Navigating the Dual Circulation Strategy: Compliance and Strategic Development for China's Medical Device Industry

March 24, Third-Party Testing Branch of China Association for Medical Device IndustryandCo-hosted by Haihe Biologics“The Forum on New Developments in Compliance and Strategy for the Medical Device Industry under the Dual Circulation of Domestic and International Markets” Was Grandly Held at the Hyatt Regency Tianjin East Hotel.

He Zhineng, Deputy Director of the Tianjin Municipal Bureau of Commerce; Mei Zhihong, Deputy Director of the Tianjin Municipal Science and Technology Bureau; Zhang Guihua, Deputy District Mayor of Binhai New Area; Li Tao, Deputy Director of the Administrative Committee of Binhai New Area Economic-Technological Development Area; Han Lin, Deputy Director of the Administrative Committee of Binhai New Area High-Tech Industrial Development Zone; Liu Zhuyan, Director of the Binhai New Area Science and Technology Bureau; Lin Yanhong, Director of the Science and Technology Finance Division of the Tianjin Municipal Financial Bureau; Zhang Wenjie, Deputy Secretary of the Party Committee of the Tianjin Medical Device Evaluation and Inspection Center; and Xu Shan, Secretary-General of the China Association for Medical Devices Industry, attended the forum.

After years of development, China’s medical device market has become the second largest in the world, but it is also facing unprecedented changes in a century: on the one hand, medical devices are subject to centralized procurement in the domestic market, and the market environment and marketing strategies have undergone fundamental changes compared with the past; on the other hand, competition among global medical device companies has intensified, technological iteration is accelerating, the international situation is becoming more complex, and enterprises are under greater pressure to innovate.

Therefore, this forum invited representatives from the government, industry associations, medical device companies, device CXO firms, and investors to engage in in-depth discussions on topics such as innovation in medical devices and the global expansion of Chinese medical device companies.

Wang Shuxin, Academician of the Chinese Academy of Engineering, President of Chongqing University, and Deputy Secretary of the Party Committee, stated: “The theme of this forum is ‘Compliance and Strategic New Developments in the Medical Device Industry under the Dual Circulation Paradigm of Domestic and International Markets,’ a theme that bears distinct characteristics of our times. In recent years, the state has advocated that all industries should prioritize domestic circulation while fostering mutual reinforcement between domestic and international cycles, thereby driving China’s high-quality development. Meanwhile, the report to the 20th National Congress of the Communist Party of China has charted the course for the advancement of China’s biomedical and health sectors. This forum brings together top-tier experts from specialized fields within the industry, who will share insights and engage in in-depth exchanges on various aspects of dual-circulation development. I am confident that attendees will gain valuable inspiration, helping to propel the high-quality development of China’s medical device industry.”

From the perspective of investment and financing, 2022 was an extremely difficult and challenging year: the capital market remained subdued, and the pace of investment slowed down.

However, at the start of 2023, investors began scrambling to recruit talent, acquire companies, and secure high-quality projects, with the capital market expected to regain momentum in May and June of this year.

Unlike the fervor seen in 2020–2021, investors today are more rational and discerning. They prefer to focus on high-growth sectors, investing in leading companies within niche markets as well as specialized, refined, distinctive, and innovative enterprises. Driven by factors such as centralized procurement, they place greater emphasis on a company’s scalability, innovativeness, and growth ceiling. Indeed, some conservative investment firms even favor companies with existing revenue streams.

Wang Junfeng, Managing Director at Legend Capital, stated, “Currently, domestic market competition is extremely fierce. Against the backdrop and overarching trend of centralized procurement, the medical device market will become increasingly ‘hyper-competitive.’ Affected by centralized procurement in China, many companies will see significant declines in revenue and profits. Therefore, medical device enterprises must pursue a dual-track strategy: while attaching importance to the domestic market, they must place even greater emphasis on overseas markets. The domestic market ensures basic survival, while overseas markets drive substantial profitability.”

Based on the market size, pricing, and gross margins in overseas markets, Legend Capital advises medical device companies to act as pioneers and venture into uncharted territories.

In the past, Chinese medical device companies expanding overseas invariably targeted Europe and the United States as their primary markets. However, an increasing number of enterprises are now turning their attention to broader regions, such as the Belt and Road Initiative countries and Southeast Asia.

Based on Legend Capital’s experience, companies must prioritize strategy when expanding their medical device businesses overseas. For instance, in 2019, Legend Capital introduced the “In China for Global” strategy to facilitate the international expansion of its portfolio companies through various channels. Chinese-made medical devices hold a strong competitive position in the global market, leveraging advantages such as high quality, low cost, and premium service, thereby positioning themselves to capture significant market share.

It is important to note that in today’s fiercely competitive environment, companies must avoid strategic missteps, maintain robust cash flow management, and keep headcount in check, refraining from blind expansion and hiring. Most importantly, given the rapid pace of technological iteration, businesses must place sustained, high priority on innovation.

When expanding overseas, companies need to consider the mode of entry into foreign markets, identify suitable partners within their internationalization strategy, and successfully achieve genuine localization.

In fact, the global expansion of medical devices is a strategic issue that requires early decisions on whether to expand overseas, which markets to target, and how to execute the expansion.

At the forum, Fu Li, Senior Vice President of Technology at Haihe Biologics, delivered an in-depth presentation on “Strategies for Global Expansion of Medical Devices and Key Compliance Requirements in Various Countries.”

According to reports, Haihe Biologics, as a full-cycle outsourcing service provider for medical devices, has been deeply engaged in the industry for nearly two decades. Its client base covers numerous multinational corporations, domestic listed companies, and innovative medical device enterprises, with extensive experience in facilitating the global expansion of medical devices and strategizing regulatory submission applications.

Fu Li stated that, many years ago, registering medical devices in multiple countries and regions required substantial repetitive work. For instance, in China, medical device companies needed to establish quality management systems and complete testing in accordance with the requirements of the National Medical Products Administration (NMPA). However, if they planned to export to the European Union, they had to discard their previous efforts and re-establish their systems and conduct testing according to CE marking requirements. Similarly, if they also intended to export to the United States, they were required to once again rebuild their systems and perform testing in compliance with U.S. Food and Drug Administration (FDA) regulations.

Nowadays, the harmonization of international regulations provides a solid foundation for an integrated compliance strategy. An integrated compliance strategy can minimize wasted effort and meaningless duplication in the registration process for medical device companies.

To promote the global expansion of medical devices with greater efficiency, lower costs, and a more systematic approach, companies must establish robust strategic planning at the conceptual stage. This includes identifying target countries and regions, conducting regulatory assessments for these markets, determining market access pathways, identifying predicate (equivalent) products in each jurisdiction, and devising a submission strategy to select the most prioritized and suitable route for the enterprise.

Furthermore, enterprises need to establish a robust quality management system. A quality management system ensures that the company’s development activities comply with applicable requirements, enabling the design of high-quality products that consistently meet performance and safety standards. More importantly, the quality management system provides a framework for corporate operations, ensuring that all activities are conducted in a controlled manner to prevent non-conformities or unexpected incidents.

For post-market activities such as adverse event reporting and handling, customer complaint management, post-market data collection, requirements for evaluation, and recall procedures, each country has its own regulations and specific requirements. The quality management system must ensure compliance with the regulatory requirements of different countries.

From the perspective of the medical device development process, device manufacturers need to identify the intended user population, establish user characteristics, and investigate user habits during the user needs confirmation phase. Subsequently, user needs must be translated into design concepts, leading to the creation of the medical device through design and development. During the design input phase, manufacturers must integrate prior regulatory and equivalence assessments, identify regulatory and standards requirements for target markets, and ensure product compliance.

Subsequently, medical device manufacturers must conduct verification and validation to demonstrate that the devices meet user needs. During this phase, manufacturers need to develop a comprehensive plan that incorporates international standards, establishes appropriate strategies, and addresses cross-country regulatory differences. Meanwhile, they should design robust verification protocols to avoid redundant testing.

The same applies to clinical trials, which require determining the clinical evaluation pathway, investigating clinical regulatory requirements in various countries, establishing appropriate clinical trial protocols, and addressing ethnic differences. Finally, companies can proceed with regulatory submission and registration, paying attention to the sequence of submissions.

As a product subject to regulation throughout its entire lifecycle, medical devices must continue to comply with regulatory requirements after market launch, with particular attention paid to the handling of customer complaints, reporting of adverse events, and change control.

At the forum, in addition to Fu Li, Senior Vice President of Technology, who provided an in-depth analysis of “Strategies for Global Expansion of Medical Devices and Key Compliance Points in Various Countries,” Jin Xiangdan, Director of Regulatory Affairs at Haihe Biologics, and Senior Consultant William Sadun also shared their insights on “Defining Clinical Benefit under the MDR Regulation” and “A Detailed Explanation of the U.S. Breakthrough Device Regulation,” respectively.

Additionally, Li Qiang, General Manager of Jiutai Pharmaceutical and Medical Device Technology Co., Ltd.; Li Ning, Registration Director at MicroPort Scientific Corporation; You Hongshun, Medical Department Manager at CSA Group; Li Ziduo, Cybersecurity Project Manager at TÜV Rheinland’s Beijing Laboratory in Greater China; and Tan Zhifeng, Medical Technology Manager and Senior Audit Manager at SGS-CSTC, also shared their insights on topics such as medical device testing and compliance consulting.

Finally, Zhou Quan, Managing Director at Legend Capital; Liu Tao, Vice President of Acotec Medical; Li Zhong, Senior Director of Regulatory Affairs at Esco Medical; Mei Jie, Registration Director at Yuwell Medical; and Li Ning, Registration Director at MicroPort Scientific Corporation, engaged in an in-depth discussion on “the global expansion of medical devices” from multiple perspectives.