Policy Tailwinds Fuel the Rise of 'Foxconn' in MedTech: How CRO+CDMO Players Are Seizing the Opportunity

On the night of this year’s Army Day, professionals in the medical device industry were destined for a sleepless night. A major announcement rapidly circulated within the sector, prompting an ever-growing number of practitioners to join the frenzy of social media posts. The source of such widespread excitement was a notice concerning the Marketing Authorization Holder (MAH) system for medical devices.

On the evening of August 1, at around 9:00 p.m., the National Medical Products Administration (NMPA) issued the “Notice on Expanding the Pilot Program of the Medical Device Registrant System” (hereinafter referred to as the “Notice”).

“The Notice” specifies that, building on the pilot implementation of the Medical Device Registrant System in the Shanghai, Guangdong, and Tianjin Free Trade Zones, the scope of the pilot program will be expanded to 21 provinces, autonomous regions, and municipalities directly under the Central Government, so as to accelerate the innovative development of the medical device industry.

The expansion of the pilot scope for the Medical Device Registrant System, as the most prominent development in the current medical device industry, has sparked extensive discussion. Experts believe that the continuous expansion of the pilot program for the Medical Device Registrant System will have a significant impact in five key areas:

1. Foster the continuous emergence of new business models and industrial forms;

2. Cultivate and incubate a cohort of “Foxconn-like” enterprises in the medical device industry, such as CRO+CDMO service providers (Note: CRO refers to Contract Research Organizations, which are professional institutions that primarily provide clinical research services for product development to pharmaceutical and medical device companies through contractual agreements. CDMO is an emerging outsourced service model that deeply integrates with a company’s entire supply chain system—including R&D, procurement, and production—from preclinical research and clinical trials to commercial-scale manufacturing. It provides innovative process development and large-scale production services, replacing simple capacity output with higher value-added technology transfer);

3. A large number of high-tech innovation and entrepreneurship enterprises have achieved technological implementation and commercialization;

4. Significantly reduce the costs for enterprises and product manufacturing;

5. Create billions in industrial value for China's medical device industry.

Amidst a vibrant atmosphere of discussion, the “Innovation • Leadership: High-Level Summit on Enterprise Development Opportunities under the Medical Device Registrant System,” hosted by CRO+CDMO service provider Medicalstrong, was officially held in Shanghai on August 2. The forum proved to be exceptionally timely. During the event, Dong Binzhe, Co-founder of Medicalstrong; Jiang Haihong, Associate Professor at Shanghai University of Medicine & Health Sciences; Lin Senyong, Director of the Medical Device Supervision and Administration Division at the Shanghai Municipal Medical Products Administration; Yang Yuanfang, Deputy General Manager of Shanghai Zhangjiang Medical Device Industry Development Co., Ltd.; Zhu Xiaowen, from the Medical Device Supervision and Administration Division of the Pudong New Area Market Supervision Administration; Gu Hongchen, Director of the Nanobiomedicine Research Center at the Med-X Research Institute of Shanghai Jiao Tong University; and Zhai Jingbo, Founder of Shanghai Yanxitang Enterprise Management Co., Ltd., delivered keynote speeches in succession, engaging in multifaceted discussions on the medical device registrant system.

Why Has the Medical Device Registrant System Garnered Widespread Attention? What Challenges in the Medical Device Industry Can It Address? What Impact Does It Have on the Medical Device Market? Today, We Provide an In-Depth Analysis of the Medical Device Registrant System.

For a long time, the medical device industry has been governed by the Regulations on the Supervision and Administration of Medical Devices (hereinafter referred to as the “Regulations”) promulgated and implemented in 2014, along with its 2017 revision. However, subordinate regulations and detailed implementation rules, such as the Measures for the Administration of Medical Device Registration, have not been well aligned with the Regulations and its revision, primarily resulting in the following issues:

1. The applicants for medical device registration of non-innovative medical devices are limited to medical device manufacturers;

2. Samples of non-innovative medical devices shall not be produced under entrustment during the registration application stage;

3. Both the entrusting party and the entrusted party shall possess registration licenses and production licenses during the commissioned production phase;

4. To obtain registration approval, the product must be manufactured in-house; outsourcing to third parties is permitted only when internal production capacity is insufficient;

5. Entrustment for production shall be limited to no more than one manufacturing enterprise.

Specifically, applicants for medical device registration are restricted to medical device manufacturers. Researchers, research institutions, clinicians, and R&D-oriented innovation platforms are either ineligible or face significant hurdles in obtaining medical device registration certificates. This severely hinders the commercial translation of technologies and impedes the efficient allocation of social resources. Furthermore, bundling medical device registration with production constraints hampers industry specialization and prevents the realization of the principle that “professionals should focus on their areas of expertise.”

Current regulations constrain the innovative enthusiasm of researchers, institutions, clinicians, and R&D-oriented innovation platforms, which is detrimental to enhancing the overall technological level of the medical device industry against the strategic backdrop of “Mass Entrepreneurship and Innovation” and “Made in China 2025.”

Current regulations stipulate that the entity registering a medical device must be the same as the entity manufacturing it. This requirement compels medical device companies to independently manage multiple stages throughout the product launch process, including production line establishment, quality management system implementation, raw material selection, process validation, supply chain management, sample production, registration testing, clinical evaluation, and application for the Medical Device Production License.

Taking medical device products subject to non-exempt clinical trials, such as diagnostic reagents, as an example, the journey from research and development to market launch involves numerous stages, including production line establishment, quality management system implementation, process development and validation, raw material selection, sample manufacturing, performance verification, registration testing, clinical trials, role-specific training, system audits, regulatory submission, product registration approval, and application for a production license.

Even after obtaining a production license and achieving commercial-scale mass production, it remains essential to maintain robust supply chain management, establish post-market training, after-sales service, and recall management systems, and uphold a sound quality management system to cope with increasingly stringent unannounced inspections.

Each of these stages carries significant uncertainty and risk, such as compliance of manufacturing facilities, stability of raw materials, whether samples can pass registration testing, and whether clinical trial outcomes meet the intended design specifications. For medical device companies, every new product—from research and development to production and sales—requires navigating a precarious path. Small and medium-sized enterprises face immense financial pressure; a single misstep can result in the loss of all prior efforts.

Among the aforementioned challenges, a particularly prominent pain point for small and medium-sized enterprises (SMEs) is the self-construction of manufacturing facilities. The establishment of such facilities entails stringent professional and regulatory requirements. Due to a lack of relevant experience and resources, SMEs inevitably encounter non-compliant processes or details that fail to meet regulatory standards. Furthermore, the post-hoc review conducted by drug regulatory authorities means that these potential non-compliances are not identified in a timely manner. Once identified at a later stage, they impose severe financial and time burdens on enterprises, including substantial costs for rectification, redundant construction, or even complete demolition and reconstruction.

What makes the situation even more awkward is that the factories and systems, built with substantial capital and resources by companies, remain idle for a considerable period in the early stages. This is because production activities cannot commence until the product obtains its registration certificate and manufacturing license. Therefore, low utilization rates of facilities are a common phenomenon among medical device enterprises.

According to statistics, under the implementation of the Regulations, medical device products involving non-exempt clinical trials for diagnostic reagents typically require approximately 2–4 years to complete the market launch process, with a capital investment of RMB 5–8 million.

The above issues began to change at the end of 2017, with the source of this transformation being the Medical Device Registrant System.

At the end of 2017, the Medical Device Registrant System was first piloted in the Shanghai Free Trade Zone, subsequently expanded to cover the entire municipality of Shanghai, and gradually extended to what now comprises 21 provinces, autonomous regions, and municipalities directly under the Central Government. This system permits the separation of medical device registration from manufacturing, meaning that the registrant and the manufacturer need not be the same entity.

This system allows medical device registration applicants to include medical device manufacturers, R&D institutions, researchers, and clinical experts. Under the Medical Device Registrant System, registrants can focus on product research and development while outsourcing production to qualified enterprises with adequate manufacturing capabilities. Furthermore, the registration holder may commission multiple enterprises for production, thereby achieving a "decoupling" of medical device registration from manufacturing.

This initiative greatly facilitates the technological transfer for personnel and institutions with R&D capabilities, promoting the commercialization of scientific research outcomes and the market launch of innovative products. Meanwhile, it enables enterprises with comprehensive medical device production conditions to engage in specialized manufacturing, thereby reducing the trial-and-error risks during the sample finalization process and mitigating the risks of product quality instability in the early stages of mass production.

The Medical Device Registrant System has also promoted refined specialization within the industry. By allowing registrants to outsource production, including multi-site contract manufacturing, the system eliminates the mandatory requirement for companies to build their own manufacturing facilities. This enables R&D-focused entities to concentrate on innovation while manufacturing specialists can dedicate themselves to operational excellence, thereby significantly improving resource utilization across the sector and providing substantial support for corporate innovation and industrial upgrading. Furthermore, this framework fosters greater collaboration and division of labor between medical device R&D institutions and manufacturers, optimizing the allocation of industry resources.

The Medical Device Registrant System is a regulatory framework that requires the registrant to assume full responsibility for product quality throughout the entire lifecycle of the medical device, including design and development, clinical trials, manufacturing, and after-sales service. This system not only promotes industry development but also clarifies the rights and obligations of the registrant, thereby facilitating effective oversight by regulatory authorities.

Certainly, institutional reforms will bring substantial dividends, but they will inevitably entail short-term growing pains. While some medical device companies reap the benefits of favorable policies, others that fail to adapt to the new industry landscape may be eliminated. Survival of the fittest is an immutable law; thus, how should medical device companies position themselves in response to the Medical Device Registrant System to achieve better development?

The Medical Device Registrant System Has Cultivated and Created a Vast Market: Medical Device CRO + CDMO Services. Given the profound significance of the registrant system to the medical device industry, numerous investment institutions and investors are highly optimistic about this sector. Taking Medicalstrong, a CRO + CDMO service provider, as an example, we analyze how companies in the medical device industry can achieve better development under the registrant system.

Medicalstrong was founded in 2011 and completed a Series A financing round worth tens of millions of RMB in 2018, with investments from Honghui Capital and Chongshan Capital. Driven by corporate growth and favorable policies, Medicalstrong is currently preparing for a Series B financing round, aiming to raise between RMB 30 million and RMB 50 million. The funds will be primarily used for the construction of CDMO facilities and business expansion.

Medicalstrong has accumulated ten years of experience in the CRO sector, providing one-stop pre-market services including R&D guidance, manufacturing system consulting, testing agency services, regulatory submission, clinical trial research, and clinical evaluation for medical devices. It has successfully managed the regulatory submissions for numerous high-difficulty, high-risk medical devices that were first-of-their-kind in China or pioneered in Asia.

However, in 2018, it chose to expand into the CDMO business, providing medical device companies with services including R&D translation, pre-registration manufacturing, and the establishment and guidance of quality management systems. Its first CDMO platform was established in the East Zone of Zhangjiang Medical Device Park in Pudong New Area, Shanghai, where a GMP clean workshop and laboratories covering over 2,000 square meters have already been put into operation. In addition, its CDMO platforms in Tianjin and Guangzhou are currently under preparation.

Why Is Medicalstrong Upgrading Its Business? Dong Binzhe stated, “In the medical device industry, small and medium-sized enterprises (SMEs) are the main force. Every stage—including R&D, quality system establishment, regulatory registration, clinical trials, and manufacturing—requires substantial capital investment. Our CDMO services help SMEs save time and costs while mitigating project risks. Furthermore, the promotion of the Marketing Authorization Holder (MAH) system presents a significant opportunity for CRO+CDMO service providers, enabling us to serve more medical device companies. We will operate our platform based on a ‘traffic + technology’ model to help enterprises rationally reduce costs and create greater value.”

In his speech, Dong Binzhe stated, “Medicalstrong’s target customer base includes startup teams, enterprises seeking product upgrades, optimization, or production line expansion, distributors with stable channels looking to develop their own brands, and high-quality overseas projects. The Medicalstrong CDMO platform is currently focused on IVD products and will expand into other product areas after accumulating sufficient experience. The company chose diagnostic reagents as its entry point for three reasons. First, the company has years of experience providing CRO services to leading domestic and global diagnostic reagent enterprises, giving it a solid foundation of expertise and resources. Second, diagnostic reagents exhibit a high degree of homogeneity in R&D and production management processes. Third, there have been numerous innovations in diagnostic reagents in recent years, and these products offer high gross profit margins.”

What are the advantages of Medicalstrong’s CRO+CDMO service platform? Dong Binzhe stated, “The company boasts industry-leading project experience, a robust execution team, and extensive accumulated industry resources. It has established strong collaborative relationships with regulatory authorities, testing institutions, and numerous clinical trial sites, enabling it to effectively anticipate, mitigate, and resolve potential issues across various stages, including product testing, quality management systems, registration, and clinical trials. Furthermore, the company’s diverse cooperation models ensure the confidentiality of clients’ technologies and clarify intellectual property ownership. Finally, by seamlessly integrating upstream and downstream industry resources—spanning R&D, manufacturing, suppliers, and end-users (physicians)—the company can efficiently and compliantly help registrants create greater value.”

In summary, Medicalstrong has aligned itself with policy trends, conducted thorough market research and analysis to address corporate challenges, and enhanced its technical capabilities and service scope. Committed to empowering more startups and companies in transition, it is actively exploring pathways for industry development under a “pilot-first, then scale-up” strategy. These initiatives provide a valuable model for entrepreneurs and corporate growth, offering fresh insights for the market.

Meanwhile, as the mainstay of the medical device industry, small and medium-sized enterprises (SMEs) should identify their core competencies and define their future development directions while the Marketing Authorization Holder (MAH) system is still in its ascendant phase. Whether upgrading R&D or manufacturing capabilities, creating greater value within existing product portfolios, or transitioning into specialized contract manufacturers, SMEs must strengthen their internal capabilities to achieve robust growth under the new regulatory framework and market environment.

Research-oriented startups and experts gearing up to enter the medical device industry can strategically select high-quality CDMO service platforms to accelerate the translation of scientific achievements and rapidly realize commercial value. Distributors with extensive channel resources who aspire to establish their own brands are advised to tailor their strategies to their specific conditions, develop robust budget and timeline plans, select products aligned with their business development goals, engage reputable CRO providers and manufacturing platforms, and gain in-depth understanding of regulatory frameworks, thereby leveraging the benefits of the Marketing Authorization Holder (MAH) system as registered MAHs.