China is one of the world’s fastest growing economies, housing a fifth of the global population and one of the largest healthcare markets around the world. Along with sustained economic and population growth, as well as an aging population, the Chinese healthcare market has maintained an annual average growth rate above 16% since the1990’s. In 2014, the total value of medical devices in the Chinese healthcare market reached RMB 259.5 billion (approx US$41.8 billion). Imported medical devices made by overseas and multinational companies account for about a half. Many high-tech and high-valued medical devices, such as magnetic resonance imaging (MRI) equipment and computed tomography (CT) equipment, are almost monopolized by GE, Siemens, Philips and other overseas and multinational companies.
It is estimated that by 2015, the medical device sales in the Chinese healthcare market are likely to be more than RMB 340 billion (about US$54.8 billion). The Chinese medical device market will surpass Japan to become the second largest market following the United States, making it a field worth playing on.
China’s healthcare space has become an indispensable market for overseas and multinational medical device companies. However, Chinese regulations are undergoing sharp changes, which present big challenges to global companies. What is the reason for such radical change and will this affect business in China? Most importantly, how do businesses respond to these challenges? Overseas and multinational medical device companies need to know the answers to these key questions to operate successfully in the Chinese medical device market.
What is behind the radical changes?
The Chinese economy is on a slowdown. China’s new leaders took office in March 2013 and soon recognised that the economic development pattern must be transformed, and existing technologies innovated. Only industrial transformation and technological innovation can lead China to break away from the “Middle Income Trap” mentioned in the "East Asian Economic Development Report (2006)" published by World Bank. Chinese authorities begin to further open up to worldwide restrictions on foreign investment as businesses are moving towards liberalisation. Overseas activity and investment from multinational enterprises, in addition to business in mainland China and China’s private sector, are the indispensable forces to sustain economic growth and further reduce unemployment within the region.
China as an outsourcing destination is evolving as a large market around the world. A series of factors still support China as a hot destination to attract entry from overseas and multinational enterprises and expanding businesses: an aging population, the growth in wealth, changing consumer attitudes, rising environmental awareness, sharp urbanisation accompanying population migration from rural to urban, and growing middle class are all pushing the country through a process of great change.
China’s rapid population growth and aging society will be one chief driver of change, the total population will reach 1.45 billion and 18% will be accounted for by the elderly population aged 65 years and over by 2020. A scenario that will pose challenges and opportunities in healthcare, pharmaceuticals and senior care sectors as a rapidly aging society urgently will need good medical conditions to support this national stabilisation.
However, when searching on websites of the Chinese regulatory authority, people find there are many announcements of medical device adverse event reporting and medical device recalls, including those medical devices made by overseas and multinational medical device manufacturers.
China’s new leaders have recognised that the regulations for supervision and administration of medical devices are far from perfect along with rapid economic and population growth in the past three decades. If this should continue, there would be possible health risks to the Chinese population which is why China’s new leaders have begun to implement the tighter regulation enforcement.
What and how are Chinese regulations in the medical device market undergoing sharp changes?
The Chinese state council issued the latest “Regulations for the Supervision and Administration of Medical Devices” on February 12, 2014 which came into force on June 1, 2014. Before long, the China Food and Drug Administration (Chinese FDA) issued the latest “Measures for the Administration of Medical Device Registration”, “Measures for the Supervision and Administration of Medical Device Production”, “Measures for the Supervision and Administration of Medical Device Distribution”, “Measures for the Administration of IVD registration” and “Regulations on the Administration of the Instructions and Labels of Medical Devices” on July 30, 2014 respectively, all of which came into force on October 1, 2014.
Among them, the latest “Measures for the Administration of Medical Device Registration (2014 Edition)” (hereafter referred to as “Measures”) poses for overseas and multinational medical device manufacturers the challenges and opportunities within the market.
The latest “Measures” stipulate that the imported medical device for application registration or recordation should be approved by the medical device competent authorities of the country or region where the registration site of registrant or filer, or the manufacturing site is located to be sold in that market. Therefore, the maximum challenges are for those medical devices that have not been granted the certificate of marketing authorisation of medical device issued by the government authorities of origin which have been intercepted outside the door of the Chinese medical device market.
Another great challenge is the latest “Measures” outlining that all class medical devices applying for registration or recordation should conduct clinical evaluations or clinical trials based on the clinical literature, experience data, and any other information on clinical trials.
There are two ways: clinical evaluation and clinical trial. However, the Chinese concept of clinical evaluation and clinical trial for medical device registration is unique, which is distinct from the clinical trial in U.S. and EU countries. If the Class II and III imported medical devices have the equivalence of similar products sold on the Chinese market or the products listed into the Catalogue of Exempted Clinical Trial Medical Devices issued by Chinese FDA, the applicant can conduct the clinical evaluation by contrasting the identity and discrepancy between the product applying for registration and the similar products sold on the Chinese market or the products listed into the Catalogue of Exempted Clinical Trial Medical Devices to prove the safety and effectiveness of the product applying for registration.
Until now, the Chinese FDA has issued the “Catalogue of Exempted Clinical Trial Class II Medical Devices” covering 488 medical devices, as well as the “Catalogue of Exempted Clinical Trial Class III Medical Devices” including 79 medical devices. For those Class III implantable medical devices with a higher risk to human body, the applicant must conduct the clinical trials in the qualified medical device clinical trial institutions in Chinese territory and must be approved by the Chinese FDA. Until now, the Chinese FDA has issued the “Catalogue of Class III Medical Devices Need to Clinical Trial Approval” involving 5 kinds of medical devices. Prior to issuance of the latest “Measures”, overseas and multinational medical device manufacturers could submit foreign trial data to be accepted at the Chinese FDA’s discretion. Now, that is no longer possible.
The latest “Measures” also pose overseas and multinational medical device manufacturers many opportunities. The Chinese FDA relaxed and simplified the admittance license of overseas medical devices. All overseas medical device manufacturers exporting Class I medical devices to China only need to file the archives and certificate of marketing authorisation issued by the government authorities from the country of origin to the Chinese FDA for record.
In China, the process of application and approval for imported overseas medical device registration is very complex, because the Chinese medical device authorities administer and control this process by exorbitant administrative regulations and measures. Moreover, these measures and regulations are variable and lack transparency. In addition, the cultural difference between China and Western countries, as well as the language barriers, will increase the challenge faced by overseas and multinational medical device manufacturers and producers. The Chinese FDA stipulated requirements of application dossiers for exporters of medical devices into China are far stricter than that of previous application dossiers, despite the admittance that the license of overseas medical devices has relaxed. Thus, the preparation of application dossiers for oversea medical device registration or recordation in compliance with the new requirements became the key first checkpoint of oversea medical device exporting into China.
The latest “Measures for the Administration of IVD registration (2014 Edition)” brings overseas and multinational manufacturers the challenges and opportunities for application and approval of imported in-vitro diagnostic reagent registration similar to imported overseas medical device registration.
Special Examination and Approval Procedures
In order to promote the research and innovation of medical devices, Chinese FDA has set a special examination and approval procedures for innovative medical devices since March 1, 2014, which is equivalent to “fast track approval” in the United States and the European Union. For those overseas medical devices have been granted the invention patent right of core technology in Chinese territory, or the overseas applicant, by transference, its medical device product has acquired the Chinese invention patent right or the right to use such patent in Chinese territory, the overseas applicant may apply for special examination and approval procedures for its medical device product to speed up approval for entry into Chinese market and reduce the uncertainty in examination and approval process.
For the application granted special examination and approval of innovative medical device product, Chinese FDA will give priority of examination and approval for innovative medical devices and designate specific staffs to provide prompt communications and guidance upon applicant's request, and to jointly discuss technical issues with the applicant at various stages of examination and approval process. Up to now, the all bioabsorbable stent system manufactured by Abbott Vascular has been agreed the special examination and approval. Now, it is publicized on the website of Center for Medical Device Evaluation (CMDE) of Chinese FDA to March 30, 2015
How do you respond to challenges?
The overseas and multinational medical device companies and their senior executive officers engaging in regulatory affairs must have a comprehensive and thorough knowledge of the latest Chinese regulations. In light of the current climate, the judicious attitude responding to challenges is to be in compliance with the new regulations. How to operate a business smoothly in China depends upon your skills of acquiring an essential knowledge of the latest Chinese regulations and in communication with the Chinese regulatory authorities, as well as the agent service companies, including the contract research organizations (international and domestic CROs). The abstruse skill and profound vision remain to be grasped for overseas and multinational medical device companies.
Interested in more insights on the changing Chinese regulatory on medical device market? Browse Access China Management Consulting Ltd.'s reports.
This post was written by Labwu, Access China Management Consulting Ltd.
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