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March 29, 2022

Volume-based procurement to plunge China’s orthopaedic market into recession

According to GlobalData analysis, China’s orthopaedic market was valued at $3.0 billion in 2021.

By GlobalData Healthcare

Orthopaedic players have had a tough time since the beginning of 2020, not only because of the cancellation and delay of elective procedures due to Covid-19, but they were also hindered by the volume-based procurement policy in the fast-growing market of China. According to GlobalData analysis, China’s orthopaedic market was valued at $3.0 billion in 2021. It is expected to decrease by 45%, reaching $1.7 billion, in 2022 due to ongoing volume-based procurement (VBP) programs.

The VBP programs in China integrate a larger purchasing volume with a lower price to suppress the inflated prices of high-value medical devices. At present, two rounds of national VBP have been successfully carried out, including coronary stents and joint implants. The third round of national VBP for trauma fixation devices is in process. Additionally, the geographic regions and device categories in the inter-provincial VBP programs are expanding. VBP has led to a steep price reduction of 55% to 84% for spinal, hip, and knee implants in China. GlobalData anticipates the price drop of the trauma fixation devices due to national VBP in the following months will fall into a similar range. Obviously, high-value orthopaedic devices will continue to be the major focus of VBP, compared with other medical devices.

China’s orthopaedic devices market can be segmented into hip and knee replacement, spinal replacement, trauma fixation, arthroscopic devices, orthobiologics, and others. Approximate 76% of the revenue is from hip and knee replacement, spinal replacement, and trauma fixation, which have all been heavily impacted by VBP. Multi-national companies (MNCs) used to control over 60% of major markets, but the competitive landscapes have changed rapidly. Domestic companies with excellent cost control, diverse portfolios, and optimal pricing strategies have won more share in the markets that do not have high technical barriers. For example, the domestic players’ share in trauma fixation devices has reached a high level. In the previous VBP program of the 12 provinces, the domestic devices were 935,600 sets, accounting for 96.7%, whereas the demand for imported products was 32,000 sets, accounting for only 3.3%. The major domestic players, including Dabo, Zhengtian, and Weigao, enjoyed a high proportion of the trauma fixation devices market in the region. These companies are very likely to control more shares at the country level during 2022 national VBP.

Orthopedic manufacturers need to keep investing in R&D to improve technology and develop new products, especially for devices that are not on the VBP list. Future direction includes novel absorbable materials in the trauma market, 3D-printed spinal implants, and orthopaedic surgical robots in the spine and joint market.

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