Hazards in Outsourcing: China’s Medical Device Market

This article was also published on MPO

Hazards in Outsourcing: China's Medical Device MarketIn spite of slower growth projections for 2013, the Chinese economy is still expanding at a comparatively rapid pace. In 2012, it posted an aggregate GDP of $8 trillion, second only to the US in terms of total size. In 2013, growth rates could reach 7.5 percent, according to some analysts. If this is the case, China’s economy will overtake the US economy (in terms of total size) by 2030.

China’s medical device market is expanding even more quickly than the rest of its economy. As per capita income increases, middle class Chinese are willing to spend more and more disposable income on healthcare. This spending is evident in an annual growth rate of nearly 18 percent in the Chinese medical device market. At this speed, China’s medical device market should be worth $33 billion by 2022.

With the expansion of the market, the range of Chinese suppliers for medical devices and components has also expanded. Previously, China was associated primarily with low tech components and disposable medical devices. But over the last five years, Chinese manufacturers have made considerable strides in both medical technology and product quality. High end products like diagnostic imaging technology can now be sourced from China. An increasing number of Chinese factories are ISO 13485 compliant and hold China Good Manufacturing Practices (CGMP) certification. These companies have also benefited from experience working closely with Western firms.

Nevertheless, quality issues can still flare up. Despite their international certifications, some Chinese companies cut corners on compliance. Everything from quality assurance documentation to raw material sourcing, manufacturing processes and record keeping can pose significant problems during an audit.


Recently, Pacific Bridge Medical audited a manufacturer of optical instrument components in Changsha. For years, this manufacturer had business dealings with major Western medical device companies. Their components had been approved both in China and overseas.

In terms of record keeping, though, their system was a mess. When our auditor arrived at the factory, she immediately discovered that many batch records were missing. In addition, no one could present her with the quality manual. She could find no executable written procedures, including instructions for batch testing.

A seasoned auditor could never have anticipated a violation quite this serious. So our auditor spent the next week with the factory’s technical staff, putting together a quality manual to improve operations.

Meanwhile, the auditor set up a face-to-face meeting with the factory manager. The manager agreed on the importance of continuous quality training. He said he would make certain that her improvements to batch testing were enforced. But he also thought that their former way of operating was not really a problem. He said the factory was losing both time and money accommodating the auditor’s quality assurance requirements. This was a strain on the factory’s other operations. The new requirements, according to the manager, were “not appropriate.”

In spite the factory manager’s repeated assurances, the auditor felt that the optical instruments components manufacturer was not completely committed to implementing her recommended changes. Rather than searching for the optimal solution to a problem, the factory manager consistently looked for a “second best” option or excuses that would allow him to avoid facing the problems. The attitude of the factory manager, reported the auditor, did not speak well to the company’s future prospects.


While the above story is just one incident, it nevertheless highlights some common problems in China’s medical device outsourcing industry. China based manufacturing facilities — even reputable ones — may not always follow proper procedures for quality standards.

As Chinese medical device manufacturers and suppliers become more sophisticated, many still cut corners to maintain existing profit margins. This is especially true when it comes to quality. Therefore, foreign medical device companies should prepare themselves to always check and double check site conditions for their Chinese outsourcing partners. Due diligence should never be done in a “second best” fashion.