In the medical device world, the United States remains the powerhouse market—by manufacturing volume and consumption of goods. But if you look over your shoulder, you’ll notice that the giant has more than one eye open and he’s stretching after his long nap.
It seems that regulators in China want to address some of the issues that have plagued medtech manufacturing in their country. A new set of regulations, set to go into effect in June, will increase fines and toughen oversight of the country’s fast-growing medical device sector as it overhauls outdated laws to stamp out corporate malpractice.
China is trying to get out in front of issues that regulators in the United States have been tackling for years. For example, U.S. authorities have fined AGA Medical Corp. and Biomet Inc. millions of dollars for corporate malpractice in China, while Germany’s
Siemens AG faced a lawsuit in the United States over its China operations. The case was dismissed last year.
The new regulations raise the fine for illegal manufacturing or selling of medical equipment to 20 times the value of the goods,
according to documents recently published on China’s State Council website. The original law, established in 2000, set a cap at five times the value. Under the updated rule, medical equipment in China will be registered and divided into three categories based on the potential health risks they could pose to public health. High-risk equipment will be placed under stricter control by China’s regulatory authorities. Manufacturers or operators of high-risk medical equipment without proper clearance will have their illegal profits seized, along with having the technology and/or materials confiscated. In addition to the heftier fines, violators also could face criminal charges, according to the new regulations. In the most serious cases, firms that sell products illegally could be banned from applying for an operating license for up to five years.
“The new rules increase the range of possible punishments, and the level of fines for the most serious violations,” government officials said in a Q&A published on the State Council’s website. Violations include operating without relevant licences or misleading regulators. “In recent years, we’ve seen some issues of illegal behavior, and the legal foundation for striking back has not been clear enough. To resolve the problem, we needed a complete revision of the existing legislation,” officials added.
The stricter policy will not go unnoticed, as medtech multinationals race to the market.
Increasingly attractive data and demographics have attracted some of the largest global medtech firms to establish operations in China, including Siemens Healthcare, GE Healthcare, Philips Healthcare, Johnson & Johnson and Medtronic Inc., which compete with local companies such as Mindray Medical International Ltd., China Resources Wandong Medical Equipment Co. Ltd., and MicroPort Scientific Corp. (which recently purchased the large-joint assets of Wright Medical Group Inc. and rebranded as MicroPort Orthopedics Inc.).
According to research firm Global Data, China’s medical device market may double to more than $50 billion by 2020 (current worldwide market value of the medical device sector is projected at approximately $375 billion). The country’s population of nearly 1.4 billion is a magnet for life-science companies looking to cash in as China’s healthcare network becomes less rural, better funded and much more sophisticated.
Sleeping giant indeed.