Chongqing IVD Industrialization Platform: Building Integrated Solutions to Empower Distributor Transformation and Foster an Ecosystem Cluster

As one of the most primary diagnostic methods in clinical practice, in vitro diagnostics (IVD) provides 80% of the information for clinical diagnosis while accounting for only 1% of total healthcare expenditure. It has become an increasingly vital component in the prevention, diagnosis, and treatment of diseases, with the IVD industry gradually evolving into the largest segment within the medical device sector. The IVD industry chain primarily consists of upstream IVD manufacturers, midstream IVD product distributors, and end-users such as medical institutions and third-party medical laboratories.

As the “Two-Invoice System” and “Centralized Procurement” policies are further implemented and refined across China, the domestic IVD industry has experienced significant fluctuations. According to the “Announcement on Negotiated Pricing for Centralized Volume-Based Procurement of Clinical Laboratory Reagents by Public Medical Institutions in Anhui Province,” county-level and above hospitals in Anhui Province will include five categories comprising 23 products in centralized procurement. The hospital entry price for chemiluminescence reagents under this centralized procurement has decreased from 30–35% of the charged price to 20–22%, resulting in an approximate 10% reduction in profit margins.

Zhu Qishan, Co-founder and Operations Director of the Chongqing IVD Industrialization Platform, believes that the approximately 10% profit margin eliminated by centralized procurement corresponds to the profits of distributors. In the future, centralized procurement of medical devices will align with that of pharmaceuticals, becoming more normalized and frequent, making the transformation of small and medium-sized distributors an urgent imperative.

Thus, VCBeatZhu Qishan, Co-founder and Operations Director of the Chongqing IVD Industrialization PlatformConducted an exclusive interview to gain in-depth insights into the challenges faced by IVD industry distributors and the solutions provided by the platform.

Since 2008, the founding team of Chongqing Ailingda Biomedical Research Co., Ltd. (hereinafter referred to as “Ailingda”) has been participating in joint venture projects in the IVD industry, accumulating extensive resources in the raw materials and technical services sectors over the past decade.

On January 9, 2017, the state issued the “Implementation Opinions (Trial) on Promoting the ‘Two-Invoice System’ in Drug Procurement by Public Medical Institutions.” The “Two-Invoice System” refers to issuing one invoice from the manufacturer to the distributor, and another invoice from the distributor to the medical institution.

Zhu Qishan stated, “Given that in vitro diagnostic (IVD) reagents share highly similar industry characteristics with pharmaceuticals, following the implementation of the ‘Two-Invoice System,’ we anticipated that the IVD sector might also undergo centralized procurement, thereby exerting a certain impact on overall pricing. Consequently, we began planning the establishment of a specialized platform to help distributors build self-sustaining capabilities and mitigate the impact of centralized procurement.”

Industrialization Base Image provided by the platform

VBInsight, with its forward-looking vision, was established in October 2020.Chongqing IVD Industrialization Platform, integrating new technologies in the field of in vitro diagnostics,Centered on Product R&D and Industrialization, covering a comprehensive platform with six major integrated services to provide customers with holistic solutions for the industrialization of in vitro diagnostic products.To date, we have served dozens of large clients and publicly listed companies across the industry.

“In our view, the most significant impact of volume-based procurement (VBP) on the IVD industry lies with distributors. For manufacturers, profits are actually safeguarded. Manufacturers need only focus on production costs—namely labor costs—as well as ensuring the stability and cost control of upstream raw materials. Consequently, many large domestic IVD companies are now acquiring or establishing raw material suppliers to mitigate the effects of VBP. With distributors’ profits eliminated, traditional distributors will cease to exist by a certain point in time,” said Zhu Qishan.

CurrentlyPlatformThe primary customer base comprises three categories: distributors, research institutions, and other manufacturing enterprises, with distributors accounting for approximately 80%. Zhu Qishan stated that the IVD industrialization platform is essentially designed to mitigate or hedge against the impact of centralized procurement on the industry, particularly in safeguarding distributors.

 Project Evaluation and Platform Collaboration Model. Image provided by the platform.

Statistics show that there are over 20,000 IVD distributors in China. These distributors lack technical expertise, manufacturing facilities, and the capacity for independent product development and production, but they possess extensive market reach. In contrast, research institutions boast strong scientific research capabilities but often have limited market insight and lack the ability to commercialize their innovations.

The IVD industrialization platform can provide technologies, R&D and production facilities, registration and approval services, and product manufacturing and supply services, helping IVD distributors and research institutions transition into IVD manufacturing. The project implementation approach is as follows:Leverage the platform to develop and convert products favored by distributors or those with strong market presence, obtain registration certificates, and launch them for commercial sale.

The primary sources for project commercialization are medical device distributors, universities, research institutes, healthcare institutions, overseas research organizations or enterprises, and projects reserved by the platform. Project evaluation is mainly conducted from three aspects: first,Market Application Status, namely the clinical application of the product both domestically and internationally, as well as the landscape of domestic and international competitors and their competing products. Second,Technical Assessment, whether the technology can be upgraded, such as the sensitivity and accuracy of product reactions. Thirdly,Can the timeliness of product testing be improved?, for example, if a test takes half an hour, can it be shortened to 15 minutes.

Implementation Process of the Overall Solution for IVD Industrialization – Image provided by the platform

The IVD industrialization platform integrates new technologies in the field of in vitro diagnostics, focusing on product R&D and industrialization. It covers six comprehensive service platforms to provide customers with overall solutions for the industrialization of IVD products, helping distributors transform into manufacturers, build their own product brands, and lay out domestic and international markets.

R&D PlatformProvide technical support for product research and development of existing enterprises and manufacturers. The IVD industry undergoes rapid technological updates; when a company’s products encounter bottlenecks at any stage, the platform can offer technical services.

CDMA Custom R&D and Production PlatformWe provide distributors with manufacturing process development and technical upgrades. Under the Marketing Authorization Holder (MAH) system, distributors commission the design and development of a product and then outsource its manufacturing to us, allowing them to focus solely on sales.

CRO Clinical Trial and Product Registration PlatformThe IVD industrialization platform has a CRO clinical trial service team of nearly 10 members, capable of providing clinical trial and registration approval services to manufacturers.

CMO-Commissioned Product Commercialization and Production PlatformPlatform, OEM-Commissioned Mass Production Base, primarily targeting large enterprises. The current development trend in the IVD industry is that manufacturers need to offer comprehensive product portfolios. However, since certain tests have relatively low market utilization rates, many large companies may be reluctant to produce them in small batches. This segment can be outsourced to platforms for contract manufacturing.

Furthermore,CSO Global Sales and Supply PlatformProvides raw material supply and sales channels through a global network. Leveraging Ailingda’s decade-long accumulation of raw material sales resources, which cover 70% of enterprises in the industry, the company can rapidly import raw materials from abroad. Furthermore, collaborations with multiple international agents have established an international distribution network spanning Europe, Spain, the four Nordic countries, Germany, the United Kingdom, Egypt, Brazil, the United States, and other countries and regions.

Currently, the platform has completed the construction of a specialized R&D and industrialization center covering an area of 6,000 m², including a 1,200 m² R&D center, a 3,000 m² production center, a 1,200 m² office center, and a 300 m² professional exhibition hall. It has established an integrated technical and industrialization center focused on the R&D and industrialization of new technologies in the field of in vitro diagnostics (IVD), encompassing technical service platforms for raw material R&D and supply, clinical trials, and regulatory registration and approval.

R&D Laboratory. Image provided by the platform.

The platform consolidates three major advantages, striving to build an IVD ecosystem industrial cluster. First isRaw Material Advantages. The most critical strategic node in the IVD industry is raw materials, as they determine whether product quality is excellent and stable. Ailingda has its own raw material company and holds national agency qualifications for dozens of internationally renowned brands. Its raw material sources are extensive and readily available, with standard lead times for agency-sourced materials controlled within one month.

Secondly,Talent and Technological AdvantagesThe IVD industrialization platform boasts a technical team with over a decade of experience in R&D and commercialization within the IVD industry. It has participated in the incubation and translation of more than 300 IVD products, providing products or services to 70% of enterprises in the sector, including well-known listed companies, and possesses extensive expertise in technological reserves and regulatory registration. Furthermore, the platform collaborates with key laboratories at Southwest University, Chongqing University of Science and Technology, and Army Medical University, assembling a team of doctoral experts to provide technical support for projects. Class II medical devices can obtain registration approval in as little as six months, while Class III devices can be approved in as little as two years.

Lastly,Policy AdvantagesThe Chongqing IVD Industrialization Platform is a key initiative supported by the Chongqing Municipal Government and the Liangjiang New Area Administrative Committee. Enterprises introduced through this platform can directly access government support policies. According to the "Several Policies on Supporting the High-Quality Development of the Biopharmaceutical Industry" issued in 2019, and the "Chongqing Action Plan for Promoting the High-Quality Development of the Big Health Industry (2020–2025)" released in 2020, companies registered in Chongqing are eligible for site support, as well as a range of preferential policies for talent and taxation, varying in degree.

Furthermore, the IVD industrialization platform is located in Dadi Enterprise Park, Liangjiang New Area, Chongqing. It boasts excellent transportation connectivity with access to light rail lines, and features well-developed surrounding amenities. The area includes three public rental housing communities and the Affiliated Middle School of Southwest University, offering comprehensive facilities ranging from education and healthcare to daily living services.

Due to geographical and historical factors, Chongqing’s in vitro diagnostics (IVD) industry started later than the rest of China, particularly compared to coastal regions, and the development and expansion of its IVD industrialization platform are just beginning. Zhu Qishan stated, “We aim to provide high-quality services to the industry through this platform, attracting elite enterprises, especially those from coastal areas, to invest in Chongqing, and jointly build an IVD ecosystem cluster in Chongqing that ranks among the top in the Southwest region and across China.”

To realize this vision, numerous challenges still need to be overcome. Zhu Qishan stated that, first, at the national policy level, new medical device administrative measures and interpretations of the Marketing Authorization Holder (MAH) system are being rolled out successively. However, for Chongqing, the implementation and enforcement of these policies remain unclear, necessitating greater efforts by the government to provide policy interpretation and guidance for enterprises.

Second, from the perspective of the enterprises themselves, there is a shortage of facilities, and Chongqing’s local talent attraction policies—particularly those targeting high-end, cutting-edge technological talent—need to be further strengthened.

Third, there is the issue of prolonged transit times for imported raw materials. As this involves customs procedures and national policies, and no relevant implementable policies are currently in place, the extended transportation timelines are hindering the rapid development of the industry.

Looking ahead, Zhu Qishan stated, “We have currently partnered with six clients. Our short-term plan is to initiate more than 20 projects by the middle of next year, facilitating their translation and successful market launch to achieve self-sustaining revenue generation for the enterprise. In the long term, we will continue to strengthen project collaborations with research institutions. We aim to attract more large enterprises to establish a presence on our Chongqing-based platform within six to eight years. The platform company will provide technical guidance through equity participation based on technology, fostering an IVD industrial ecosystem cluster. This will lay the foundation for delivering one-stop, bundled solutions for comprehensive hospital testing services in the future.”