The Medical Devices Market in China
According to the U.S. Department of Commerce, China is now the world’s second largest market for medical equipment. According to the Hong Kong Trade and Development Council (HKTDC), the Chinese medical device market was worth about $34.51 billion in 2013. The annual growth rate of China’s medical device market has been between 15% and 20% depending on the product sector. The major driving forces behind this growth include increasing demand for healthcare services due to improved and complete coverage for Chinese nationals and the increasing aging population in China. Hospitals are major distribution portals for medical devices accounting for more than 75% of the market share according to the HKTDC. Medical device makers from the United States, Europe and Japan take up roughly three-quarters of China’s medical device market. This is mostly because Chinese consumers consider foreign products better in quality and are technologically advanced. To no one’s surprise, China has been speeding up the development of its own medical device industry and promoting domestic products in its recent “Buy China” efforts.
China’s deliberate promotion of its domestic device makers aside, foreign players should be mindful of the many rules and regulations governing this industry. For example, all medical devices marketed or sold in China must be registered with China’s Food and Drug Administration (CFDA). The CFDA classifies medical devices based on the intended purpose and function of a medical device, the risks to patients, and the duration of use of the device on a patient. Any accessories to a medical device are classified independently. You can find specific guidance with respect to medical device classification from the CFDA here. You can find the regulations for the supervision and administration of medical devices on the CFDA website in English here. Please note that registration is only valid for four or five years depending on the product and renewals must occur within six months of expiration.
Importing medical devices into China also may require country of origin certificates such as the U.S. issued 501(k) letter. In the United States, device manufacturers must register and notify the Food and Drug Administration (FDA) of their intent to market a medical device at least 90 days in advance. We have seen contract provisions that require the importer to fulfill the Chinese CFDA registration requirements within a time limit but the contract will say nothing about the country of origin registration. We highly recommend that importers carefully consider how long it will take to get the necessary country of origin certificates before even initiating the Chinese registration process. It is always a good idea to build in ample time for these registration requirements. It is even a better idea to engage local counsel on both sides of the pond from the start to help navigate the regulatory timeline in your contracting and planning efforts.
Additionally, all medical devices distributed in China must include product specifications on its labels and packaging identification. The same circular that established the labeling requirements also requires manufacturers of foreign medical devices to establish quality control protocols and maintain relevant documentations. Importers and manufacturers must also appoint China-based agents to coordinate the CFDA registration process, any adverse events reported including product recalls, and an after sales agent to provide technical service and maintenance support. It is also important to know that most medical equipment purchases in China are done through a formal tendering process since a large number of hospitals in China are state owned. This tender and procurement process has some very specific requirements such as specification documentations, expert reviews, and undergoing an adjudication process. Importers should retain local counsel and review the Chinese Tender Law and the government procurement process in its planning and execution. It is also ideal to have cooperation or distribution agreements in place with reputable hospitals or research institutions during the planning phase to ensure proper and timely business execution and avoid any procurement problems.
China is currently undergoing reform and stimulus efforts in its healthcare industries. This will likely boost market growth and increase demand for medical device imports. If you are already importing medical devices into China, you should consider planning for in-country operations to anticipate the effects of China’s recent “Buy China” policies. If you have not yet formulated a strategy to import medical devices, you should begin by building your Chinese agent network and start your promotion through trade shows and well-known organizations. For more information or assistance, please contact our China Desk attorneys.
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Joseph J. Dehner Joe Dehner concentrates his practice on multinational business and securities disputes. He counsels a wide variety of companies, domestic and foreign, on issues confronting global business, including transnational investment, mergers and acquisitions, joint ventures, customs and trade issues, international business structures, distribution and agency agreements and the resolution of international disputes.