Check out part 1 of our conversation with Yi Kong, PhD, where we explored the IVD market in China today and how recent policies like VBP and “Made in China” impact innovation! Yi leads Greater China operations at a major life sciences and diagnostics company. Continue below for a deep dive into the nuances of stakeholder engagement and technology adoption in China: 

‍Disclaimer: The views expressed in this interview are those of the individual expert and do not necessarily reflect the positions, policies, or opinions of their current or former employers or any affiliated organizations.

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In terms of market entry and go-to-market strategy, are there any nuances in terms of local sales cycles, KOL engagement, or hospital decision-making in China that differ from Western markets?

For sure. Many elements are the same: you need to demonstrate clinical utility, obtain regulatory approval, gain endorsement of national and regional KOLs, and get buy-in from all stakeholders.

There are also unique differences. For example, historically, China mandated that to apply for NMPA (National Medical Products Administration) approval, you had to first obtain approval in your home country. Just recently, China said it will allow parallel review, so you can apply for FDA approval in the U.S. while you also apply for NMPA approval. It remains to be seen how this policy gets implemented.

The second is that the business is often done through a network of local distributors. Unfortunately, that network is highly fragmented. Unlike in the U.S., it's very region-specific.

The third is that for government-funded projects, you have to go through a tender process. That process is published online and can take quite a while. Furthermore, a tender does not guarantee exclusivity or minimal purchase orders.

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We’ve been hearing about mandatory pricing transparency, at least in certain regions, and how that is bringing prices down. Is this happening across the board?

Yes, absolutely. It's called the Sunshine Procurement System. If you're using government funds, you must go through tender and publish the process including pricing. For hospitals, in many provinces, and I think the intent is to ultimately make it nationwide, you must publish the price online.

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You also mentioned certain Chinese KOLs and other key stakeholders. What kind of roles do they have?

The lab director or technician is an important stakeholder in the purchasing process for IVD, they could also influence other hospitals' decisions.

Then, clinicians who prescribe the test need to be convinced of its clinical value or performance. They can play a role in deciding what tests the hospital purchases or uses. Of course, the procurement process as well as leadership can weigh in as well.

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Moving on to innovation and technology adoption, are there any technologies or platforms being adopted unusually quickly in China at the moment?

COVID was probably the prime example. Prior to COVID, the infrastructure for qPCR was basically non-existent. Within two years, 2,000 test providers were born out of nowhere. What China has proven over and again, is its ability to build and excel at something at breakneck speed and super efficiency.

Another thing that has a major influence is government policies and subsidies which can play a major role in driving an entire industry forward.

For the next big area of growth in diagnostics, if you look at the value chain, it will probably be upstream and downstream of disease diagnosis, such as screening, prognosis, therapy matching, therapy monitoring, or post-treatment surveillance. There have been successful examples in surveillance and screening for cancer and transplant, especially in the U.S. Those are not yet huge in China, owing to policy and reimbursement limitations. But the future can and will change.

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What does the adoption and reimbursement landscape look like for advanced diagnostics like NGS and MRD today and how do you expect it to evolve?

There were a few players that made some inroads in NGS-based cancer testing.

If you look at NGS for NIPT back in the 2010s to 2018, testing started and grew very rapidly. Then more regulations and reimbursement policies took place. Now this area is rather stable and reimbursed, but the profit margin is limited.

Then cancer came. Again, rapid adoption, a lot of excitement, followed by some shakeout of the industry. On the positive side, there isn't VBP, so the price hasn't gone down to the floor. At the same time, there isn't a huge market funded by the public, so you're limited by how many people can pay out of pocket. For the next wave, MRD is potentially one. Screening has not demonstrated a path to reimbursement.

You're always in a bit of a conundrum: if there's a stamp of approval and a path to reimbursement, you can't get a high margin. If you want the high price and high margin, you're almost always limited to the LDT/RUO type of market, which is much more limited in size.

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From your perspective, if a company could secure one competitive advantage in China's IVD market, what would it be?

For me, it's deep local expertise. I think a lot of multinational corporations come with the mindset of, "I know how to do this. I've been successful in the U.S. and Europe. I have 70-80% market share. I've already won." They think, "How different could China be? I'll just apply my philosophy here."

That mentality will often hit a wall because of the nuances we spoke about. It's critical for a company to remain humble and recognize that what's successful elsewhere may not translate directly into success in China. What a company needs is deep local knowledge, experience, connections, and expertise. You need the right talent, the right mindset, local adaptability, and long-term commitment.

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That is very interesting and extremely relevant. Thank you so much for speaking with us today.

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