Reshaping the medical device industry: regulators and industry discuss how to separate the wheat from the chaff

Medical devices have become one of the most prominent industries in China's high-tech sector, with new products constantly emerging and product quality continuously improving. Mobile medical devices, precision medicine, and big data-based products are developing rapidly. This was stated by Wang Shucai, Deputy Director of the Medical Device Supervision Department of the National Medical Products Administration, at the 2019 Huaihai Biopharmaceutical Industry Development Summit.

Medical devices involve nearly 100 disciplines, including acoustics, optics, electricity, magnetism, and mechanics, demonstrating extensive interdisciplinary collaboration. It is widely recognized as a high-tech intensive industry. "Europe, the US, and Japan are all powerhouses in medical devices. The US and EU medical device industries account for nearly 70% of the global medical device market, and adding Japan and China brings the total to over 90%. "

Wang Shucai indicated that in recent years, the number of domestic medical device manufacturers and distributors has increased significantly, with nearly 18,000 medical device Manufacturers. Domestic medical device production and distribution have entered a new phase, presenting new challenges for regulation.

Currently, medical device supervision includes targeted inspections and overseas checks, with special actions focusing on high-risk products, those with high public usage, and those attracting significant public attention.

Regarding research on key issues, Xu Wei, Deputy Director of the National Medical Products Administration's Center for Medical Device Evaluation, announced at the meeting that an AI working group was established at the end of 2017. Its main tasks include analyzing and researching the market launch of AI medical devices overseas, investigating the R&D progress of domestic companies and research institutions involved in AI medical device development, and discussing the review requirements for AI medical devices.

Although some domestic products have reached internationally advanced levels, Wang Shucai pointed out that the medical device industry still faces challenges due to its fragmented nature, and the development of the medical device industry still has a long way to go.

The development of the domestic medical device industry not only presents new regulatory challenges but also brings new challenges to medical device logistics and distribution companies. Multiple regulations and policies for the domestic pharmaceutical industry have been successively introduced, and mergers and acquisitions among pharmaceutical supply chain giants have continuously strengthened, further increasing industry concentration.

Guo Wei, Executive Vice Secretary-General of the Medical Logistics Branch of the China Federation of Logistics and Purchasing, stated at the Huaihai Medical Device Supply Chain Sub-forum that the concentration of the domestic medical device distribution industry is relatively low. However, with the further development of the "two-invoice system," volume-based procurement, and zero-markup policies, future distribution companies will undergo corresponding adjustments.

"Judging from volume-based procurement of pharmaceuticals, volume-based procurement of medical devices will also come soon. In the future, off-site warehousing and third-party logistics will play a crucial role in the linkage of volume-based procurement."

With the increase in industry concentration, medical devices need to be quickly delivered to meet clinical needs, and the demand for off-site warehousing will continue to grow. In 2018, the State Drug Administration issued a "Notice on the Handling of Matters Concerning the Establishment of Warehouses Across Administrative Regions by Medical Device Operators," officially allowing the establishment of off-site warehouses.

However, Guo Wei predicts that the promotion of off-site warehousing will be relatively difficult: "Large land occupation, low tax revenue, especially in the special medical industry, which is related to life safety. However, with clear documents already issued, we believe it will be promoted soon."

Under the pressure of centralized procurement and the "two-invoice system," the fragmented nature of medical device operators will be reshaped. "In the future, medical devices may also begin to implement the "two-invoice system," or even a "one-invoice system." By looking at the path taken by pharmaceuticals, we can see the potential future path for medical devices."

However, there were also dissenting voices from industry insiders at the meeting, who believed that large-scale centralized procurement of medical devices would not occur in the short term. "Pharmaceuticals can undergo consistency evaluation, and under the same quality, the lowest bidder wins. However, the consistency evaluation of medical devices may not be available within three or four years, especially for high-value consumables." This industry insider stated that the medical device industry is different from the pharmaceutical industry, with a small number of doctors controlling a large amount of resources. "For example, only about 1300 doctors in China can proficiently operate urological endoscopes. In this situation, unlike pharmaceuticals with multiple departments and indications, medical devices will inevitably have unequal market sizes."

In August of this year, the National Medical Products Administration issued the "Rules for the Unique Identification System of Medical Devices," announcing the UDI coding rules for medical devices. At that time, there were already voices suggesting that this move was in preparation for future centralized procurement.

In vitro diagnostic reagents, due to their ability to undergo equivalence testing, may be the first type of medical device to achieve centralized procurement. The aforementioned industry insider stated that future centralized procurement of high-value consumables may be based on the most clinically used Models. "The cost of centralized procurement negotiations is very high, and the industry scale must be at least 500 million yuan, or even 1 billion yuan."