Eight Opportunities and Ten Trends in the Medical Device Industry!!

With the further deepening of China's reform and opening up, social construction, economic construction, and cultural construction have all entered a new period of development. Against this broader social backdrop, the public's demand for medical care is gradually increasing, with the innovation and development of medical devices maintaining a rapid and healthy momentum, and regulatory policies will be further improved.

In the past two years, the author has systematically studied the development of the industry, through the past20 years of development trajectory and achievements of China's medical device industry, judging that in the next 10 years, China's medical device industry will Enter the fast lane.

Eight Opportunities and Challenges

Analyzing and summarizing the current development of China's medical device industry, the opportunities and challenges can be summarized as follows:

1. The national policy environment is conducive to industry development

The intensive introduction and implementation of various policies in 2017-2018, and the good regulatory environment have made the industry feel the arrival of "the best of times"; in 2015, the policy proposed "integration of medical care and elderly care" as a priority; in 2016, "Healthy China 2030" was introduced, and the National Conference on Health and Health elevated "Healthy China" to a national strategy; in 2017, "Made in China 2025" was implemented, accelerating the transition from a manufacturing powerhouse to a manufacturing powerhouse. In particular, the establishment of innovative medical device review and approval, and the establishment of the MAH system, are significant policy benefits, and the future development of the industry is full of expectations.

2. Continuous market expansion

Over the past five years, China's medical device industry has maintained a compound annual growth rate of approximately15%, and it is expected that the growth rate of China's medical device industry will remain above 10% annually in the next 10 years. The ratio of China's medical device and pharmaceutical sales is currently approximately 0.25:1, and it is expected to further increase. In this "golden period" of medical device development, achieving or exceeding the 1:1 goal of developed countries is not a fantasy.

3. New medical reforms stimulate rapid growth of low- and mid-range devices

Since the new medical reforms, the market volume in areas such as low- and mid-range medical consumables,POCT, and primary-level laboratories, and the production and operation of medical devices are paying increasing attention to the primary-level market. Market changes have already emerged, and in 2018, the "updating and replacement" and "filling gaps" of equipment and consumables in the primary-level medical market remain a trend.

4. Continuous emergence of domestically produced and independently innovative medical devices

In recent years, the state has successively introduced encouraging policies for domestically produced medical devices. Good policy incentives have greatly encouraged the domestic medical device industry, leading to rapid development. It is foreseeable that in the future3-5 years, a large number of domestically produced innovative medical device products will be launched, and many medical practices will change due to the emergence of new technologies and products.

5. Continued increase in imports and exports

Data show that changes in international market demand and China's"One Belt, One Road" policy guidance have led to unexpected results in exports, and the momentum is good. With the improvement of China's scientific and technological level, the structure dominated by "low value" will inevitably change.

6. Accelerated industry mergers and reorganizations

In the circulation field, mergers and reorganizations among companies such as Sinopharm, Shanghai Pharmaceuticals,九州通, and Rekang Pharmaceutical have occurred frequently. Horizontal and vertical mergers and reorganizations of production enterprises are also flourishing, stirring up the overall industry landscape. We have reason to believe that this trend will continue, and some regional leading enterprises will also join the merger and acquisition boom, with cross-border mergers and acquisitions showing an upward trend.

7. The booming development of household medical devices

Data show that the current market size of household medical devices is approximately75 billion yuan, with an annual growth rate of 25%. Diagnostic and monitoring instruments such as traditional blood pressure monitors, blood glucose meters, and stethoscopes; therapeutic equipment such as home-use hemodialysis machines; and rehabilitation equipment such as medical beds and smart workstations have all performed well, and many new intelligent products based on the Internet have emerged. In 2018, the state introduced relevant documents on "Internet + medical care," which will promote the listing of new products based on "Internet +".

8. Accelerated rise of third-party services

It is estimated that the medical device service market will have a market capacity of100 billion yuan; medical imaging, testing, hemodialysis, and pathology will remain the main areas for "third-partyization." Third-party service models such as medical asset management, overall repair solutions, and bundled payments will become increasingly common, and new emerging third-party integrated service models such as logistics platforms and disinfection will also emerge.

Top Ten Future Development Trends

Looking to the future, the development of China's medical device industry shows ten significant development trends:

1. The medical device industry is eye-catching in the new economic cycle. With the arrival of the new economic cycle; the government's "large department" reform has redefined the responsibilities of various government departments, and various policies have redefined the responsibilities of various links, including research and development, registration, procurement, production, distribution, sales, quality, and agency. The pilot program and implementation of the medical device listing license holder system (MAH) further clarifies the responsibilities of product holders from the perspective of "responsibility," presenting the industry with unprecedented opportunities.

2. With the implementation of the Healthy China strategy and "Healthy China 2030," the great health industry will lead the next wave of economic development in China in the future, and medical devices will play a huge role in it. In the future, the medical and health industry will face unprecedented opportunities and challenges, and the medical and health industry based on "great health, great hygiene, and great medicine" is expected to become the fastest-growing industry in the national economic development, becoming a pillar and new driving force for China's economic development.

3. Policies and industrial planning guide the improvement of the concentration of the medical device industry, and mergers and acquisitions will intensify in the next 2-3 years, leading to a rapid increase in concentration. The medical device industry is generally relatively scattered, and it will tend to be more concentrated in the future. With the implementation of policies such as the "two-invoice system," "tax reform," "Document No. 94," and "industry rectification," as well as the higher requirements of the new version of GSP for enterprise procurement, acceptance, storage, and distribution, industry integration will intensify, and concentration will rapidly increase in the next 2-3 years.

4. With the advancement of supply-side structural reform in the medical industry, it will further eliminate "inventory," new supply will bring new demand, and the industry will face tremendous changes. After nearly two years of efforts, the drug regulatory system has actively addressed the backlog of applications, accelerated the approval of innovative devices, cracked down on the falsification of clinical trial data, and conducted process consistency checks, eliminating zombie medical device licenses. It has increased the intensity of flying inspections, eliminating backward production capacity with low technical levels and high product duplication, as well as "small, scattered, poor, and chaotic" operating enterprises. Through the "two-invoice system" and GMP/GSP flying inspections, it eliminates old marketing models. Reform from the supply side, with one unit of new supply bringing N units of new demand, will accelerate the progress of the industry.

5. Increasingly strict government regulation of the industry is eliminating non-compliant companies, gradually improving the market environment; intensive inspections are eliminating industry malpractice. In 2018, the intensity of policy compliance control increased, and standardized operations and finances became a test for traditional marketing models, with continued efforts to combat monopolies, administrative intervention, and commercial bribery. We assert that compliant companies are the hope for the future, while illegal companies will gradually be eliminated, and the industry environment will gradually improve.

6. New technologies can create efficiency and save costs for healthcare providers and patients, and allow medical device companies to play a wider role in prevention, diagnosis, treatment, and care. We predict that in the next 3-5 years, the medical device industry will introduce a large number of innovative products, fundamentally disrupting traditional diagnosis and treatment.

7. "Internet+" will be closely integrated with the medical device industry, and the level of informatization throughout the industry will be generally improved, realizing product traceability and using information technology to supervise the entire process of medical device production and circulation. With the advent of the 5G era, the Internet of Everything will greatly improve the widespread application of medical devices. Currently, the information traceability mechanisms, systems, and coding in the medical device field are not yet perfect and need further improvement.

8. In terms of market and clinical applications, it will give rise to new "drug + device integration" models. Drugs and devices play a synergistic role in medical institution diagnosis and treatment and patient health care. In recent years, some manufacturers have explored integrated marketing models of "drug and device integration" with success, such as Lepu Medical and AstraZeneca; some pharmaceutical commercial enterprises have also found breakthroughs in development from devices, forming a "drug + device common development" model.

9. Capital is driving the leapfrog development of the medical device industry. Mergers and acquisitions in the international and domestic medical device fields are booming. In 2018, capital flowed towards high-quality investment, giving medical device companies unlimited impetus for development.

10. Artificial intelligence application services will develop rapidly. Breakthrough progress will be made in artificial intelligence technology, medical robots, large medical equipment, emergency rescue medical equipment, bio-3D printing technology, and wearable devices. On April 25, 2018, the "Opinions on Promoting the Development of "Internet + Medical and Health" (Guo Ban Fa [2018] No. 26) was issued by the General Office of the State Council, clearly stating: "Promoting the application of "Internet +" artificial intelligence services. Develop clinical diagnosis and treatment decision support systems based on artificial intelligence, carry out intelligent medical image recognition, pathological typing, multidisciplinary consultations, and the application of intelligent voice technology in various medical and health scenarios to improve the efficiency of medical services"; "Strengthen the integration, sharing, and application of clinical and research data, support the research and development of medical and health-related artificial intelligence technologies, medical robots, large medical equipment, emergency rescue medical equipment, bio-3D printing technology, and wearable devices, etc." This provides policy support for the development of artificial intelligence in medicine.