Healthcare Management Expertise in China – The Unique Core Competency
After nearly 30 years of serving the Chinese healthcare markets, with an executive leadership team that has been in place for over 25 years, Chindex has an extraordinarily unique insight into this industry sector. Chindex’s accumulated knowledge and expertise is sought after by government officials from both the U.S. and China, and by various international organizations and trade associations. Chindex leadership has provided advice to various Chinese ministries and departments regarding healthcare policy, serves the US Government through work with the Joint Commission on Commerce and Trade (JCCT) and its Medical Device Forum, has testified before Congress, and provides expertise in business forums by participation on the Board of Governors of AMCHAM-China and on the Board of Directors of The U.S.-China Business Council.
Chindex’s longevity and first-hand knowledge of the history and current status of the Chinese healthcare system also provides the Company with an invaluable perspective about future trends. It is this perspective that has made Chindex a pioneer in many areas of Chinese healthcare. Chindex was the company that introduced the first magnetic resonance scanner, the first color Doppler ultrasound system, and the first surgical robot to the Chinese healthcare community. It was the first company to utilize loan guarantees available from the Export-Import Bank of the United States to provide financing packages that would support U.S. exports to compete with the preferential loans available from European governments. It was the first company to introduce private, for-profit healthcare in China which embodies a new standard in healthcare provision, patient-centered care, and preventative medicine through its United Family Healthcare network. The distribution platform made
Chindex one of the first foreign entities to be licensed to conduct foreign currency business when WTO reforms opened China’s distribution sector. Chindex continues to stand at the forefront of the ongoing reforms in the Chinese healthcare system, as an active catalyst for the development of private health insurance products in China and consolidated hospital supply chain services in line with the reform goals of the Chinese Government.
As China’s market has opened, China’s regulatory environment has become increasingly arduous for sellers of medical products. Chindex has a department dedicated to regulatory compliance and has years of successful track record in efficient product registration, as well as an unblemished compliance record. Chindex’s staff of regulatory specialists monitors developments in China’s regulatory system, analyze the impact to the products sold by Chindex, and communicate to its partners and clients the changes in regulations and resulting required changes for the compliant sale of their products in China.
The Chindex regulatory team has substantial expertise in this tough and problematic area for medical device manufacturers in China. In addition to attending conferences and briefings presented by regulatory authorities in China, Chindex’s regulatory team has regular communication about general and product-specific issues with government officials. The registration process is often opaque and the background workings of the Chinese government agencies are hard to ascertain. The team guides manufacturers through the regulatory process including arranging for local translation of registration dossiers, tracking the review process through government contacts and supervising the testing process at the testing centers nationally. The team also manages business and legal issues related to assertions of non-compliance.
Government Financing Programs
Chindex was the pioneer in providing U.S. Government programs for medical equipment purchases in China. The first such programs were initiated in the mid 1990s in response to the need for financing solutions in the medical equipment markets in China. Obtaining financing for their own capital medical equipment purchases has always been a challenge for most hospitals in China, which are responsible for administering their own budgets. In response to this need, Chindex has developed an expertise in providing Chinese hospitals with access to attractive financing packages supported by both the U.S. Export-Import Bank and the German KfW Development Bank. These projects are very complex to organize and administer, providing a high barrier to entry for potential competitors. In addition to the attractiveness of the financing packages themselves, hospitals have a keen interest in utilizing these government-sponsored loan projects because the goods purchased through the related contracts normally receive an exemption from duty and VAT. While duties on medical devices have been significantly reduced as a result of China’s entry into the WTO and are now at an average of only 2-3%, most medical device imports are still subject to a 17% VAT, so the cost savings of utilizing a government-sponsored loan administered by Chindex can be upwards of 20%.
Supply Chain Management
Chindex’s Medical Products Division (MPD) provides Supply Chain Management services for the United Family Healthcare network (UFH). China’s distribution system today is incredibly fragmented, with many small distributors carrying only a small number of product lines, forcing hospitals to maintain a database of hundreds of different distributors from which to source their everyday supplies. This system is not only inefficient for the hospitals, but also fails to create economies of scale from which to gain pricing advantages.
Through its work with the central supply departments within the UFH system, the MPD Distribution group has developed a network of manufacturers whose products it can supply directly to UFH, becoming the type of “one-stop-shop” for hospital products that is quite common in the US and other Western countries. This supply chain management has not only simplified the purchasing for UFH, but has also resulted in considerable cost savings. As the distribution system becomes increasingly consolidated, more foreign-invested healthcare entities are opened, and the Chinese hospital system continues to be forced into increased efficiencies, the supply chain management solutions offered by Chindex’s Distribution group are poised to increase in demand, creating further opportunities for strengthening the supply network and further reducing costs.
As the Chinese economy has grown and developed over the course of Chindex’s 29-year history, the company has seized new opportunities to move into new lines of business, adjust to changing conditions, and otherwise adapt to the dynamic nature of the healthcare market. The establishment of a comprehensive supply chain infrastructure through which Chindex can conduct local currency sales, manage the physical flow of goods both into China and distributed throughout the country, and arrange local sourcing of product and consolidation for local distribution or export is a prime example. This initiative has placed Chindex in a unique position to provide full-service distribution to manufacturers of a wide variety of imported medical products. The platform presents a welcome alternative to foreign manufacturers who desire to find more reliable and transparent distribution partners.
Historically, imported medical products must be channeled into China through a Chinese Government officially-sanctioned Foreign Trade Corporation (FTC). Since 1996, Chindex has provided specialized local distribution solutions. In 2005, Chindex’s subsidiary in Shanghai received approval for a National Importation and Distribution License which allows it to fully replace an FTC outside of the bonded zone with the ability to sign local currency contracts directly with hospitals and to import products directly without the use of an agency. Chindex’s subsidiary in Beijing received the same license a year later, providing the company with two channels through which it can perform these functions.
The Distribution group within Chindex’s Medical Products Division (MPD) operates the supply chain operations of the Beijing and Shanghai subsidiaries, both of which have both bonded and customs cleared warehouse storage for the products imported and sold by the Distribution group. The operations utilize advanced information technology systems to track the flow of goods and funds, and the warehouses adhere to strict Standard Operating Procedures and Key Performance Indicators to perform Right Management of all activities, which has also enabled its ISO 9001 certification ISO 9001 for Distribution and Logistics Service of Medical Devices. The Distribution group prides itself on and has been recognized by the Chinese Government authorities for operating this business in full legal compliance, ensuring that products are imported through legal channels and properly declared, product registrations are current and valid, and all relevant regulations are followed. This performance has earned Chindex’s subsidiary operations AA certification from SAIC, and extended payment and express clearance terms from the Customs authority.
Through its supply chain management work for the international-standard UFH system, the MPD Distribution group has developed a network of local manufacturers of high-quality medical devices, instrumentation and consumables. Many of these manufacturers can easily adjust production and capacity to serve as contract manufacturers for Western companies looking to shift some or all of their production to a lower-cost location such as China. Because of its experience and knowledge of the industry, and the specialty that it has developed in product sourcing for locally-based hospitals, Chindex is able to quickly identify and evaluate suitable manufacturing partners. Furthermore, because of its many on-the-ground resources in China, Chindex can provide significant value added to Western manufacturers interested in outsourcing, including following through the whole process from contract conclusion to product quality control until the export is completed.
Chindex’s sourcing specialists have experience in all areas of medical product sourcing and provide a customized solution to each of its sourcing clients, including creating an ID partner list, sample quotation/production, on-site due diligence, contract negotiations, relationship management, domestic support, quality assurance/quality control, and of course supply chain management.