Report: Chinese medical device market growing faster than pharma

The medical device industry in China is experiencing rapid growth when compared to the global medtech market, as well as its  pharmaceuticals industry, according to a report from China Med Device.

Between 2005 and 2015, the medical device market in China hit an annual growth rate of greater than 20%, according to the report, with demand for medical devices “expected to increase significantly.”

In 2014 the medical device industry in China hit total sales of $387.4 million (Yuan 2,556 billion), up 20% year-over-year, beating the pharmaceutical industry’s growth for the year of 13%, according to the report.

While the industry in the region has seen rapid growth over the past few years, the area is still dependent on imports from foreign manufacturers due to a lacking industrial foundation, China Med Device reports.

The country has recently set plans in motion to implement a 2-Invoice System, which limits multi-tiered distribution and requires only 2 invoices be issued: 1 between a manufacturer and a distributor, and 1 between distributors and hospitals.

The change will push the industry in 3 major directions, according to the report: Horizontal acquisition, vertical extension and transformation.

Large scale companies will look to continue to merge and integrate regional channels to reduce steps between production and distribution, according to the report, which projects that performance growth for such companies “will be significant.”

For vertical extensions, manufacturers will look to channelize their downstream, with larger entities acquiring dealers. Distributors will look to obtain manufacturing capabilities and add downstream service options and all players looking to improve profitability through synergistic acquisitions, according to the report.

Business models which previously operated between manufacturers and distribution companies will have to shift as well, with many looking to pivot towards becoming contract service operations under the new 2-invoice model, according to the report.

Even with these changes, the medtech industry is expected to continue to grow at a higher rate than pharmaceuticals in the region according to the report. This growth is being driven by improving living standards and higher health care expenditure by the government, society and individuals.

“With the sustained growth of Chinese national economy as well as the continued improvement of the living standard, increase in health care expenditure by the government, society and individuals, we believe there is tremendous potential in China’s medical device market. Many international medical device giants look to increase their presence in China through mergers and acquisitions, set up subsidiaries in China or move R&D centers to China in order to capture the rapid growth of Chinese medical device market,” China Med Device wrote in its report.

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