Everyone knows that it is getting tougher and tougher to export medical devices to China. While some companies with unique devices are succeeding and making large profits, many companies are not. Unprofitable Western business is a result of a number of factors including reduced pricing via Volume Based Procurement (VBP), Diagnostic Intervention Packet (DIP), and Diagnosis Related Groups (DRG) systems. In addition, the Chinese government’s policy to limit the number of foreign devices hospitals can purchase has increased. Furthermore, the Made in China 2025 program is forcing many foreign medical companies to set up shop in China to be in the market there.
In an extreme measure, China has recently banned Illumina, the large maker of gene sequencing machines, from exporting its products to China. Illumina is now on China’s Unreliable Entities List (UEL). China claims that Illumina has violated market transaction rules by canceling Chinese client contracts and has prejudiced Chinese competitors. This action may be a result of Illumina supporting the Biosecure Act (still not approved yet) to fend off Chinese competitors in the US. China is strongly supporting its own life science industry and as of now, there are no other Western life science companies on the UEL list. It is unlikely that other Western companies will be added if the foreign medical community plays by China’s rules. However, if frictions continue to increase with the US and the West, healthcare companies beware.
Written by: Ames Gross – President and Founder, Pacific Bridge Medical (PBM)
Mr. Gross founded PBM in 1988 and has helped hundreds of medical companies with regulatory and business development issues in Asia. He is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross has a BA degree, Phi Beta Kappa, from the University of Pennsylvania and an MBA from Columbia University.