented in full as expected, the proposed changes within the community. Made in China 2025 mandates that
would standardize regulatory requirements, allow for at least 70 percent of the medical devices used by county-
greater use of foreign data broadening eligibility of sites to level hospitals and clinics in China had to be manufactured
conduct trials, provide greater transparency of the ethics domestically by 2025 (Wang). Public hospitals are not
processes, and ultimately shorten approval timelines. prevented from importing medical devices, but they are
The proposed changes present a proactive response by highly encouraged to buy domestically. The National
a regulatory body keen to improve the overall domestic Health and Family Planning Commission (NHFPC) is in the
drug development process and make new medicines process of establishing an incentive scheme to encourage
available faster (Southey). the use of domestically produced medical devices and
is creating a series of lists of qualified products. This is
The same month, U.S. drug distributor Cardinal Health why many foreign companies are moving or considering
put its Chinese business up for sale, an opportunity that is moving their production to China so that their products
drawing keen interest from state-backed domestic firms. can meet the qualifications and remain competitive in the
The deal could be worth as much as $1.5 billion. Shanghai Chinese market (Zhu and Wu).
Pharmaceutical Holding Co., Ltd., China Resources
Pharmaceutical Group Ltd and Sinopharm Group Co., In developed overseas markets, medical devices
Ltd. immediately started eyeballing the details of the and equipment account for 42 percent of the overall
potential sale of Cardinal Health China, one of the nation’s market size of pharmaceuticals and devices/equipment
largest drug distributors. The planned sale comes after combined. In the domestic Chinese market, however, the
Beijing introduced a so-called “two-invoice” procurement share of medical devices and equipment is just 14 percent,
system for drug distribution on a trial basis. For over creating a huge potential to raise the share of locally made
ten years, China has been considering streamlining its devices. China’s medical device sales volume increased
multi-layered drug distribution, a system which profits from 120 billion yuan to 308 billion yuan between 2010
intermediaries and drives up drug prices. Under the new and 2015. An average annual growth rate of more than 20
system, expected to be fully implemented in 2018, drug percent is expected for the near future. China’s medical
manufacturers can only work with a single distributor to device sales volume is expected to reach about 600 billion
directly supply products to healthcare facilities such as yuan in 2019 (Li, China’s medical).
hospitals. The system overhaul is expected to reshape
the nation’s drug distribution landscape. Distributors that In China, medical devices are classified into three
lack links to strong manufacturers and healthcare facilities categories based on the level of risks in connection
could be cut out of the supply chain (Zhu and Wu). with the use of the devices. Class I devices are deemed
safest and Class III devices most risky. Different classes
Medical Devices of devices are subject to different filing and registration
requirements with different levels of the CFDA. Class I
China is the world’s second largest medical device devices are not subject to a clinical test while Class II and
market with an average growth of 20 percent year-on- III devices are, with the exception of a few prescribed cases
year. This speedy growth, however, has not kept up with (Li, China’s medical). Ten years ago, China made Class I and
the strong demand of an increasingly ageing population II commodity devices for export to the West. Today, China
and the growth in the number of affluent consumers who can also make sophisticated Class III medical devices.
want better quality medical services and are willing to For example, in the orthopedic implant devices sector,
pay for it. Resources are minimal and underdeveloped in Western companies such as Zimmer or DePuy Synthes sell
relation to medical devices in rural areas, but the demand their products in Brazil, and Chinese orthopedic implant
154
a list that could be announced as soon as January 2018 for medical devices is expected to increase from second
(Jourdan and Marques). and third tier cities and villages in the coming five to ten
years. As of 2016, China had over 16,000 mostly privately
Additional changes to the market continued in May owned hospitals. China’s first comprehensive five-year
2017 when the China Food and Drug Administration’s blueprint for the healthcare sector, the National Planning
four new draft policies were released. The proposed Guideline for the Healthcare Service System, presented
changes to drug, medical device, and clinical testing clear targets for 2020 including one clinic and one medical
regulations could herald an exciting new era by opening service center for each community with a population of
up the floodgates for drug and device development. If over 30,000 and 1.2 hospital beds for every 1,000 residents
implemented in full as expected, the proposed changes within the community. Made in China 2025 mandates that
would standardize regulatory requirements, allow for at least 70 percent of the medical devices used by county-
greater use of foreign data broadening eligibility of sites to level hospitals and clinics in China had to be manufactured
conduct trials, provide greater transparency of the ethics domestically by 2025 (Wang). Public hospitals are not
processes, and ultimately shorten approval timelines. prevented from importing medical devices, but they are
The proposed changes present a proactive response by highly encouraged to buy domestically. The National
a regulatory body keen to improve the overall domestic Health and Family Planning Commission (NHFPC) is in the
drug development process and make new medicines process of establishing an incentive scheme to encourage
available faster (Southey). the use of domestically produced medical devices and
is creating a series of lists of qualified products. This is
The same month, U.S. drug distributor Cardinal Health why many foreign companies are moving or considering
put its Chinese business up for sale, an opportunity that is moving their production to China so that their products
drawing keen interest from state-backed domestic firms. can meet the qualifications and remain competitive in the
The deal could be worth as much as $1.5 billion. Shanghai Chinese market (Zhu and Wu).
Pharmaceutical Holding Co., Ltd., China Resources
Pharmaceutical Group Ltd and Sinopharm Group Co., In developed overseas markets, medical devices
Ltd. immediately started eyeballing the details of the and equipment account for 42 percent of the overall
potential sale of Cardinal Health China, one of the nation’s market size of pharmaceuticals and devices/equipment
largest drug distributors. The planned sale comes after combined. In the domestic Chinese market, however, the
Beijing introduced a so-called “two-invoice” procurement share of medical devices and equipment is just 14 percent,
system for drug distribution on a trial basis. For over creating a huge potential to raise the share of locally made
ten years, China has been considering streamlining its devices. China’s medical device sales volume increased
multi-layered drug distribution, a system which profits from 120 billion yuan to 308 billion yuan between 2010
intermediaries and drives up drug prices. Under the new and 2015. An average annual growth rate of more than 20
system, expected to be fully implemented in 2018, drug percent is expected for the near future. China’s medical
manufacturers can only work with a single distributor to device sales volume is expected to reach about 600 billion
directly supply products to healthcare facilities such as yuan in 2019 (Li, China’s medical).
hospitals. The system overhaul is expected to reshape
the nation’s drug distribution landscape. Distributors that In China, medical devices are classified into three
lack links to strong manufacturers and healthcare facilities categories based on the level of risks in connection
could be cut out of the supply chain (Zhu and Wu). with the use of the devices. Class I devices are deemed
safest and Class III devices most risky. Different classes
Medical Devices of devices are subject to different filing and registration
requirements with different levels of the CFDA. Class I
China is the world’s second largest medical device devices are not subject to a clinical test while Class II and
market with an average growth of 20 percent year-on- III devices are, with the exception of a few prescribed cases
year. This speedy growth, however, has not kept up with (Li, China’s medical). Ten years ago, China made Class I and
the strong demand of an increasingly ageing population II commodity devices for export to the West. Today, China
and the growth in the number of affluent consumers who can also make sophisticated Class III medical devices.
want better quality medical services and are willing to For example, in the orthopedic implant devices sector,
pay for it. Resources are minimal and underdeveloped in Western companies such as Zimmer or DePuy Synthes sell
relation to medical devices in rural areas, but the demand their products in Brazil, and Chinese orthopedic implant
154
