This article was also published on the MassMEDIC blog.
Getting medical devices registered and approved in China has become much more difficult with the October 2014 reforms. The cost is higher and the timeframe for registrations is a lot longer. Getting approval is key, but obtaining medical device reimbursement in China will also help your Chinese sales.
China’s Regulatory Agencies
Multiple government agencies are responsible for policy-making as well as monitoring the medical device industry in China.
- National Health and Family Planning Commission (NHFPC)
- China Food and Drug Administration (CFDA)
- Ministry of Human Resources and Social Securities (MOHRSS)
- National Development and Reform Commission (NDRC)
Among these four agencies, the NHFPC, NDRC, and MOHRSS are the three bodies responsible for determining pricing and reimbursement at the national level.
The Market Access Process for Imported Medical Devices
In order for a medical device to receive approval and reimbursement status, foreign companies must go through a complex, lengthy, and uncertain process.
This process includes CFDA approval, patient price approval (including national and provincial medical device reimbursement), and provincial bidding. This system began in the late 90’s and has been upgraded over the years in an effort to ensure transparency, minimize corruption, and reduce costs for both the payer and patient. Ongoing changes and experimentations implemented in late 2014 – which will be discussed later – have added to the uncertainty regarding future approval processes.
In general, medical devices must pass through the following steps:
Patient-Price Application Approval
Before entering the bidding process, the manufacturer needs to submit and receive approval for the highest allowable patient-price. The manufacturer must submit sensitive information on COGs, CIF, and other patient-price items in select reference countries. It normally takes 3 months to receive price approval in the province in which the company is registered or at the port of importation.
Provincial Bidding & Approval
Regardless of whether the Product Code is in the National/Provincial Reimbursement List, brands must undergo a bidding process before they are allowed to pursue hospital listing. The bidding time window has become unpredictable in recent years in all provinces. Manufacturers must pass through the bidding process province by province. After the manufacturer wins and accepts a bidding offer, it can then go to hospitals for listing in individual hospitals. The procurement price (hospital purchase price) in that province is specified in the accepted bid.
Winning the provincial bidding does not guarantee that the brand will enter hospitals automatically. The manufacturer also needs to pursue hospital listing with each targeted hospital individually. The manufacturer can lobby for special procurement with hospitals while undergoing or awaiting the bidding.
The Tendering and Bidding Process
Tenders are done at the provincial level and are generally issued once a year; however, this process has become more unpredictable in many provinces due to new regulatory changes. For example, some urology medical devices had a nation-wide centralized tendering in 2008 with new supplements in 2010. Two or three brands/manufacturers are selected for one Product Code, with a range of SKUs. One SKU is assigned to an imported brand with two allotted for local brands.
The procurement price is a key area for negotiation and is crucial in winning a bid. Manufacturers can rely on local distributors for help throughout the bidding process. Ultimately, if a manufacturer loses the bid, it cannot enter hospitals in that province. If an asking price is too low, the manufacturer can choose not to accept the bid and give up reimbursement (or market access) in that particular province.
Provincial Reimbursement Issues
Besides the national reimbursement scheme, reimbursement is primarily done at the provincial level. The provincial reimbursement normally includes 3 lists:
- List A devices are generally reimbursed 100% with a co-pay less than 10%
- List B devices have a 20-60% co-pay. Deductibles may also apply in the case of imported products.
- List C devices receive no reimbursement and must be purchased at 100% cost.
Another key provincial reimbursement issue involves the various “ceilings.” Annual ceilings are applied to each patient individually and are normally set at 4-6 times the average annual income in a particular province or city. There are also ceilings that apply to each patient for each diagnosis code as well as a ceiling on each hospital stay.
Supplemental reimbursement is another key issue. This includes an insurance policy purchased by the employer or employee from a commercial insurance company. Local government and commercial health insurance are mainly designed for “catastrophic diseases.”
In late 2014, China instituted a series of healthcare reforms designed to reduce the burden on the healthcare system and patients, squeeze out mark-ups in the value chain, push for consolidation of distribution for medical supplies, and favor local innovation. Over time, the central government will likely remove itself from price setting somewhat, although high-value medical supplies will continue to be tightly controlled for the coming years.
Reimbursement policies are undergoing changes. Hospitals, which are constantly underfunded by local governments, are under pressure to implement a “zero mark-up” scheme. They are limited by complicated reimbursement and formulary restrictions including a monthly quota on the use of certain products.
For device products and manufacturers, the reimbursement process and Chinese government outlook means that future price-cuts are certain. Obtaining medical device reimbursement in China requires a strong market access team to successfully navigate the complex local reimbursement process.