Unfortunately for foreign devicemakers, import substitution appears to be one of the means by which China intends to achieve its goal of creating 10 med tech breadwinners worth 5 billion yuan ($820 million) apiece by 2020.
The deputy commissioner of China's National Health and Family Planning Commission met with the head of 44 large hospitals during his September visit to Shanghai and urged them to buy more domestically made and designed medical equipment, reports PharmAsia News.
The meeting signals a policy shift. Chinese devicemakers have traditionally focused on supplying smaller hospitals, but now deputy commissioner Sun Zhigang wants high-end, large urban hospital to use domestic equipment. PharmAsia News says those hospitals rely on imports for as much as 80% of their medical equipment.
One sector that could be particularly affected is imaging, dominated in China and around the world by the big three: General Electric ($GE), Philips Healthcare ($PHG) and Siemens. Sun and the hospital heads toured local company Shanghai United Imaging during the visit. The company is affiliated with The Shanghai Advanced Research Institute and the state-run Chinese Academy of Sciences.
Sun's goal is not merely his own. Import substitution is called for in China's latest five-year plan, according to PharmAsia News. In 2011 China listed the biotechnology industry--including the device industry--among its 7 strategic industries.
The U.S. Department of Commerce has had some success in reining in Chinese policymakers when it feels they become overly protectionist. Last year, the agency was able to secure the removal of China FDA (CFDA) regulatory language stating that innovative devices must be made in China to be eligible for accelerated approval, according to The Gray Sheet.
In addition, PharmAsia News reports that the FDA is preparing for the entry of Chinese-made high-risk class III devices into the U.S. Ames Gross, president of consultancy Pacific Bridge Medical, told FierceMedicalDevices that the exportation of Class III medical devices from China to the U.S. is possible in the long run, but not likely in the near term due to quality issues of the China-made products.
|M9 Ultrasound System--Courtesy of Mindray|
However, he pointed out that Chinese-made drug-eluting stents are already exported to Eastern Europe. And Chinese companies are making inroads into the U.S. market among lower-risk products that don't require a PMA approval from the FDA. Mindray this week announced the launch of the M9 ultrasound system in the U.S.
Meanwhile, foreign manufacturers in China are seeing increased competition from domestic players in class II and class III product categories, Gross said. Device companies in China must also deal with local clinical trial requirements that recently came into effect.
"Overseas clinical trial studies for risky (Class III) device registration is not new. What is new is an increase in local clinical trials in addition to the foreign clinical data for the registration of riskier products in China," Gross said. "Both foreign manufacturers in China and local medical devices in China are now required to do more local clinical studies in China. Local companies may have advantages here since local provincial CFDA offices may be more friendly to local companies as opposed to foreign companies trying to register their devices in China."