13 Major Changes Facing the Medical Device Industry in 2020!

2020: A More Exciting Year for the Medical Device Industry 

 

National-level Blacklist of Medical Consumables, Imminent Completion

 

On July 31 this year, the State Council issued the "Reform Plan for the Governance of High-Value Medical Consumables," requiring strengthened standardized management of high-value medical consumables, clarifying the scope of governance, and focusing on high-value medical consumables with relatively high unit Price and resource consumption ratios as key governance targets.

 

It also requires the completion of the first batch of key governance lists by the end of 2019, with the National Health Commission and the National Medical Insurance Administration responsible.

 

It is important to note that although the above document requires the completion of the first batch of lists by the end of the year, it is still uncertain whether they will be published by the end of the year.

 

However, it is certain that the provincial key governance lists will be completed or published successively in 2020.

 

On December 20 this year, the Henan Provincial Health Commission issued the "Notice of the Henan Provincial Health Commission on Announcing the List of Key Governance of High-Value Medical Consumables in Medical Institutions Across the Province," announcing the list of key governance of high-value consumables.

 

Involving 50 categories of high-value consumables such as vascular intervention, orthopedics, neurosurgery, extracorporeal circulation and blood purification, and electrophysiology. If specified by consumable name, the key governance list actually involves hundreds of consumables.

 

New Regulations on Medical Device Supervision and Management, Imminent Release

 

It has been rumored within the industry that the new "Regulations on Medical Device Supervision and Management" (hereinafter referred to as the "Supervision and Management Regulations") will be released before the end of 2019, but judging from recent developments, the probability of release before the end of the year seems low.

 

Each amendment and adjustment of the "Supervision and Management Regulations" reflects the development and regulatory trends of the industry to some extent.

 

Previously, some insiders revealed that after the revision of the "Supervision and Management Regulations," the supervision of medical device companies will become increasingly professional and stricter.

 

Because currently in various provincial drug regulatory bureaus, there are only a few professional inspectors who are truly dedicated to medical device inspections. Others, such as those responsible for certification, the review center, and relevant personnel in medical device testing institutions, will also act as "part-time inspectors" for inspections.

 

The next key focus of the country is to increase professional and specialized inspectors. In the future, inspections will mainly be conducted by such professional and specialized inspectors, with part-time inspectors acting as supplementary.

 

Under this trend, more and more problems of medical device companies will be exposed, and legal compliance is the real trend.

 

Two-Invoice System for High-Value Consumables, Set to Change

 

On December 5, the National Healthcare Security Administration (NHSA) issued a "Reply to Suggestion No. 1209 of the Second Session of the Thirteenth National People's Congress," stating that:

 

In December 2016, the State Council's Medical Reform Office issued the "Implementation Opinions (Trial) on Promoting the Implementation of the "Two-Invoice System" in Public Medical Institution Drug Procurement," promoting the implementation of the "Two-Invoice System" in public medical institution drug procurement.

 

Since its implementation, it has played a role in regulating the circulation market, accelerating the integration and large-scale development of the circulation sector.

 

However, considering the huge differences between high-value consumables and drugs, as well as the complexity of their clinical use and After-sale Service, the issue of the "Two-Invoice System" for high-value consumables requires further study.

 

Although there are many voices within the industry that believe that the process of extending the two-invoice system for high-value consumables nationwide may slow down or be suspended.

 

However, in the aforementioned reply, the NHSA did not provide a detailed response as to which specific issues regarding the two-invoice system for high-value consumables require further study.

 

However, regardless of the adjustments made to the consumable two-invoice system, the impact on the industry is widespread and significant.

 

One-Invoice System for Consumables, Emerging Successively

 

On November 15 this year, the Leading Group of the State Council for Deepening Medical and Health System Reform issued the "Notice on Further Promoting the Experience of Deepening Medical and Health System Reform in Fujian Province and Sanming City."

 

It shows that pilot provinces for integrated medical reform should take the lead in promoting direct settlement of funds between medical insurance agencies and pharmaceutical production or distribution enterprises, and other provinces should also actively explore this.

 

Recently, the Hebei Provincial Health Commission also issued a relevant document stating that it will carry out a pilot program for direct settlement of drug and consumable procurement. For drugs and medical consumables purchased by medical insurance designated medical institutions, it will explore direct settlement by the medical insurance department.

 

Direct payment bypassing distributors is indeed a one-invoice system in terms of the number of invoices, but it does not eliminate distributors and small circulation enterprises like the two-invoice system. The purpose of the one-invoice system may be more to ensure that medical device companies receive payments.

 

For example, in November this year, the Hubei Provincial Health Commission issued the "Opinions on Further Deepening Medical and Health System Reform," clearly stating that it will explore the direct settlement of consumable procurement by the medical insurance department, with the purpose of ensuring timely payment to enterprises and mobilizing their enthusiasm for participating in centralized volume procurement and lowering Price.

 

At the same time, some industry insiders have analyzed that due to the complexity of consumable categories, the feasibility of the one-invoice system is not high. Medical device companies that win bids in volume procurement will most likely use the one-invoice system, but only for some varieties.

 

Consumable Consistency Evaluation, Industry-Wide Focus

 

In August this year, the NHSA issued the "Reply to Suggestion No. 6395 of the Second Session of the Thirteenth National People's Congress," stating that: Next, the National Health Commission will cooperate with relevant management departments to establish consumable consistency evaluation institutions.

 

The consistency evaluation of generic drugs has become the cornerstone of implementing volume procurement of drugs. In the field of consumables, the role of consistency evaluation is equally significant.

 

Consumable consistency evaluation can provide a guarantee for the quality of consumables while lowering Price through volume procurement.

 

In the volume procurement of consumables, how to guarantee the quality of low-Price winning products has always been a difficult problem, and consistency evaluation is equivalent to setting a "quality standard line" for consumables, negotiating and procuring products above the standard line. Even if the lowest Price is the priority, the quality can still be basically guaranteed.

 

However, consumable consistency evaluation is also different from that of drugs. Drugs have original drugs and reference preparations, but consumables are difficult to have. How to conduct consistency evaluation for consumables may be the key to the problem.

 

National-Level Consumable Negotiation, Already Set

 

On December 5, the NHSA issued the "Reply to Suggestion No. 1209 of the Second Session of the Thirteenth National People's Congress," stating that it will carry out pilot work on volume procurement of high-value consumables domestically.

 

In the "Suggestions on National Centralized Procurement of Key High-Value Consumables" section, the NHSA states that: Next, the NHSA will select key varieties to implement pilot programs for "volume procurement" to reduce the Price of high-value medical consumables and benefit the people.

 

It is noteworthy that this will be an initiative of the National Healthcare Security Administration (NHSA), selecting key high-value consumables for volume-based negotiations, rather than each province independently selecting varieties for negotiation.

 

In another response, the NHSA stated that for products with high clinical value and high market prices, such as sole-source or patented products, it will explore establishing a negotiation mechanism, using medical insurance reimbursement as leverage to promote the reasonable formation of prices.

 

Currently, the price reduction for varieties negotiated at the provincial or municipal level has exceeded 90% in some cases. If the NHSA takes the lead, using the national market to exchange volume for price, it is unknown how much the product price reduction will be.

 

However, with the national market presented to medical device companies, even with price reductions, this is a market opportunity that cannot be missed.

 

National Medical Insurance Negotiation: A Mixed Bag of Joys and Sorrows

 

Medical insurance negotiation and volume-based procurement negotiation differ. Volume-based procurement directly uses the purchase volume to exchange for price, while medical insurance negotiation indirectly promotes product volume and then exchanges volume for price by including it in the category B medical insurance catalog and reimbursing part of the expenses.

 

A batch of consumables will enter the medical insurance catalog, and some products will be removed from the medical insurance catalog.

 

On July 31 this year, the State Council issued the "Reform Plan for the Governance of High-Value Medical Consumables," clearly indicating that negotiations on medical insurance prices for high-value consumables will be conducted.

 

The aforementioned reform plan requires establishing a basic medical insurance access system for high-value medical consumables, gradually implementing price negotiations for medical insurance access to high-value medical consumables, and achieving "exchanging volume for price."

 

Implement the catalog management of high-value medical consumables and improve the dynamic adjustment mechanism of the catalog, promptly supplementing necessary new technologies and products, and removing products that are no longer suitable for clinical use.

 

From the perspective of medical insurance negotiations for drugs, the average price reduction for three rounds was 44%, 56.7%, and 60.7%, respectively, with a single product's price reduction exceeding 85%.

 

Cross-Provincial Consumables Alliance Emerges

 

News of cross-provincial alliance consumable negotiations has been circulating, and now it has finally been implemented, with eight provinces and cities jointly conducting volume-based procurement.

 

According to the Tianjin Medical Insurance Bureau, the Beijing-Tianjin-Hebei medical consumables joint volume-based procurement has received full affirmation from the National Healthcare Security Administration (NHSA) as the first cross-provincial volume-based procurement regional alliance nationwide.

 

Liaoning, Jilin, Heilongjiang, Shanxi, Inner Mongolia and other places have also expressed their intention to actively follow up and participate in joint procurement, striving to establish a northern procurement alliance based on Beijing-Tianjin-Hebei cooperation, forming a "3+5" joint procurement new model.

 

The next most anticipated is the Shaanxi 14-province alliance.

 

In August of this year, a "Letter Regarding Soliciting Opinions on the Proposed Varieties of High-Value Medical Consumables for Organized Concentrated Volume-Based Procurement" from the Shaanxi Provincial Medical Insurance Bureau was widely circulated in the industry.

 

The above-mentioned document points out that in order to fully leverage the scale and technological advantages of the alliance, promote cross-regional joint volume-based procurement, and further reduce the price of high-value medical consumables, it is proposed to launch the inter-provincial procurement alliance for centralized volume-based procurement of high-value medical consumables.

 

National Medical Device Price Linkage

 

In December of this year, the NHSA clearly stated in the "Letter of Reply from the National Healthcare Security Administration Regarding Proposal No. 4000 of the Second Session of the 13th National Committee of the Chinese People's Political Consultative Conference (Proposal No. 435 of the Medical and Sports Category)" that a national medical device price linkage mechanism should be formed to achieve "one province listing, nationwide availability."

 

The NHSA emphasized that it will refine the filing and procurement system for provincial centralized bidding and procurement platforms for medical devices and limit the filing period.

 

Forming a national medical device price linkage mechanism and achieving "one province listing, nationwide availability" will maximize the reduction of enterprise bidding and sales costs.

 

In another response, the NHSA stated that it will establish a national price sharing platform to achieve nationwide sharing of information on provincial centralized procurement of drugs and consumables; and establish and improve a linkage mechanism between medical insurance payment prices and bidding prices.

 

The power of price linkage is, to some extent, greater than volume-based procurement because it not only involves a large price reduction but also a wide range of varieties.

 

For example, in November this year, the Shaanxi Provincial Drug and Medical Device Centralized Procurement Network issued the "Notice on the Public Announcement of the Results of the Dynamic Adjustment of Part of the Results of the Dynamic Adjustment of 12 Major Categories of Medical Consumables, Including Vascular Intervention."

 

The notice shows that 692 consumables have undergone price linkage reductions, with the highest price reduction reaching 90.79%, and 14 consumables have price reductions exceeding 50%. The price-reduced products involve medical device companies such as Medtronic, Abbott, Boston Scientific, Olympus, Lepu Medical, and Shandong Weigao.

 

National Medical Consumables: Cancellation of Markups

 

This year, the State Council issued the "Reform Plan for the Governance of High-Value Medical Consumables," which clearly requires the cancellation of markups on medical consumables.

 

By the end of 2019, all public medical institutions will achieve "zero markup" sales of medical consumables, and the sales prices of high-value medical consumables will be implemented according to the procurement prices.

 

Recently, documents and notices on the cancellation of consumable markups have been continuously issued by various provinces. In fact, as early as 2017 and 2018, many regions issued relevant documents on the cancellation of consumable markups, but the end of 2019 was an important node, with the nationwide cancellation of consumable markups.

 

For medical institutions, consumables have changed from income to cost, which will lead to significant changes in internal management. In order not to occupy medical insurance quotas, some hospitals may further pressure enterprises and distributors to reduce prices.

 

At the same time, combining with the cancellation of consumable markups is the DRG payment system.

 

DRG: A Heavy Blow to Consumable Governance

 

In October of this year, the NHSA issued the "Notice on Issuing the Technical Specifications and Grouping Plan for Diagnosis-Related Groups (DRG) Payment National Pilot Program," announcing the "National Medical Insurance DRG Grouping and Payment Technical Specifications" and the "National Medical Insurance DRG (CHS-DRG) Grouping Plan."

 

According to the Qilu Evening News and the Zhejiang Medical Insurance Bureau, Shandong and Zhejiang's DRG and DRG point-based payment systems have also begun to be implemented.

 

Many medical device professionals do not take DRG seriously, but in fact, DRG will have a profound impact on the medical device industry.

 

Medical insurance no longer tolerates large prescriptions based on itemized payments but instead pays in advance. Similar to the cancellation of consumable markups, consumables and examinations have changed from sources of income to costs. Hospitals and doctors will also actively standardize clinical practices and reasonably control prescriptions and drug expenses. This will have a significant impact on consumable manufacturers and medical device manufacturers.

 

In addition, some industry experts believe that with the cancellation of consumable markups and DRG, hospitals will independently strengthen supervision of doctors.

 

Because doctors want to use more consumables, but hospitals want to control costs and use fewer consumables and conduct fewer examinations. Once the interests of the two parties conflict, internal supervision will be strengthened, and the effectiveness of the traditional sales model of medical device companies will be greatly reduced.

 

Medical Device ID, pilot program to be completed next year

 

On December 10, according to the official website of the National Medical Products Administration, the medical device unique identification database was officially launched, opening up the function of declaring unique identification related data for pilot products to pilot enterprises.

 

Currently, nine categories and 64 varieties of products, including pacemakers, hip joint prostheses, and injectable fillers for plastic surgery, are included in the first batch of medical devices subject to unique identification.

 

116 medical device companies and other units, including Medtronic, GE, Johnson & Johnson, Abbott, BD, Siemens, Roche, Sinopharm, and Weigao, are already in the pilot program.

 

According to the "Pilot Program for the Medical Device Unique Identification System" published by the National Medical Products Administration:

 

December 2019—February 2020: Organize the verification of the upload, download, and interface standards of the medical device unique identification database.

March—June 2020: Organize the verification of inter-departmental connection and extended application of unique identification data.

July 2020: Organize a pilot summary meeting, form a pilot report, and improve the implementation plan for the unique identification of the first batch of products.

 

The medical device ID is of great significance to the entire medical device industry and is the cornerstone of industry governance. With the medical device ID, industry policies such as volume-based procurement, consistency evaluation, and full-process supervision will be accelerated and promoted with high quality.

 

Medical Device Registrant System: Medical Device Companies Must Move Towards Innovation

 

In August this year, the National Medical Products Administration issued the "Notice on Expanding the Pilot Program for the Medical Device Registrant System".

 

The pilot program will be expanded to 21 regions: Beijing, Tianjin, Hebei, Liaoning, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Shandong, Henan, Hubei, Hunan, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Yunnan, and Shaanxi provinces.

 

Under the medical device registrant system, the medical device registration certificate and production license no longer need to be completed by the same entity, which can free a batch of medical device companies from the pressure of factories and production, allowing them to invest more funds and energy into research and development.

 

Some industry insiders have analyzed that the entire medical device industry's attention to the medical device registrant system is not high because the industry's overall innovation capacity is not yet good enough, and the number of companies engaged in innovative medical devices is very small.

 

Although domestic substitution is accelerating, if domestic medical device companies want to stand on their own, they must innovate independently; simply following behind multinational medical device companies will not work.