Price reforms cuts China’s orthopaedic market to half, forcing out global competitors

MedTech News: As the world’s second-largest healthcare market, China presents opportunities to exporters in many healthcare sub-sectors. However, China’s volume-based procurement (VBP) policies for the medtech sector builds on its long-term ‘made-in-China’ ambition to have local companies taking up the lion’s share of the market for medical devices by 2030.

In fact, the Chinese government’s 14th Medical Equipment 5-Year Plan (2021–25) sets a goal to have more than six Chinese manufacturers among the top 50 global medical device companies. Therefore, the Chinese government will continue to support the growth of domestic companies in various forms, including granting subsidies and tax deductions.

High-value orthopaedic implants are the major focus of VBP which has led to a steep price reduction, at a range between 55% and 84% for spinal, hip, and knee implants.

China’s orthopaedic market was valued at $3.0bn in 2021 and is expected to decrease by 45%, reaching $1.7bn in 2022 due to ongoing VBP programs, said GlobalData, a leading data and analytics company.

Tina Deng, Principal Medical Devices Analyst at GlobalData, commented “China’s orthopaedic devices market can be segmented into hip and knee replacement, spinal replacement, trauma fixation, arthroscopic devices, orthobiologics, and others. Approximately 76% of the revenue is from hip and knee replacement, spinal replacement, and trauma fixation, which have all been heavily impacted by VBP.

“Multi-national companies (MNCs) used to control over 60% of major markets, but the competitive landscapes have changed rapidly. Domestic companies with excellent cost control, diverse portfolio, and optimal pricing strategy have won more share in the markets that do not have high technical barriers.”

The domestic players’ share in trauma fixation devices has reached a high level. In the previous VBP program of the 12 provinces, the domestic devices were 935,600 sets, accounting for 96.7%, whereas the demand for imported products was 32,000 sets, accounting for only 3.3%. The major domestic players, including Dabo, Zhengtian, and Weigao, enjoyed a high proportion of the trauma fixation devices market in the region. These companies are very likely to control more shares at the country level during 2022 national VBP.

While manufacturers integrate their sales forces and sell to healthcare facilities directly, most of the distributors who sell the high-value devices on VBP lists are being forced out.

Deng concluded “Orthopaedic manufacturers need to keep investing in R&D to improve technology and develop new products, especially for devices that are not on the VBP list. Future direction includes novel absorbable materials in the trauma market, 3D-printed spinal implants, and orthopaedic surgical robots in the spine and joint market.”

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