Source: Medical Economic News

With the further deepening of China's reform and opening up, social construction, economic construction, cultural construction, and other areas have entered a new period of development. In this large social context, the public's demand for medical care is gradually increasing, among whichMedical Devicesthe innovative development maintains a rapid and healthy trend, and regulatory policies will be further improved.

In the past two years, the author has systematically studied the development of the industry, judging that the development of China's medical device industry will enter a fast lane in the next decade by sorting out the development trajectory and achievements of the industry over the past 20 years.

Eight Major Opportunities and Challenges

Analyzing and summarizing the current development of China's medical device industry, the existing 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 from 2017 to 2018, along with a good regulatory environment, have made the industry feel the arrival of a "good era"; the policy proposed "integration of medical care and nursing" as a focus in 2015; the introduction of "Healthy China 2030" in 2016, and the national health and health conference elevating "Healthy China" to a national strategy; the implementation of "Made in China 2025" in 2017, accelerating the transition from a major manufacturing country to a strong manufacturing country. Especially the establishment of innovative medical device review and approval, the establishment of the MAH system, etc., are significant policy benefits, and the future development of the industry is full of expectations.

2. The market continues to expand

In the past five years, China's medical device industry has maintained a compound growth rate of about 15%. It is expected that in the next 10 years, the growth rate of China's medical device industry will remain above 10% annually. The current ratio of medical device sales to drug sales in China is about 0.25:1, and it is expected to further improve. During this "golden development period" of medical devices, reaching or exceeding the developed countries' target of 1:1 is not a fantasy.

3. New medical reform stimulates rapid growth of mid-to-low-end devices

Since the new medical reform, the market increment in mid-to-low-endmedical consumables, POCT, and grassroots laboratories has increasingly attracted the attention of production and operation enterprises, showing market changes. In 2018, the "upgrading" and "filling gaps" of equipment and consumables in the grassroots medical market continued to be a trend.

4. Domestic self-innovative devices continue to emerge

In recent years, the state has successively introduced encouraging policies for domestic medical devices, and good policy incentives have inspired thedomestic medical deviceindustry, which is developing rapidly. It can be foreseen that in the next 3 to 5 years, a large number of innovative domestic medical device products will emerge, and many medical practices will change due to the emergence of new technologies and products.

5. Imports and exports continue to increase

Data shows that changes in international market demand and China's "Belt and 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. Industry mergers and acquisitions accelerate

In the circulation field, mergers and acquisitions represented by enterprises such as China National Pharmaceutical Group, Shanghai Pharmaceuticals, Jiuzhoutong, and Ruikang Pharmaceutical are rising one after another. Horizontal and vertical mergers and acquisitions among production enterprises are also in full swing, stirring the overall industry pattern. We have reason to believe that this trend will continue, and some regional leading enterprises will also join the wave of mergers and acquisitions, with cross-industry mergers on the rise.

7. Home devices are booming

Data shows that the market size of homemedical equipmentis currently about 75 billion yuan, with an annual growth rate of 25%. Diagnostic monitoring instruments, such as traditionalblood pressure monitors,blood glucose meters,stethoscopes, etc.; treatment devices, such as home personaldialysis machines, etc.; rehabilitation devices, such as medical beds, smart workstations, etc., are all performing well, and many new intelligent products based on the Internet have emerged. In 2018, the state introduced relevant documents on "Internet + Medical", which will promote the launch of new products relying on "Internet +".

8. Third-party services are accelerating

It is estimated that the medical device service market will have a market capacity of 100 billion yuan;medical imaging, testing, blood purification, and pathology will still be the main areas of "third-partyization". Third-party service models such as medical asset management, overall maintenance solutions, and cost packaging will become increasingly common, and new emerging third-party centralized service models such as logistics platforms and disinfection will also emerge.

Future Ten Development Trends

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

1. The medical device industry performs remarkably in the new cycle of economic development. With the arrival of the new economic cycle in the country; the government's major institutional reform has redefined the responsibilities of various government departments, and various policies have redefined the responsibilities of research and development, registration, procurement, production, distribution, sales, quality, agency, and other links. The pilot and implementation of the medical device marketing authorization holder system (MAH) further clarifies the responsibilities of product holders from the perspective of "responsibility", presenting unprecedented opportunities for industry development.

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

3. Policies and industrial planning guide the concentration of the medical device industry, and mergers and acquisitions will intensify in the next 2 to 3 years, with rapid increases in concentration. The medical device industry is currently relatively fragmented, and it will tend to concentrate in the future. With the implementation of policies such as "two-invoice system", "business tax reform", "Document No. 94", and "industry rectification", as well as the new version of GSP setting higher requirements for procurement, acceptance, storage, and distribution, industry consolidation will intensify, and concentration will rapidly increase in the next 2 to 3 years.

4. With the advancement of supply-side structural reform in the medical industry, the "inventory" will be further cleared, and new supply will bring new demand, leading to significant changes in the industry; after nearly two years of efforts, the drug regulatory system is actively addressing the backlog of approvals, accelerating the approval of innovative devices, combating clinical trial data fraud, and verifying process consistency, among other things, to eliminate zombie approvals for medical devices; increasing the intensity of flying inspections to eliminate backward production capacity with low technical levels and high product redundancy, as well as small, scattered, poor, and chaotic operating enterprises. Through the "two-invoice system" and GMP/GSP flying inspections, old marketing models will be eliminated. Reforming from the supply side, a new supply from one unit can bring N new demands, accelerating the progress of the industry.

5. The national regulation of the industry is becoming increasingly strict, and non-compliant enterprises are being eliminated, leading to a gradual improvement in the industry market environment; vigorous flying inspections are purging the industry's unhealthy practices. In 2018, the intensity of policy compliance control increased, and standardized operations and finances became a test for traditional marketing models, with ongoing efforts to combat monopolies, administrative intervention, and commercial bribery policies. We assert that compliant enterprises are the hope for the future, while illegal enterprises will gradually be eliminated, and the industry environment will gradually improve.

6. New technologies can create efficiency and save costs for medical service institutions and patients, and can also allowmedical device companiesto play a broader role in prevention, diagnosis, treatment, and care. We predict that in the next 3 to 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 overall level of information technology in the industry will be generally improved, achieving product traceability and using information technology to supervise the entire process of production and circulation of medical devices. With the arrival of the 5G era, the Internet of Everything will greatly enhance the widespread application of medical devices. Currently, the information traceability mechanisms, systems, and coding in the field of medical devices are not yet perfect and need further improvement.

8. In terms of market and clinical applications, a new model of "drug + device integration" will emerge. Drugs and devices play a synergistic role in the diagnosis and treatment in medical institutions and patient health care. In recent years, some manufacturing enterprises have explored the integrated marketing model of "drug-device integration" and achieved success, such as Lepu Medical and AstraZeneca; some pharmaceutical commercial enterprises have also sought breakthroughs in development from devices, forming a model of "joint development of drugs and devices."

9. Capital will support the leapfrog development of the medical device industry. Mergers and acquisitions in the international and domestic device fields are on the rise, and in 2018, capital is developing towards high-quality investment directions, providing unlimited motivation for the development of medical device companies.

10. The application of artificial intelligence services will develop rapidly. Breakthroughs will occur in areas such as artificial intelligence technology, medical robots, large medical equipment, emergency rescue medical equipment, biological 3D printing technology, and wearable devices. On April 25, 2018, the State Council issued the "Opinions on Promoting the Development of 'Internet + Medical Health'" (Guo Ban Fa [2018] No. 26), which clearly stated: "Promote 'Internet +' artificial intelligence application services. Develop clinical decision support systems based on artificial intelligence, conduct intelligent medical imaging recognition, pathological classification, multidisciplinary consultations, and applications of intelligent voice technology in various medical health scenarios to improve the efficiency of medical services"; "Strengthen the integration, sharing, and application of clinical and research data, and support the research and development of artificial intelligence technologies related to medical health, medical robots, large medical equipment, emergency rescue medical equipment, biological 3D printing technology, and wearable devices." This provides policy support for the development of artificial intelligence in healthcare.