Happy Chinese New Year….the year of the ram!
There are very good opportunities for foreign medical device companies in China because the people are becoming wealthier and want better healthcare. In addition, the government is trying to increase access to healthcare via large healthcare expenditures and new reimbursement. We estimate the medical device market size in China to be about $18-$20 billion, whereas others claim the market to be as high as $30 billion – even bigger than the market in Japan. And the Chinese market continues to grow between 15 and 20 percent per year. However, access to the marketplace is harder than ever. Why is this?
One of the biggest problems is the Chinese Food and Drug Administration (CFDA)’s new regulations, announced on October 1, 2014. Last fall, the CFDA announced new regulations that, for the most part, will make product registration harder, not easier.
Class 1 devices only need notification now and not registration. However, the requirements for notification are more difficult than they were for registration.
In the past, many Class 3 devices could use foreign clinical data to bolster their product registration dossiers, but today, more and more local clinical trials are required to obtain approval in China.
In addition, the testing centers in China are very backed up, and many do not even have the capabilities or know-how to test your products.
Finally, there is a new fast track approval system in China for innovative devices, but it is primarily for products that are developed and manufactured in China, and the intellectual property must be owned in China. How many foreign companies will have products that fit these specifications? Not many.
Besides these regulatory hurdles, the Chinese government is encouraging hospitals to purchase more devices made locally in China and not from abroad. Chinese reimbursements are normally low for devices, and this favors cheaper products made in China as well. Obtaining reimbursement on a province by province basis is often too time consuming for small to mid-sized Chinese distributors.
Thus, what should a foreign device company do? There is no one answer to this question. However, here are my suggestions: Foreign device companies need to do more due diligence with their Chinese distributors before they sign them up. They need to spend more time building quality relationships with their employees. They need to make sure they have the best RA people on their side. They also need to not look at China as just one of the 40 countries they sell products to. Senior executives taking a couple of visits to China per year to “kick the tires” normally will not make it! To be successful, foreign device companies need to spend more time, energy and money to help ensure success in this promising but complex marketplace.