The "domestic manufacturing" and "localization" of medical devices in China

Original from: IVD Professional Website

For those international medical device companies aiming to localize in China, what exactly does "manufactured within China" mean? To what extent does "localization" qualify as "manufactured within China"?

Current criteria for "domestic manufacturing" in China

Summing up various policies, the key criteria for defining "domestic manufacturing" include:

1.    Produced and manufactured by domestic enterprises 

It is the basic concept of "domestic manufacturing" that includes domestic productions by domestically registered enterprises, overseas productions by domestically registered enterprises, productions and manufactures by foreign-invested enterprises in China, productions and manufactures by joint ventures in China, and productions and manufactures by foreign enterprises who conduct collaborative research with domestically registered enterprises. Whether there will be specific adjustments to the concept in specific policies depends on the circumstances.

2.    Independent intellectual property

It includes the originality in basic principles and the designs of hardware and software applications in instruments, leadership in some principle technologies, and components largely and independently processed and manufactured within China.

3.    Core components

The core components of instruments or equipment can be completely independently produced within China, and the core technologies for software design has independent intellectual property.

4.    Non-overseas procurement and assembly or rebranding

It does not involve assembling various core components produced abroad.

Corresponding to the "domestic product", there is another concept called imported product, which was clearly defined in the Notice on Issuing the Management Measures for Government Procurement of Imported Products by the Ministry of Finance. 

"Imported products refer to products that have been declared and cleared through Chinese customs to enter the territory of China and are produced outside the territory of China." This also provides supplementary and restrictive information on the definition of "domestic product". 

The "domestic manufacturing" and "localization" of medical devices in China

For medical devices launched in China, the National Medical Products Administration (NMPA) evaluates their safety and effectiveness in accordance with the "Regulations for the Supervision and Administration of Medical Devices" through the statutory procedure. Once approved after review, a medical device registration certificate is issued. All medical device registration information can be found on the official website of the NMPA. 

Currently, medical devices are categorized into foreign medical device registration and domestic medical device registration. It's important to note that domestic manufacturing is not limited to Chinese brands but also includes international brands registered for production within China.

In addition to the model of investing in China to establish factories and carry out research and production, multinational IVD companies are also increasing their collaboration with local enterprises. Acquisitions, joint venture establishment and strategic cooperation are all common methods to rapidly promote localization and enhance their competitive advantages in China.

As of the end of 2022, the domestication rates in the IVD raw material market and the microbiological diagnostic market were 20%, while the domestication rates in the immunodiagnostic market ranged from 25% to 30%. Both the blood diagnostic and POCT markets had a domestication rate of 50%, while the domestication rates in the biochemical diagnostic market and molecular diagnostic market both reached 60%.

As the domestic substitution rapidly progresses, policies issued by the Chinese government are also opening doors for the domestic production of imported equipment and guiding foreign-funded enterprises planning to expand in the Chinese market. For foreign medical device companies to continue developing in the Chinese market, localization is an essential path.