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Medical Device Made-in-China Policy: A Comprehensive Review and Implementation (I)

China has been re-opening to the world after COVID isolation since 2023. Volume based purchasing and Made-in-China (MIC) policy are becoming more important in the public hospital purchases. This article will discuss the ways overseas manufacturers and innovators can shorten time-to-market, reduce cost and increase sales for the increasing significant role of “Made-in-China” policy. It will also review the key regulatory policies, guideline requirements regarding the policy to understand the requirements, criteria, and benefits. In addition, the different models of made-in-China policy will be discussed. Overseas manufacturers can create a strategy and implementation plan to leverage the “Made-in-China” policy. The process of utilizing in-China contract manufacturing option will be discussed as well.

For our recorded webinar on “Made-in-China” policy, please click HERE

Historical Regulatory Changes

The local Chinese medical devices manufacturing market has traditionally focused on low and mid-level devices, primarily sold within China. On the other hand, high-end medical technology is mostly imported from other countries, such as the United States, Europe, and Japan. Over the years, this market position has developed due to several factors: an emphasis on low-cost manufacturing, loosely monitored quality regulations, and a highly fragmented supply chain system that only local players could navigate. When foreign medical device manufacturers consider entering the Chinese market, they encounter a series of unfavorable conditions that hinder market entry.

However, the above situations have evolved dramatically.

The 13th Five-Year Plan (2016–2020) emphasized major regulatory reforms in various sectors, including the medical devices and pharmaceutical industries. The 13th Five-Year Plan also introduced the Marketing Authorization Holder (MAH) policy. Although there is a focus on indigenous innovation and research, policies like the MAH policy have also strengthened foreign involvement.

In 2015, the State Council announced “Made in China 2025” policy, stipulating the localization rate of large medical equipment must be increased.

The 14th Five-Year Plan (2021-2025) for medical equipment industry also proposed that, by 2025, the mainstream medical equipment should be effectively supplied, and the product performance and quality level of high-end medical equipment should be significantly improved.

Then comes the Order 104. NMPA published the “Issues regarding Approved Imported Medical Devices Manufactured by Chinese Domestic Enterprises” on September 25, 2020.

The announcement encourages foreign manufacturers to localize their approved devices’ production in China. It provides an expedited approval pathway for their medical devices made in China. This pathway becomes feasible when the main raw materials and production processes don’t change. Overseas manufacturers should also make sure the quality management system is consistent with the previous one.

When an overseas company intends to manufacture their approved devices in China, they need a Chinese entity. This entity acts as the domestic license holder. They can reuse some of the deliverables that were submitted for obtaining the imported license. This change accelerates the registration process as the localized device doesn’t need to go through the same time-consuming process.

Either the research summary or the clinical evaluation report can be reused. But the New Product Technical Requirements and new Product Registration Testing Reports are still required, though. The advantage of localizing device production is that devices will become more competitive in the market. More hospitals will begin to give preference to Chinese domestic products during public tenders.

One prerequisite for utilizing this guideline is that devices transferring to China must already receive approval as an imported device. Under this new pathway, the simplified list and the re-evaluation process will greatly facilitate the localization those devices. For our comprehensive review on Order 104, please click HERE.

Order 739 also asks for further implementation of the MAH system. The highest law governing medical devices “Regulation on the Supervision and Administration of Medical Devices”, published on March 16, 2021, allows separation of MAH and contract manufacturing in administrative level. Click HERE on our post on Decree 739.

Also worth mentioning is the centralized procurement. The Chinese government has shown a preference for using domestic medical devices in public tendering in centralized procurement. If foreign companies can achieve the “Made in China” label, their products will also be eligible for centralized procurement, leading to an increase in sales.

MAH System: A New Era in Regulatory Reforms

The MAH (Marketing Authorization Holder) system marks a new era in China’s regulatory reforms. The MAH system has shifted the focus of market entry from enterprise-based registration to product-based registration. This means that any researcher, R&D organization, or manufacturer can apply for their medical device to be registered. Once approved, they become a holder of Marketing Authorization. These individuals or organizations are then free to manufacture the device themselves or through a contract manufacturer. Subsequently, they will be able to market their device in China under their brand name but with the label “Made in China.”

The MAH system was initially launched as a pilot in Shanghai. It was then established in 21 provinces and has been legalized nationwide since July 2020. To understand the benefits of the MAH system for medical device manufacturers, let’s examine the operational changes before and after the implementation of the MAH policy.

Changes for Manufacturers Pre-MAH and Post-MAH

__Pre-MAH:

  • Enterprise-Based Registration: Manufacturers needed to register under the enterprise’s name to gain market entry.
  • Complex Market Entry Process: The entire responsibility from R&D to production was on the manufacturer, leading to a complex and lengthy process.
  • Limited Manufacturing and Sales Flexibility: Manufacturers often had to handle the entire production and sales process themselves, lacking flexibility.

__Post-MAH:

  • Product-Based Registration: Any qualified researcher, R&D organization, or manufacturer can apply for product registration.
  • Simplified Market Entry Process: Once a product is granted marketing authorization, the holder can choose to manufacture it themselves or through a contract manufacturer, offering more flexibility.
  • Increased Manufacturing and Sales Flexibility: Authorization holders can freely choose the manufacturing method and can market their product in China under their own brand name with the label “Made in China.”

Benefits of the MAH Policy

  • Lower Market Entry Barriers: Product-based registration reduces the cumbersome procedures associated with enterprise registration, facilitating more innovative products entering the market.
  • Increased Manufacturing Flexibility: MAH holders can choose the most suitable manufacturing method, no longer restricted to in-house production.
  • Promotion of Local and Foreign Innovation: The MAH policy encourages local innovation and enhances the participation of foreign companies in the Chinese market through contract manufacturing.
  • Fair Competition in Centralized Procurement: Since centralized procurement favors domestic devices, foreign companies can enter centralized procurement if they achieve “Made in China” status, increasing their sales.

The implementation of the MAH system is also fostering optimal market allocation of innovation talent. Researchers, engineers, and innovative enterprises are now collaborating, reducing fragmentation in the system. As enterprises, vendors, and suppliers begin to cooperate, there is coordinated utilization of land and environmental resources in Shanghai and designated centers. This promotes labor division and cooperation between upstream and downstream facilities in the medical device value chain, cultivating advanced manufacturing capabilities.