Everyone knows China is a big medical market. Many large and small healthcare companies are still doing well there. However, for a variety of reasons, the China opportunity is tougher to capitalize on today. For medical devices, China’s policy – Buy China (Order #551) includes restrictions on the number of foreign devices Chinese healthcare institutions can buy. The excluded import list has increased and now impacts private hospital procurement too. Price reductions via volume-based procurement (VBP), diagnosis-related group (DRG), and Diagnostic Intervention Packet (DIP) are continuing to reduce prices and margins.
For drugs, although the number of Chinese clinical trials has exploded over the last 5 years, these trials are mostly for domestically made Chinese drugs. Foreign drug companies also see some of the same types of price reduction mechanisms in China that medical devices are experiencing. Despite more foreign drugs getting on China’s reimbursement list, to do so, often requires a significant price cut. Thus, some foreign companies decide not to get on China’s reimbursement list. While foreign out-licensing of Western drugs to China has been extensive over the last 5 to 10 years, recently this too has slowed down. Finally, large foreign drug companies are now reducing their own Chinese staff and looking for Chinese partners to do more of the local legwork. On a positive note, large foreign drug companies can now in-license innovative Chinese drugs for global development and sales.
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.
Source used in the article: https://www.zs.com/insights/medtech-volume-based-procurement-in-china