The Medical Device Industry in China

China has a history of being one of the fastest growing worldwide economies, despite the current 1st Quarter growth in 2016 of 6.7 GDP. Innovation and technology drives the medical device industry as one of the largest industries in healthcare. Growth in the healthcare industry is a result of advancements in state-of- the-art medical devices. China’s medical device market is currently the third largest in the world, following Europe as the second largest and the United States as the global leader.

Medical Device Market

China’s medical device market is composed of two categories. The first is domestic manufacturers, which produce 10% of high-tech/high- price products and 90% focus on low-mid range products. The second category is imported, high-end medical devices supplied by large corporations. Sectors of the medical device market in China are Diagnostic Imaging, Medical Supplies, Orthopedics and Implants, Dental and Other Devices. The sector with the highest growth is imaging. The ratio of medical manufacturing companies in China to distribution companies is 1:10. This allows fast expansion and increased growth potential.

Opportunities

Opportunities in medical device market expansion in China are available in each of the two market categories.The first opportunity is establishing a medical device manufacturing company. There are five steps in this extensive process. This process includes pre-registration of the name with the Administration of Industry and Commerce followed by obtaining a manufacturing or trading license through CFDA, the national level authorities, or Local FDA, the provincial level authorities. The next step is the issuance of the approval for foreign investment by the Ministry of Commerce, followed by registration of the company by the Administration of Industry and Commerce. Post-registration includes the Administration of Taxation, Customs, Ministry of Finance, and Administration of Foreign Exchange. Device registration time varies depending on the classification of the medical device. Class I device registration takes approximately 100 working days, where Class II device registration takes 130 working days, and Class III can take over 130 working days. The entire process can take up to fifteen months for Class I devices and up to 24 months for Class II and Class III devices.

The second opportunity is in imported medical devices. The U.S. is base for twenty of the top thirty medical device manufacturers worldwide, making them the world’s largest medical device industry. Importing one third of China’s medical devices from the United States, known for their high quality. China’s Tier 2 hospitals currently import 66% of their medical devices and Tier 3 hospitals import 100% of their medical devices. With the increase in health care and aging population in China, the market growth potential is consistently rising. The steps for importing medical devices include registering with CFDA. Following registration, the supplier must appoint a legal agent and customer service agent, residing in China, to coordinate and manage the CFDA device registration. The device must undergo clinical trials and obtain medical device testing approval in China. Trials from country of origin are not acceptable.

China CFDA Medical Device Regulations:

Implementation of new medical device regulations in 2016 includes increased inspections, regulatory restrictions and stricter approval and implementation of rules and regulations. Closing loopholes for RUO, Research Use Only, products is a large development for this industry in China. New regulations, labeling, packaging, classification, evaluation and registration are included in China’s CFDA medical device regulations found online at:

http://www.emergogroup.com/resources/regulations-china.

Growth Potential

As the medical device industry continues to grow in China, the revenue from this industry alsogrows exponentially. Investments in this steadily growing industry, continues on the trend of positive growth potential from both manufacturing and importing of medical devices to China. Pair this with the increased healthcare spending and the increasing elderly population, positive investment opportunities are present with increased revenue.

Ingrid Rivera

MBA Candidate 2017

MGM Candidate 2017