On 24 April 2024, the European Commission announced the launch of a formal investigation into the measures put in place and practices followed by China in its public procurement of medical devices. The announcement responds to the Commission’s belief that these measures and practices favour domestic Chinese suppliers whilst putting EU companies at a clear disadvantage.
The investigation will be carried out under the EU’s International Procurement Instrument (IPI), a trade tool that aims to promote fair access to public procurement and which allows the EU to impose limitations on non-EU companies’ access to EU public procurement when it is established that the procurement policies in the bidder’s home country discriminate against EU operators. The IPI is one of the novel trade tools developed by the Commission in recent years to allow the EU to more assertively pursue its trade agenda.
This is the first time the Commission launches an investigation under the IPI (which has been on the books since August 2020). The investigation is expected to further raise trade tensions between China and the EU due to the significant impact its outcome may have on the medical devices’ market.
Measures and practices under scrutiny
The Commission’s brief notice of initiation of the investigation includes a description of the Chinese measures and practices that allegedly restrict access of EU economic operators into China’s medical devices’ market. These include:
- Favouring the procurement of domestic Chinese medical devices and services by means of specific procurement laws and requirements,
- Restricting the procurement of medical devices by means of rules that are more stringent on the procurement of imported products than on the procurement of domestic ones,
- Imposing conditions in China’s centralised procurement of medical devices leading to abnormally low bids that cannot be sustained by profit-oriented companies.
It is worth noting that the Commission reserves the right to investigate other relevant measures or practices that may be brought to its attention during the investigation (see below).
In the investigation, the Commission will assess whether the said measures or practices exist and, if so, result in a serious and recurrent impairment of access for EU economic operators, goods and services to the public procurement market for medical devices in China.
The notice also includes an indicative list of the categories of medical devices affected by the measures and practices at issue. The list is broad and covers all instruments and appliances used in medical, surgical, dental or veterinary sciences, mechano-therapy appliances, orthopaedic appliances, x-ray apparatus, medical furniture, sterilisers, carriages for disabled persons, gauze, bandages and similar articles (see Annex to the notice of initiation for more details).
Consultation procedure open
Having already carried out a preliminary assessment and gathered evidence to support the start of the investigation, the Commission now invites the Government of China (GOC) to submit its views and provide relevant information with respect to the alleged measures and practices described above. The GOC is also invited to enter into consultations with the Commission if the GOC wishes to do so.
In addition, the Commission has opened a 30-day consultation process for EU Member States and interested parties to provide information as to the existence and effects of such measures and practices. ‘Interested party’ in the IPI context means ‘any person or entity whose interest might be affected by a third-country measure or practice’, which implies that only EU companies would be interested parties.
In terms of timing, the investigation must be concluded within nine months of its initiation, although this deadline may be extended by five months under exceptional circumstances. The Commission could decide to suspend the investigation if China takes corrective actions or commitments.
Potential outcome and impact on medtech companies
If the investigation ends up confirming the existence of Chinese restrictive measures or practices against EU medical device suppliers, and if consultations with China do not lead to corrective actions that are considered satisfactory, the Commission could end up adopting score adjustment measures for Chinese bidders (eg reducing their overall score in the selection process) or even ordering the exclusion of Chinese companies from EU procurement processes concerning medical devices. In deciding whether to impose such measures, the Commission will take into account the proportionality of its IPI measures compared to China’s measures and practices, and the availability of non-Chinese sources of supply for the concerned medical devices.
Alternatively, China and the EU may find an agreement to improve access for EU medical device suppliers to the Chinese procurement market – in which case the IPI will show its worth as a market access tool. As mentioned earlier, this is the first time the Commission launches an investigation under the IPI and we will be following the procedure closely given the potential impact it may have on the medical devices’ sector.
