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China is already the second largest single-country market for medical devices and will continue to represent a double-digit growth opportunity for medtech manufacturers for some years to come. The market has not been without its challenges though, especially in its regulatory and reimbursement complexity, but recent reforms and new policies introduced by the government are expected to ease market access. At the APAC Medtech Forum, held in Singapore on October 9 to 10, one key panel session discussed how these reforms are going to impact medtech manufacturers who are already operating in or are looking to access China.
China government restructure - the low down
The APAC Medtech Forum (APMTF2018), the annual conference organised by the Asia-Pacific medical device trade association APACMed, held a panel session on October 10 that focused on China and the likely repercussions - positive or otherwise - which the recent restructure of the Chinese government will have on the medtech industry and on health care.
To recap, China had introduced and set in motion over the last few years a number of industry-positive changes to its regulatory framework, such as opening up fast-track channels - like the Green Channel - to expedite the registration of innovative devices and products that address rare disease and unmet clinical needs, as well as allowing companies to use foreign clinical trial data in its China approval applications (thus relieving the cost burden of having to do clinical trials in China).
Then, in March this year, the Chinese government underwent a restructure: the China Food and Drug Administration (CFDA) is now a part of a mega enforcement agency called the State Administration for Market Regulation (SAMR). The CFDA has been renamed the National Medical Products Administration (NMPA) and while it still regulates drugs and medical devices, it no longer regulates food products.
Katherine Wang, life sciences regulatory lawyer at Ropes & Gray and moderator of the APMTF2018 panel, told delegates that this change signalled a slight change in the regulatory agency's mission; from previously controlling the entire product life cycle (encompassing both pre-approval supervision to post-approval enforcement), the NMPA now focuses more on pre-approval supervision and is leaving the post-approval enforcement responsibility to its provincial counterpart and to the local administration of market regulation.
Wang said she believes the positive regulatory changes set by the former CFDA a few years ago will continue in spite of this government restructure because the leaders of the former CFDA have been appointed to the key positions of the current NMPA. Indeed, the head of NMPA was the former deputy commissioner in charge of the CFDA's medical device unit.
Additionally, the government restructure has also affected another aspect of market access - the reimbursement of medical products. The newly formed National Healthcare Security Administration (NHSA), which is responsible for setting high-level policy for reimbursement and pricing of medical devices, consolidates a lot of authority from different government departments.
Wang informed delegates that almost all the leaders at the NHSA are economists, signalling China's likely intention to introduce more health technology assessments to guide their reimbursement policies. The NHSA will also be in charge of a lot of product tendering and procurement policies in the future - which would allow more centralisation of this function that is currently very fragmented and carried out on a provincial level.
The China panel at APMTF2018
Sharing their views and observations on the current China medical device landscape and how these regulatory and reimbursement changes might benefit - or threaten - the medical device industry wanting to access China are:
Dr Chenxi Ouyang, a cardiovascular surgeon at Beijing's Fuwai hospital, which is a national hospital and leading clinical research centre for cardiovascular disease. He is also an entrepreneur and his company Youngsen Biotech is focused on the development of vascular grafts.
Dr Yunpeng Guan, deputy director of the department of international co-operation at the China Chamber of Commerce for Import & Export of Medicines and Health Products (CCCMHPIE). The mandate of the CCCMHPIE is to boost import and export of medical products including medical devices. It has 2,00 members, of which medical device companies make up a third.
Dr Mingdong Zhang, chief medical officer and VP of medical and regulatory affairs for Boston Scientific, Greater China, Prior to working in industry, Zhang has also worked in academia and in regulatory government agencies.
Guan on the current health of China’s medical device market:
"In 2017, total sales of medical devices in China exceeded $75 billion; 55 percent were taken up by diagnostic and therapeutic medical devices, while the remaining 45 percent were by disposables and consumables."
Guan on China's medical device import trade:
"There have been a lot of policies and initiatives to encourage the import of devices and drugs to help close the gap of the market needs. Because of those initiatives, we have seen a steady increase of imported medical products into China. In 2017, the total trade volume of the medical device sector was valued at around $20 billion, which makes up 45 percent of total foreign trade industry."
Zhang on how multinationals like Boston Scientific are taking advantage of the regulatory reforms:
"The changes with the clinical trial requirements present a significant opportunity...They will really help accelerate market access for multinational companies. As a company with a lot of high risk devices, we have been doing a lot of clinical studies in US and Europe - outside of China - and we are really leveraging that foreign clinical data [in our China approval process].
The attitude of the former CFDA is changing. They are trying to help facilitate market access for innovative technologies...even though it might take us multiple rounds of discussion to change the traditional thinking of the reviewers, they are open-minded and I think it is time we leverage that."
Ouyang's observations on the recent reforms from the perspective of a local Chinese entrepreneur:
“The Chinese government has been introducing many policies to encourage scientists and doctors to innovate and be entrepreneurial, which is how a doctor like me could become an entrepreneur and start his own company. With the new policies to improve market access for innovative medical devices, this is a good opportunity not just for domestic device companies, but also for foreign device players. Since the Green Channel, the fast-track channel for innovative devices was introduced in 2014, there has been 182 products approved through this channel and it's not just domestic devices; they also include devices from companies like Medtronic, Boston Scientific, Gore and St Jude. More than a half are cardiovascular devices."
Wang on the Chinese reimbursement landscape and its challenges:
“The Chinese reimbursement system is very fragmented. Some innovative products are tied to very innovative procedures and the procedures need to be approved by the local health authority with a price. Sometimes it takes 1-2 years to get a price for a new medical procedure, and without this price tag, the products cannot be deployed in the clinics. Additionally, many chinese hospitals already have a very well-developed formulary of medical devices. So this is another challenge for companies to get their new products into this formulary.”
Guan's advice on how mid-sized companies could better commercialise their products in China:
"Finding a good distributor is crucial for a foreign company that wants to sell their products in China. There are 13 000 distributors in China and finding a credible and good-quality distributor will affect the success of your business."
Guan on the benefits of China's new two-invoice system:
“The two-invoice system came from pharma and is now starting to affect devices, especially consumable products. With the two-invoice policy, there are two steps: one invoice is from manufacturer to distributor while the second invoice is from distributor to the clinics. This policy has helped to improve the order of the distributor sector; it has sifted out smaller distributors because they cannot cope with this new system; and medical device companies have a smaller number of, [but better quality], distribution partners to choose from.
Also, different distributors have different strengths in different regions - foreign companies should look at different distributors for different provinces, not just go with one partner."
Ouyang's advice to companies on how they could get hospitals to adopt their products:
"Our hospital is very strict about its procurement process and the government is putting pressure for hospitals to reduce costs. So as a surgeon, I look for devices that obey the FREE rules: Feasible, Reliable, Easy and Economical."
Zhang on the growing trend of health economics data in China:
"There is a growing emphasis from the reimbursement agencies on evidence-based approaches for their decision-making process. You need to emphasise health economic evidence to the NHSA, and do health economic studies and show how your product differentiates itself from other treatment options. It is not that common yet [in China] but it is a growing trend."
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