Foreign Companies Monopolize 80% of High-End Equipment, Making It Difficult for Domestic Brands to Win Bids

Recently, multiple ministries have stated their support for further increasing the application rate of domestically produced medical equipment, making domestic medical equipment companies a hot topic in the capital market.

However, the head of a domestic company producing high-end color Doppler ultrasound equipment told a reporter from *China Business Journal* that it is common for domestically produced medical devices to be met with lukewarm reception in government tenders, with bids even bluntly stating "only imported products are accepted."

Capital Frenzy

The capital frenzy surrounding domestically produced medical equipment began in May of this year.

On May 24, President Xi Jinping visited Shanghai United Imaging Healthcare Co., Ltd., stating that it is necessary to accelerate the localization process of high-end medical equipment, reduce costs, and promote the continuous development of national brands.

Following this, a series of national-level policies were launched. On May 26, the National Health and Family Planning Commission announced on its official website the launch of the first batch of selections for outstanding domestically produced medical equipment products. On August 16, Li Bin, Director of the National Health and Family Planning Commission, and Miao Wei, Minister of Industry and Information Technology, jointly convened a conference with more than 20 domestic medical equipment companies to promote the development and application of domestically produced medical equipment. Industry insiders say that despite a series of favorable policies, domestically produced medical equipment still lacks a foothold in the hospital-end medical equipment market.

It is understood that the main domestic companies producing high-end medical equipment such as MRI scanners include Neusoft Medical Systems Co., Ltd., China Resources Wandong Medical Equipment Co., Ltd., GE Healthcare Systems Co., Ltd., and Mindray Medical International Ltd.

In my country's medical device field, foreign companies monopolize approximately 80% of the CT scanner market, 90% of the ultrasound instrument market, 85% of the laboratory instrument market, 90% of the MRI equipment market, 90% of the electrocardiograph market, 80% of the mid-to-high-end monitor market, and 90% of the high-end physiological recorder market. Currently, in the MRI medical field, the main foreign companies in China include GE Healthcare, Siemens, and Abbott. These companies hold 90% of the MRI market share in China. "In June of this year, GE's entry into Tianjin marked a breakthrough in the localization of MRI equipment. This will likely lower the price of MRI equipment, further squeezing the survival space of Chinese domestic brands," said Yang Mingjing, an analyst at the Qianzhan.com Industry Research Institute, with considerable concern.

Tian Yuan, head of Suzhou-based high-end color Doppler ultrasound equipment manufacturer Feiyinuo Technology (Suzhou) Co., Ltd., told reporters that domestic hospitals currently find it difficult to accept domestic brands. Their first high-end color Doppler diagnostic instrument series went on sale at the end of 2013 and has quickly entered the markets of developed countries such as Germany and France. However, its promotion in the Chinese market remains difficult.

"Our color Doppler ultrasound equipment has even received high recognition from mainstream physicians of the Ultrasound Physicians Branch of the Chinese Medical Association. However, because they don't have the purchasing power, they are powerless to ensure that our hospital continues to prioritize the purchase of imported color Doppler ultrasound equipment in its bidding processes," Tian Yuan said.

Foreign Monopoly

Jiang Guangce, chairman of Dechuan Medical Foundation, stated that large foreign medical device manufacturers such as Siemens produce high-end medical equipment that is a rigid demand for hospitals. For well-funded public hospitals, purchasing imported equipment has always been a common practice.

In recent years, a number of innovative medical device companies have emerged in China. These companies have independently developed modern medical equipment such as angiography, hemodialysis, and digital ultrasound, which not only reach international advanced levels in overall quality but are also inexpensive, with related consumables and maintenance costs far lower than imported products.

However, according to industry insiders, some hospitals, especially large tertiary hospitals, treat domestically produced medical equipment differently from imported equipment: some institutions specifically state in their tender documents that they "only purchase imported equipment"; some even tailor their tender documents to the technical parameters of certain imported equipment; and some, upon hearing the word "domestic," refuse even a "free trial."

Recently, a tender notice from Shigatse, Tibet, has drawn criticism from within the industry. The tender notice explicitly stated that in the procurement of equipment for capacity building in maternal and child health institutions, pediatric departments of county-level general hospitals, and village clinics in Shigatse Prefecture, grassroots medical institutions reported that imported portable B-ultrasound machines, multi-dimensional color ultrasound machines, and ultrasound diagnostic instruments performed well. Purchasing these three types of imported equipment would better utilize funds and improve equipment efficiency. After review, the client decided to change the equipment to imported products, requiring the provision of technical parameters for the imported ultrasound equipment and a complete equipment configuration.

An industry insider analyzed that while domestic companies usually face discriminatory terms from top-tier hospitals, making it difficult to compete with foreign companies, it was unexpected that even grassroots hospitals, where domestic companies have a foothold, were starting to set up differentiated bidding conditions. If they don't fight back, domestic companies that can't enter mainstream hospitals may not even be able to get a foothold in grassroots hospitals.

Regarding the discriminatory clauses in the bidding process by domestic hospitals, Yang Mingjing stated that while he didn't agree with them, he could understand them. He believes that MRI machines are expensive and technically complex, and improper purchases could result in significant economic losses. Foreign products enjoy greater brand recognition, larger market share, and a more significant demonstration effect.

Faced with the increasing pressure from foreign giants, domestic enterprises have been forced to take countermeasures. In 2013, Zhuhai Hejia Medical Equipment Co., Ltd. and Zhengzhou People's Hospital agreed that Zhuhai Hejia would invest in purchasing three MRI systems and related equipment, which would be operated jointly at Zhengzhou People's Hospital for a period of 10 years. Ownership of the equipment would belong to the company, and in terms of profit distribution, the company would receive 60% of the project profits, while the hospital management company would receive 40%.

Yang Mingjing stated that, in short, this means domestic hospitals can share risks and profits with MRI manufacturers. "This model may temporarily help domestic companies snatch some market share from foreign giants."