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Stryker a Loser in China’s Medical Device Program, Expects $100 Million Impairment
Medical device maker appears to be a net loser in round one of China’s healthcare cost reduction initiative.
July 28, 2021
Three months after we warned of China’s national and regional volume based procurement (VBP) of high-value medical devices, Stryker (SYK) is signaling it’ll likely be a net loser. Government contracts will be awarded to the lowest bidders who are able to satisfy China’s quality and quantity requirements.

In its latest 10-Q, Stryker revealed it has received material information related to one type of device:

“Based on preliminary indications received subsequent to the end of the second quarter, we believe we will be a successful bidder in certain regional tenders for several of our trauma products and unsuccessful in the bid for other trauma products. When the final decisions are made, it is reasonably possible that we will record an impairment charge of approximately $100 relating to certain long-lived and intangible assets.”

Separately, Stryker will have to wait on results of the national VBP program for hips and knees as China is still preparing the program to accept bids. If Stryker loses out again, the company’s sales will obviously be negatively impacted but the accounting treatment won’t be as severe as it’s likely to be in trauma products:

“If we are unsuccessful in that national program, we expect that our commercial operations of joint replacement products will also be negatively impacted; however, we do not expect additional intangible asset impairments.”

Regarding spine products, which are part of the VBP in one province, Stryker says it’s not clear to what extent spine products will be included in further VBP initiatives at the provincial or national levels. In 2020, China accounted for approximately 2% of Stryker’s total revenue.
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