The European Commission has published an implementing regulation limiting companies and devices originating from China from fully participating in EU medical device public procurement.
It comes into effect on June 30, 2025.
This is the EU’s response to findings made public in January this year that showed China favors domestic products and restricts medtech imports via its centralized procurement.
The EU was spurred into action to impose what is referred to as an “International Procurement Instrument (IPI)” by China’s own practices which the commission views as discriminatory against EU medtech companies.
Consultation with Chinese authorities in Beijing between July 24 and 26, 2024 did not enough to achieve a “rebalance,” in the commission’s view.
The commission decided, therefore, on action that it considers “adequate and proportionate with regard to the identified measures and practices put in place and implemented by the PRC,” and which would “most effectively remedy the level of impairment of access identified” in China.
Procurement Procedures Over E5m
The measure impacts all procurements procedures for all categories of medical devices with an estimated value equal to or above €5 million ($5.85m) net of VAT and organized by any EU contracting authorities and entities.
The EU’s IPI states that all public procurement procedures subject to IPI measures, successful tenderers (regardless of their origin):
Must not subcontract more than 50% of the total value of the services contract to non-EU businesses subject to an IPI measure.
Must not supply or provide goods or services originating in the country subject to an IPI measure that would represent more than 50% of the total value of the contract whose subject matter covers the supply of goods.
Must pay a charge, if the above obligations are not observed, of 10% to 30% of the total value of the contract.
Impact Of Chinese Procurement Practices On EU Companies
The commission judged that China has established a “systematic and discriminatory framework” that favors domestic medical devices in public procurement. Key elements include:
- Chinese contracting entities are legally required to choose domestic medical devices over imported ones if they are a “reasonable alternative.”
- China’s cumbersome approval procedures make it difficult to procure foreign devices.
- Preference is given to foreign devices only if they involve technology transfer to Chinese firms.
- Public hospitals are instructed to meet domestic procurement targets, with 137 categories of devices effectively closed to imports.
- Under the Made in China 2025 strategy, county hospitals must procure 70% domestically produced high-end devices by 2025 and 95% by 2030. This would virtually eliminate imported devices from large parts of the Chinese market.
Extent Of Hit To China
Compared with the defensiveness of China, the EU measures may look reasonable since publicly available EU data show that public procurement accounts for only 50% to 70% of the total Union market for medical devices.
So, not all EU imports of medical devices originating in the China would fall within the scope of the IPI measure.
The commission estimates that public procurement of medical devices from China could range between €3bn and €4.5bn. However, since 41% of EU procurement procedures for medical devices would not be subject to the IPI public procurement measure, the value of medical devices originating in China that would potentially need to be procured from alternative sources of supply, “would be much smaller than the total value of EU imports of medical devices from China.”
The restrictions will impact Chinese suppliers as well as EU-based companies sourcing heavily from China since the regulation limits the share of Chinese origin devices in any contract to no more than 50%.
