2015 IVD Industry Annual Report

I. Policy and Background

2015 is a year that medical and health-related policies are disseminated more. These changes in policy and background have promoted the development of the In Vitro diagnostics industry, urged the industry corporate management more self-disciplined and standardized, and enhanced innovation ability. And they make a positive and profound impact on the entire industry. The main policies this year from near to far in chronological order are as follows:

1. Speed up the new medical service price project to get application

On December 25, in order to carry out the spirit of CPC Central Committee and the State Council on promoting the reform of the price mechanism, NDRC improved the management of new medical service price, encouraged research and innovation, promoted the timely access to new medical clinical technology, created a good environment of popular entrepreneurship and innovation to accelerate the new medical service price project accept audit.

All districts that deal with the new medical service price will not get restricted from "the national medical service price project specification (2012 edition)". Medical product projects that involve reagents, supplies and equipment, as long as they get approval to produce from relevant departments and have market access conditions, can be included in the scope of the new medical service project acceptance.

For the new medical service price projects that the relevant units submit, each district should timely acceptance and efficiently deal with. And they also should further simplify procedures, speed up the audit by the principle of encouraging innovation and the use of appropriate technology combining, and timely announce the audit results.

For the new medical service price projects that get approved, all localities should express the execution within their respective administrative areas, and confirm project code, project name, content, the price level or price management forms, etc.

All districts can’t, in any name or form, try to refuse or shuffle the new medical service price projects to get audit.

2. Control medical expenses in public hospitals
On November 6, NHFPC and other 4 departments issued "Opinions on the control of unreasonable growth of medical costs of public hospitals." It pointed out that with the development of social economy, health care industry had entered a rapid development stage, and the health care costs also had been rising rapidly. Meanwhile, there also existed unreasonable factors in the structure and growth of medical costs that need get controlled, including that urban public hospital expenditures accounted for large in the total amount of medical expenses and drugs, and income of examination and treatment of large medical equipment and medical supplies accounted for relatively higher.

In the future, medical expenses control of public hospitals will be linked with the performance evaluation of public hospital grade assessment requirements, financial allocations budgetary arrangements, dean annual performance appraisal, the merit wage distribution of medical staff and other aspects.

3. Health China is the overall planning of the development of health and family planning of “the 13th-five period”

On October 29, "Health China" was written in the bulletin of "Opinions on formulating the 13th Five-Year Plan of National Economic and Social Development of CPC Central Committee " of the Fifth Plenary of 18th session CCP. In early September this year, NHFPC had comprehensively started the compiling work of "Health China Construction Plan (2016-2020)."

The bulletin promotes health China building, deepens the medical and health system reform, rationalizes drug prices, implements the linkage of medical, health care, and pharmaceutical and establishes the basic medical and health system and modern hospital management system that covering urban and rural to realize food security strategies. It also promotes the balance development of population, improves population development strategy, fully implements the policy that a couple have two children, and actively deals with population aging. It’s expected that fully opening two-child policy will bring 3 to 5 million newly increased population every year, and short-term incremental population may be released in the next five years. The total number will be 15-25 million.

4. The reform opinions of the medical service price points out to lower part of the inspection and check price

On October 21, NDRC said the guidance draft of the medical service price reform had been completed and it was currently in the process of soliciting opinions.

In recent years, NDRC jointly with relevant departments has increased the intensity of medical service price reform. It standardized medical service price project, carried out reform experimental units according to the charging system of diseases, service units and so on. It also guided the local public hospitals to cooperate with public hospitals’ reform. It not only issued comprehensive measures and linkage policy such as eliminating drug addiction as well as lowering drugs accounting, reducing some validation checking price, adjusting the price of medical service, and implementing government medical liability, but also promoted the establishment of new medical institutions compensation mechanism. Some medical service price can be decided by medical institutions independently.

Medical service price reform has strengthened the link among price, health care, medical and other related policies. First, it makes full use of the role of health care costs; second, it establishes a scientific compensation mechanism; third it helps reduce the burden of patients. It helps to ensure medical institutions under sound operation, health insurance fund can withstand, and the burden on the masses without increasing.

5. Improve hierarchical diagnosis and treatment system, strengthen the training of general medical practitioners, and promote physicians freelance

On September 11, the State Council announced the "Guiding Opinions on Promoting Hierarchical diagnosis and treatment system construction." Opinions showed that through a variety of policies, measures and work currently, it would accelerate the establishment of hierarchical diagnosis and treatment system. And at last it would realize the hierarchical diagnosis and treatment model of implementation of the grassroots clinics first, two-way referral, acute and chronic partition, the upper and lower linkage.

Until 2017, Hierarchical diagnosis and treatment policy system will gradually get improved, and division of labor of health care institutions will be basically formed. Then the hierarchical diagnosis and treatment system will be established accord with the basic national conditions. By 2020, the service capacity of hierarchical treatment system will get fully enhanced, and the security mechanism will gradually get improved, forming the basic construction of medical service system of reasonable layout, appropriate scale, hierarchical optimization, responsibilities clear, functional maturation and rich efficiency.

6. “Internet +” healthcare will have a long-term effect on the industry

On June 24, the State Council executive meeting put forward “the Internet +” action guidance deployment, promoting the “Internet +” action. Under the background of the nation vigorously promoting the "Internet +" action plans, Internet medical industry had been entering a rapid development period.

“Internet +” healthcare has changed not only the way of medical treatment, but also helped popularize medical resources. Tele-medicine, mobile medical and other future healthcare can also reduce transaction costs, improve the efficiency of health care, and play a good role in solving the "difficulty and high cost of treatment".

7. Further encourage the development of social medical

On June 11, the State Council issued "a number of policy measures on accelerating the development of social medical." These measures stipulated to reduce operating approval limits, explore and establish a regional center for inspection. It encouraged the mutual recognition and resource sharing between public medical institutions and social medical institutions in medical imaging, medical laboratory, medical sterilization and supply center. It stipulated that the ownership of medical institutions can’t be regard as the pre-condition of medical insurance designated, and districts can’t refuse to include medical institutions into medical insurance for reasons like non-medical service capacity. It also stipulated to further standardize various medical fee bills, refine fees and bills using of different medical institutions and settlement of medical healthcare insurance funds.

According to NHFPC, until the end of April 2015, the total number of national medical and health institutions was 985 000, of which: 26000 hospitals, 921 000 primary health care institutions, 35000 professional public health agencies and 3000 other institutions. For the hospitals: 13314 public hospitals and 13000 private hospitals.

8. Product registration fees

On May 27, China Food and Drug Administration (CFDA) announced the "Registration fee standard of drugs and medical devices product “and "Implementing Rules (Trial) of medical device product registration fees ". It formulated the fee standards for medical devices. Previous in vitro diagnostic product registration was with no fees. In addition, it also announced the classification rules and random inspection methods of medical devices.

CFDA currently has issued domestic vitro diagnostic product number, covering a variety of in vitro diagnostic reagents and equipment commonly used in clinical practice. This year CFDA has issued policies including registration fees, and they will affect the development of the industry.

9. Thousands miles of the quality of in vitro diagnostic reagents

On May 12, “Thousands miles of the quality of in vitro diagnostic reagents” campaign was launched under the guidance of China Food and Drug Administration Medical Device Supervision Division and the host of China Medical Association of news and information. Quality and safety of in vitro diagnostic reagents obtained further regulatory attention.

The theme of "Thousands miles of the quality of in vitro diagnostic reagents" was to strengthen the control of quality, and improve the diagnostic level. It mainly conducted research and interviews in six provinces and municipalities including Beijing, Shanghai, Guangdong, Fujian, Jiangsu, and Zhejiang. And attention was focused on biochemical reagents that was used clinically with a large amount and a wide range, genes that reflected the level of scientific and technological innovation, reagents that can detect tumor, as well as home diagnostic reagents like pregnancy tests, ovulation, blood, urine, etc.

10、Comprehensively implement the comprehensive reform of public hospitals at the county level

On May 8, the State Council issued "Opinions on Implementation the comprehensive reform of public hospitals at the county level." In 2015, all public hospitals at the county level in the country (city) got rid of compensation system for the medical cost through drug-selling profits, and focused on management system, operation mechanism, the service price adjustment, personnel salaries and health insurance payments, to fully implement the comprehensive reform of public hospitals at the county level. In 2017, the modern hospital management system will be basically established, and the county health service system will be further improved. The level of illness treatment and problem solving in the county public hospitals will be significantly improved. It will basically realize no serious illness in the country, and make the people get medical treatment in their own country.

11. 2025 China making requires innovation ability

On May 8, the State Council issued a new era of "2025 China making", and vigorously promote the breakthrough development of the ten key areas of new materials, bio-medicine and high-performance medical equipment. Medical equipment industry went into the new development period of innovation. High-end medical devices and innovative medical devices had the priority in research, review, registration and other sectors.

12. Actively promote the precision medicine

In January, NHFPC issued “the work notice of high-throughput sequencing screening and diagnosis of clinical experimental application that prenatal diagnosis mechanism develop". 108 medical institutions got approval to carry out this work. NHFPC had unveiled policies to promote the application in non-invasive examination, tumor diagnosis and personalized medication in March and May.

The demonstration phase of precision medicine plans has been completed, and during the "13th five period”, the government will have a very strong support for this project.

II．Present situation and development.

Global IVD market: According to statistics provided by Boston biomedical consultants，inc, in 2014 the global IVD market was $55.8 billion and the increase speed was 4%. In 2019, it is estimated to be $68.9 billion, with an overall increase speed of 4% every year. The US and EU take position of most of the market shares and the US is the center for IVD innovations. The emerging markets occupy less market shares, however they hold the fastest growing speed. Among all the market segments of IVD industry, immunologic diagnosis takes up 23%, biochemical diagnosis holds 17%, molecular diagnosis accounts for 11%, blood diagnosis has 10% and the other segments take up39%.

Chinese IVD market: Since there is a difference among domestic industrial information, we introduce the data of listed IVD companies. Now we have 39 listed IVD companies in China, which are:

Small plates: Shanghai Kehua Bio-engineering Co., Ltd., DaAn Gene Co., Ltd.

Growth Enterprises Market: Guangzhou Improve Medical Instruments Co., Ltd., DIAN diagnostics, Beijing Leadman Biochemistry Co., Ltd., Sinocare Inc., Beijing Bohui Innovation Optoelectronic Technology Co., Ltd., DIRUI Industrial Co., Ltd., Beijing Strong Biotechnologies, Inc., Ningbo Medicalsystem Biotechnology Co., Ltd., Sichuan Maccura Biotechnology Co., Ltd., Guangzhou Wondfo Biotech Co., Ltd.

Shanghai A share: Shanghai Runda MedicalScience and Technology Co., Ltd.

New three board: NYMPHAVN Biotechnology Co., Ltd., Shanghai Kexin Biotech Co., Ltd., Wuhan J.H Biological Technology Co., Ltd., Shanghai BaiO Technology Co., Ltd., Wuhan EasyDiagnosis Biomedicine Co., Ltd., Guangzhou SurExam Bio-Tech Co., Ltd., Jinan Babio Biotech Co., Ltd., Shenzhen New Industries Biomedical Engineering Co., Ltd., Chengdu Rich Science Industry Co., Ltd., Sichuan Xincheng Biological Co., Ltd., Shanghai FengHui Medical Science & Technology Co., Ltd., Xiamen Zeesan Biotech Co., Ltd., Wuhan King Diagnostic technology Co., Ltd., AVE Science & Technology Co. Ltd., MultiSciences (Lianke) Biotechnology Co., Ltd., NingBo Jia Cheng Biotechnology Co., Ltd., Henan Shuguanghuizhikang Biotechnology Co., Ltd., GUANGZHOU DARUI BIOTECHNOLOGY Co.,Ltd., Zhuhai Encode Medical Engineering Co., Ltd., Mokobio Life Science Corporation Beijing. China, Zhuhai Sinochips Biotechnology Co., Ltd., Shanghai ZJ Bio-Tech Co., Ltd., Beijing Enjihe Biological Engineering Co., Ltd., Beijing Lawke Health Laboratory Center for Clinical Laboratory Development, Beijing Promed Co., Ltd.

Hong Kong stocks: BioSino Bio－Technology & Science Inc.

According to their annual reports, in 2014 the revenue average growth is 23.1% and the total revenue is ￥11.2 billion. Net income increased by 20.6% and the total net income is ￥2.3 billion. In the first half of 2015, the total revenue is ￥6 billion, with an increase of 18.1% and the net income is ￥1.1 billion, with an increase of 10.3%.
China Association for Medical Devices Industry IVD branch and In-vitro Diagnostics Systems Committee of Shanghai Medical Instrument Trade Association respectively did a survey to their member units in the end of 2015 and the beginning of 2016. Their member units are IVD manufacturing enterprises, including foreign-funded enterprises. Survey result shows that:

For 2015, 2% enterprises think industrial increase is uncertain, 2% enterprises think there’s no increase, 38% enterprises think increase is below 10%, 42% enterprises think increase is between 10-20% and 16% enterprises think increase is above 20%.
For 2016, 2% enterprises think industrial increase is uncertain, 32% think increase is below 10%, 41% think increase is between 10-20% and 25% enterprises think increase is above 20%.

In aspect of increased percentage, most enterprises holding pessimistic opinions are domestic companies, while most of the foreign-funded enterprises believe there’s a considerable increase. In conclusion, the increased percentage in 2015 and 2016 is between 10% to 20%.

The main driving forces of growth:

1.With the implement of healthcare reform in China, coverage rate of healthcare insurance exceed 95%. This leads to more medical demands and brings a larger number of patients seeking diagnosis.

2. The aging of Chinese population brings up the number of geriatrics patients, while morbidity of chronic diseases such as diabetes maintains at a high level. According to NBSC, in 2014, among all the 1.367 billion people in China, people over 60 years old are 212 million, accounting for 15.5% of the total population and people over 65 years old are 137 million, accounting for 10.1%. WHO estimated that in 2050, China will have 35% aged people who are over 60 years old and will become the greyest country in the world.

3. People’s enhanced awareness of disease prevention and physical examination.

4. The increase of clinical diagnosis and treatment items brought by new technologies and new products.

5. Good governmental policies such a