VZCZCXRO6028
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2897/01 2070914
ZNR UUUUU ZZH
P 250914Z JUL 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 8801
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 2267

UNCLAS SECTION 01 OF 02 BEIJING 002897 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EEB 
STATE PASS TO USTR 
USDOC FOR 4420/ITA/MAC/CEA/RKARNAK 
USTR FOR STRATFORD/WINTER/MCCARTIN/GRIER 
USTR FOR GRIER 
TREASURY FOR OFFICE OF INTERNATIONAL INVESTMENT 
TREASURY FOR OASIA/ISA - DOHNER AND HAARSAGER 
GENEVA PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD CH KIPR WTRO EFIN EINV EIND PGOV
SUBJECT: PUSHING FOR TRANSPARENCY ON MEDICAL DEVICE 
TENDERING AND BIDDING PROCESS 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE 
ACCORDINGLY.  NOT FOR DISTRIBUTION OUTSIDE USG CHANNELS. 
 
¶1. (SBU) Summary.  Embassy FCS officers and Econoff met 
with Ministry of Health (MOH) Department of Planning and 
Finance Director General Zhao Zilin and MOH International 
Health Exchange and Cooperation Center (IHECC) Centralized 
Purchasing Office Director Li Ling on July 24 to push for 
greater transparency in the medical device tendering and 
bidding process in China.  DG Zhao explained MOH and NDRC's 
regulatory role in the medical device tendering and bidding 
process and suggested further technical discussions be held 
by experts on both sides at a later unspecified date.  End 
Summary. 
 
---------- 
BACKGROUND 
---------- 
 
¶2. (SBU) United States Department of Commerce (DOC) Under 
Secretary (U/S) Christopher Padilla sent a letter dated 
June 5 to China's Vice Minister of Health Chen Xiaoheng 
requesting MOH postpone its June 10 scheduled national 
tender for medical devices in lieu of United States 
industry concerns regarding lack of clear and transparent 
guidelines in the tendering and bidding process.  VM Chen's 
June 19 dated response letter indicated MOFCOM would not 
postpone its scheduled national tender, but referred 
Embassy staff to meet with Ministry of Health officials to 
discuss United States industry concerns further. 
 
-------------------------------- 
Same Equipment, Different Prices 
-------------------------------- 
 
¶3. (SBU) Ministry of Health (MOH) Department ofPlanning 
and Finance Director General Zhao Ziin admitted to FCS 
officers and Econoff on July 24 that China's current 
tendering and bidding process is not "perfect", and 
acknowledged that different prices for medical products 
with the same specifications sold in different hospitals 
across varying regions, and challenges in regulating that 
market is a concern not only for United Sates industry, but 
also for MOH.  He cited for example, that the same 
radiation knife sold for RMB 35,000 (USD 5,147) in a 
hospital in Shanghai is sold for RMB 50,000(USD 7,353) in 
Guangxi Province, a difference of RMB 15,000 (USD 2,205). 
Zhao stated that MOH IHECC's centralized purchasing of high 
value medical devices started only half-a-year ago, that it 
is the first time MOH has conducted a centralized tender, 
and that MOH is interested in continuing to learn from the 
United States and industry on best practices.  Zhao 
welcomed Embassy staff recommendations that further 
technical exchanges occur between experts on both sides to 
discuss how the United States enforces and ensures 
regulatory transparency in the tendering and bidding 
process. 
 
¶4. (SBU) Zhao explained that IHECC is tasked with 
centralized purchasing of high value medical devices and is 
responsible for formulating methodologies to ensure that 
appropriate price controls are in place to prevent 
manufacturer?s from exorbitantly marking up the price of 
medical devices.  Complicating the process in China, 
however, is the requirement that regulations adhere to 
three separate laws - the Tendering and Bidding Law, 
Government Procurement Law, and MOH's Medical Equipment 
Purchasing Measures, and the challenge to ensure measures 
adhere to all three, falls under the International Health 
Exchange and Cooperation Center (IHECC), Zhao said.  He 
stated that the results of MOH's centralized tender would 
be released to the public soon and that there would be a 
standard nationwide price for high value medical devices 
published and released to domestic hospitals in the near 
future.  He explained that MOH's Medical Equipment 
Purchasing Measures classify large-scale and high-end 
 
BEIJING 00002897  002 OF 002 
 
 
medical equipment into two categories (A and B).  Category 
A includes new technology and equipment valued over RMB 5 
million (USD 735,294) while Category B includes equipment 
such as MRI, Cat Scanners, Accelerators, and other devices 
that fall under the various provincial-level departments of 
health jurisdiction. 
 
¶5. (SBU) Zhao said NDRC is responsible for monitoring 
prices and controlling the mark-up of prices at the 
hospital level whereas MOH is responsible for ensuring 
sufficient price controls are in place at the 
manufacturer's level.  Zhao stated it would be worth 
discussing regulatory procedures for ensuring standard 
pricing practices are used across the board and across 
regions to avoid inordinate mark-ups for medical equipment 
in the future.  When asked about a RMB 1500 (USD 221) 
tendering fee per item that companies must pay each time 
they want to sell their product, Zhao stated the fee is 
usually a one-time fee charged by intermediary agents and 
brokers.  Zhao stated that in the future only operational 
costs should be charged.  Embassy staff emphasized that 
such "hidden" transaction fees have nothing to do with the 
price of the equipment itself, unfairly raises the price of 
equipment, and hence cost of medical services to consumers. 
 
------------------------------ 
Non Transparent Review Process 
------------------------------ 
 
¶6. (SBU) MOH International Health Exchange and Cooperation 
Center (IHECC) Centralized Purchasing Office Director Li 
Ling stated the method in which they develop a reference 
price for the tendering process is through a randomly 
selected review panel of experts that score products.  She 
said before determining product price, the expert panel 
reviews general quality of products, past sales history, 
post-sales services and technical support, and scientific 
advancement.  However, she did not specify the composition 
of the expert committee, what specific "scientific" 
criteria were being used by the committee to determine 
price, nor revealed how expert committee scores and 
evaluations for determining product price were being 
collected and reviewed. 
 
¶7. (SBU) Zhao stated that in October, MOH plans to hold a 
large-scale medical equipment exhibition in Beijing 
including a technology show in which it plans to discuss 
regulatory proposals.  He also stated that MOH would like 
to hold a seminar inviting domestic and foreign 
participants including his MOH counterpart officials at the 
local level, industry, United States government, and the 
expert committee to discuss the tendering process further 
and explore ways to improve it for the future. 
 
#Randt