The Chinese government desires explosive growth in biomedical and high-end medical device manufacturing under the “Made in China 2025” plan.
The plan identifies the goal of raising the domestic content of core components and materials to 40% by 2020 and 70% by 2025. The medical device industry is one of the key breakthrough in technological development among ten major focus areas. The goals of increasing domestic device use in high tier hospitals are to 50%, 70%, and 95% by 2020, 2025, and 2030, respectively.
Domestic manufacturers in China are providing cheaper local alternatives to marketed medical devices in Chinese hospitals while directly growing the Chinese economy.
Traditionally, the majority of products from China’s domestic medical device manufacturers have been low-cost and require only low technology. The plan focuses on the development of high-performance devices such as diagnostic imaging equipment, robotic surgery devices, high-end medical consumables like fully degradable cardiovascular stents, wearable devices, and telemedicine. Innovations in the field of biological 3D printing and precision medicine based on gene sequencing and immune therapy are also highlighted. As local Chinese companies increase their technological capabilities and produce high-end medical devices, it will continue to strengthen China’s medical device market.
In the past decade, local Chinese companies have been steadily taking share from international companies. The import data of the major medical devices category (Harmonized System Codes 90) in China declined 12.7% from 2012 to 2016 with a negative Compound Annual Growth Rate (CAGR) of 3.3%. GlobalData expects imports of medical devices to further reduce with implementation of the “Made in China 2025” plan in the long term. Competition in the Chinese medical device market, the most important battleground for medical device firms of all emerging economies, will become more intense than ever.
International companies have historically followed the strategy of leveraging existing distribution networks, establishing key partnerships with local suppliers, and founding innovation centers to make inroads into the Chinese market.
As the market shifts towards the use of local devices, foreign manufacturers will need to develop other strategies to remain competitive. One option is the acquisition of domestic players; however, companies will need to be cognizant of each province’s guidelines on “local” manufacturers. In some districts, when a foreign company purchases a local manufacturer, the resulting domestic subsidiary may actually be considered a foreign entity by the provincial authority.
The other option is to make enough changes to an innovative device and classify it as a Chinese device. This also helps get faster approvals from China Food and Drug Administration (CFDA) by Fast Track Approval Process for Innovative Medical Devices. Alternatively, foreign companies may seek to achieve broader product portfolios that offer better outcomes and prove cost-effectiveness over local products to have higher appeal for clinicians, patients, and payers.