President Trump approved tariffs on around $50 billion goods imported from China on June 14. While the final list of goods has not been announced yet, the preliminary list published in early April by Office of the United States Trade Representative (USTR) showed the 1,300 products included IVDs (e.g. blood-grouping reagents, malaria diagnostics), pacemakers, defibrillators, major modalities of medical imaging equipment (CT, X-Ray, MRI, ultrasound, etc). China Med Device, LLC thinks that US medical device companies will be impacted more than the China ones especially for imaging companies.
On China side, US medical devices companies have benefitted from setting up factories in China. With 5 times the U.S. population and low healthcare standards as well as very under-developed medtech industry, most of the large US companies have benefited with setting up local factory to reduce cost and provide easier access to local population.
In the past three years (2015 to 2017), China CFDA has approved about US medical devices 1,300+ each year on average. According to the 2017 CFDA registration report released on March 28, 2018, CFDA approved US medical devices was 1,469 in 2017, about 35% of the total newly approved imported medical device. The 2nd largest country is Germany with 827 approvals. The 3rd largest country is Japan with 404 approvals. US has 642 devices more than Germany and 1,065 more devices than Japan. US still dominates the China premium market. Top US medical device companies now get at least 30% to 50% more sales from a single country, China.
China needs western countries technology to improve its healthcare. At the same time, it needs to reduce healthcare cost to provide access to its huge population. US companies will benefit more from the positive policies from the Chinese government and population needs. The top five imported medical devices categories registered in 2017 are: implantable materials and artificial organs, optical and endoscopic equipment, dental materials, medical polymer materials, and major electronic equipment. In the recent China National Congress meeting in March, Chinese Premier Li Keqiang announced that “tariffs for cancer drug and medical devices imported to China could be reduced to zero.”
In addition, the CFDA has accepted overseas clinical data and created the innovation approval pathway to expedite the access of new devices to Chinese population. Companies such as GE, Johnson and Johnson, Medtronic, Abbott, Edwards Lifesciences have all benefited.
The tariffs could have more negative effects on the medical imaging industry, as many firms that once manufactured scanners in the U.S. have moved operations to China to take advantage of lower labor costs. However, most of the imaging products made in China are mid to low end products. US hospitals tend to purchase higher end products. Imaging centers and outpatient centers who are more price sensitive may hurt more.
The tariffs could also affect the nascent Chinese imaging equipment export industry. Homegrown Chinese companies have begun to look beyond their home markets to find international customers in the U.S. and Europe, among other locations. A 25% tariff could negate much of the price advantage of these companies but mostly in the mid to low end tier.
I remember running into a couple of managers from Caterpillar a few years ago in China. They mentioned that 50%+ of their sales came from China. How could we say US did not benefit from China economic development?
About China Med Device, LLC
China Med Device, LLC provides turn-key solutions for western medical device/IVD companies to enter China with regulation and commercialization services. Our CFDA regulatory services cover strategy, premarket submission, clinical evaluation, CRO, QA and post market compliance. We are experienced in handling innovation approval and priority review. Our commercial services cover market assessment research, reimbursement, partnership, distribution qualification and management. We have offices in Beijing, Suzhou and Boston. Our management team has 100+ years of combined experience in medical device and IVD and has been involved with 1,000+ CFDA certificates, 200+ companies’ success.