In previous newsletters (Aggressive National Programs To Drive Down Drug Costs, published in January 2019 and Medical Disposables & Consumables Players Face Challenge of Government-Initiated Price Cuts in China, published in September 2019), Boston Healthcare reported the mounting pressure that biopharmaceutical and medical device companies are facing in defending their prices in China.

In November 2020, two years following the implementation of the national centralized tender program that started with biopharmaceuticals, the first medical device was targeted – drug-eluting coronary stents. The tender results were jaw-dropping, with the average price of the ten stent products that won the national tender dropped to 700 Yuan ($100), down from 13,000 yuan (~) $1,857), an average price from prior provincial tenders.1

Below, we would like to draw your attention to and share our insights on some other interesting findings in the process.

The market size of drug-eluting coronary stents, by annual volume, is in the 1.3 ~ 1.6 million range

Our medical device clients seek China’s market data in terms of annual procedure volume to understand the potential of the market and the competitive landscape. It has always been difficult as such data are not publicly available and industry analysts like us traditionally must make a bold estimate based on a mix of primary and secondary information, modeling, and, frankly, our years of Chinese industry experience.

Whereas this national tender has revealed that the current market size is in the 1.3~1.6 million range as the volume of this national procurement program, 1.07 million stents, is calculated as 65%~80% of the consolidated demand estimated by the public hospitals in China. Table 1 is the procurement plan by province that adds up to 1.07 million. To put the provincial market into perspective, BHA has also added the population and number of Class III hospitals in the province.

Table 1: Estimated Annual DES Procurement Plan Through the National Tender by Province 

ProvinceDES Volume EstimatePopulation (2010 Census)No. of Class III Hospitals (2019)
Anhui32,17059,500,46867
Henan92,56894,029,93984
Guangdong90,108104,320,459192
Shandong72,48495,792,719165
Hebei66,82871,854,21065
Beijing65,30419,612,36885
Liaoning54,53243,746,323128
Shanghai51,06123,019,19647
Jiangsu50,13778,660,941157
Sichuan47,19280,417,528200
Zhejiang43,16754,426,891130
Shanxi41,74637,327,37961
Shannxi34,28535,712,10156
Guangxi32,29646,023,76174
Jilin28,70327,452,81547
Hunan28,08265,700,76285
Tianjin26,34512,938,69343
Hubei26,34257,237,727102
Xinjiang30,50821,815,81551
Heilongjiang25,60838,313,99190
Inner Mongolia22,15624,706,29178
Yunnan21,62845,966,76664
Jiangxi19,26344,567,79771
Gansu14,98425,575,26339
Fujian14,45736,894,21767
Chongqing12,67528,846,17039
Guizhou11,31234,748,55651
Ningxia10,8116,301,35015
Hainan4,5538,671,48518
Qinghai2,9125,626,72320
Tibet4973,002,16513

Tender results: 10 winning products from 8 manufacturers, led by domestic players

The eight winning companies include two international players, Boston Scientific and Medtronic and six Chinese companies (JWMS, Essen Technology, MicroPort, Lepu Medical, Kindly Medical and Medfavour Medical).

The tender document has also revealed that there are currently 27 CFDA approved drug-eluting stents supplied by 12 manufacturers. Table 2 is the reported intended procurement volume by manufacturer, revealing the market share information.

Table 2: Reported Procurement Plan by Manufacturer (*indicates tender won)

ManufacturerDomestic/ ImportedPlanned Procurement in 2021
Microport*Domestic392,226
Boston Scientific*Imported120,626
Lepu Medical*Domestic120,560
Abbott VascularImported108,944
Medtronic*Imported105,955
JW Medical (JWMS)*Domestic100,690
Kindly Medical*Domestic53,441
Essen Technology*Domestic41,865
BioventionDomestic20,070
Medfavour Medical*Domestic9,774
Biotronik AGImported563
Micell Technologies IrelandImported8
TOTAL1,074,722

As mentioned earlier, the average price to win the national tender was a 93% drop across the board. JWMS, who won the tender with the lowest price, slashed the price from 13,300 yuan ($1,900) to 469 yuan ($67); Boston Scientific went from 17,000 yuan ($2,428) to 775 yuan ($111) for two of its stents.

Apart from the immediate questions such as whether this is a sustainable business for these winning companies, how to ensure the quality of the stents is not compromised etc.,  we are just as interested in observing what is going to happen to those who lost the bidding war (e.g. Abbott Vascular). We know that this national tender is intentionally designed to leave some room for hospitals to purchase from outside the tender scope as instead of covering all the demand, the tender volume is only 65% ~ 80% of the estimated sum. So, it will be interesting to watch the competitive dynamics in the 20%~35% “free” space of the market, or 500,000 stents approximately by volume.

Although the sustainability of the national tenders has always been questioned by the industry and industry advocates, the practical advice we will give to the industry is to be prepared especially if you have products that fall into the following categories, which are defined as “High-Price Consumables” by a working document, called Tentative Guidelines for Centralized Procurement of High-Price Medical Consumables issued in 2012 by the Ministry of Health. These include intravascular interventional devices, non-vascular interventional devices, orthopedic implants, neurosurgical implants, electrophysiological catheters, pacemakers, extracorporeal blood circuit/blood purification devices, ophthalmic implants, dental implants, and others.

A key element of the tendering process is the speed with which it is executed. When we review the timeline of the DES tendering process, the official tender document was released on 16 October, the bid date was 5 November and just within hours, the bidding was done, and the results were immediately made available to the public. As a result, organizations must decide before the tendering process, not during the tender, whether the organizational imperative is to win the tender and the lowest price they can go.

Boston Healthcare Associates works with innovative medical technology and biopharmaceutical players to help clients unlock the value of innovation. Our in-market experts closely monitor the policy and market trends in strategic markets like China to stay on top of industry trends and develop strategies and action plans to capture opportunities and mitigate barriers. BHA will continue to monitor and provide updates on the further development of the national tenders in China. Please contact us to see how we can help.

References:

1. https://www.chinadaily.com.cn/a/202011/05/WS5fa3ffaea31024ad0ba83631.html