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% through
2018, 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 its
competitive 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
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 national
scientific 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.










Regulatory Climate
Chinas State Food and Drug Administration (SFDA) regulates the medical device industry and is
roughly 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 by
the 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.




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 are
now 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 from
China to India.




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
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 formation
of 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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