The Neglected Billion-Dollar Track: Endoscope Protective Covers, A Secret 'Efficiency Revolution' | JD Insights
2026-01-04
(Photo generated by ChatGPT)
Abstract: Here, there are no myths, only profound reverence for clinical pain points and deep insights into the structure of healthcare costs.
Research team | JD Capital Healthcare Investment Department
Managing Director，Zhang Yunfeng zhangyf@jdcapital.com
Investment Manager, Mu Pei mupei@jdcapital.com
……
In the vast landscape of medical devices, the spotlight of capital often falls on products imbued with 'disruptive' narratives. For instance, in the field of endoscopy, the most prominent trend over the past three years has been 'disposable endoscopes'.
However, amid the current pressures of DRG cost control and the operational efficiency of hospitals reaching their limits, a revolution of a 'middle path' that better aligns with China's national conditions is quietly taking place in the departments of otolaryngology, urology, and gastroenterology. This is a story about' endoscopic protective Covers ': they are not merely low-value consumables, but redefined' optical micro-devices. 'Their purpose is not to disrupt traditional endoscopy, but rather to serve as a' bulletproof vest 'and' accelerator' for conventional endoscopic procedures.
JD Capital's industry research reveals that in the niche market of endoscopic examinations, this razor-sharp business is emerging as the undisputed leader among medical consumables.
I. The "Hidden Corner" in the Operating Room:The Compacted 20 Minutes
Before discussing the business model, we need to first reconstruct a real clinical scenario:
In the busy otolaryngology outpatient department of a Grade A hospital, approximately 200-300 patients may await laryngoscopy examinations daily. However, the number of flexible laryngoscopes available in the hospital is often in the single digits.
According to the "Technical Specifications for Cleaning and Disinfection of Flexible Endoscopes" (WS507-2016) issued by the National Health Commission, an endoscope must undergo a series of procedures after use, including leak testing, enzymatic washing, cleaning, rinsing, high-level disinfection (immersion), terminal rinsing, and drying. The minimum physical time required for this standard procedure is 40-60 minutes.
A contradiction emerged: each endoscopic procedure takes approximately 10 minutes. If the sterilization standards are strictly enforced, one endoscope can only examine one patient per hour, and two endoscopes can only treat 6-8 patients in the morning. What about the remaining patients?
How is compromise achieved in practice? In fact, to pursue efficiency, many hospitals have had to rely on automated cleaning machines, even artificially compressing procedures to reduce disinfection time.
Although the widespread use of automated decontamination units has alleviated this issue to some extent, many procedures are still omitted in fast-paced outpatient settings. The resulting risks are insidious and potentially fatal.
First, the complex structure of endoscopes, with their minute angles and gaps, makes it prone to residual biofilm if enzyme washing is incomplete. Second, insufficient immersion time in disinfectants such as glutaraldehyde significantly reduces the actual sterilization rate compared to the theoretical 99.9%. Additionally, frequent chemical immersion and mechanical cleaning are the primary sources of depreciation for precision soft endoscopes (unit price: 200,000-800,000 RMB).
In fact, even after cleaning and high-level disinfection in accordance with guidelines, the complex structure of endoscopes and the difficulty in achieving complete drying still pose a significant risk of biological load. In 2018, Ofstead conducted an on-site investigation at three medical institutions in Minnesota, USA. Among the 45 endoscopes that completed the reuse procedure, 49% contained residual moisture, 22% exhibited high levels of ATP values (RLU), and 71% showed bacterial growth, with 16% of the specimens having an uncountable number of bacterial colonies.
Additionally, JD Capital's research revealed that another analysis of 70 patients treated with digestive endoscopy indicated that the primary sites of postoperative nosocomial infections were the respiratory tract (40.00%) and the urinary system (25.71%), suggesting that endoscopic sterilization issues may lead to systemic cross-infections. Particularly for gastroscopy, due to its proximity to the respiratory tract, the risk of infection is higher, accounting for 71.43% of infected patients.
This therefore represents the core pain point in today's endoscopy market: hospitals cannot simultaneously achieve both' high efficiency 'and' high infection control' under current operational capacity.
Against this backdrop, the market once turned its attention to "disposable endoscopes." However, after several years, disposable endoscopes failed to dominate the reusable endoscope market as predicted. The reason is straightforward: in today's healthcare system with stringent cost controls, few hospitals and patients can afford the additional 1,000-3,000 yuan in consumable costs per examination.
Thus, a rift emerged in the market between 'unclean reuse' and 'affordable disposable solutions.' This marked the advent of endoscopic protective Covers—a 'third way' tailored to China's healthcare realities.
II.Why is 'single-use endoscope' a false proposition?
The capital market once believed that the ultimate solution to cross-infection was the 'disposable endoscope' (producing endoscopes costing tens of thousands or even hundreds of thousands of yuan as single-use products).
International giants such as Boston Scientific and Ambu have entered the field, and a number of domestic startups have also emerged. The logic seems appealing—completely eliminating cross-infection. However, in the actual operational logic of China's public hospitals, this path does not work.
Because, this is an account that cannot be calculated.
Even domestically produced disposable endoscopes incur procurement costs of 1,000-3,000 yuan per unit. Except for high-risk, low-frequency scenarios such as ICU or emergency departments, or in high-end private hospitals, general outpatient patients find it difficult to afford examinations costing several thousand yuan per session. More importantly, physical principles dictate that "disposable endoscopes priced at several thousand yuan" cannot match the imaging clarity and operational comfort of "reusable endoscopes costing hundreds of thousands of yuan." For physicians requiring precise manipulation, even a slight blurring of vision exponentially increases the risk of missed diagnoses.
Meanwhile, in lower-tier markets (cities of the fourth and fifth tiers or county-level hospitals), the persistently high cost of disposable endoscopes has led to the bizarre practice of repeatedly disinfecting and reusing them—a practice that completely deviates from their original purpose.
Therefore, disposable endoscopes are destined to serve only as a supplement in specific scenarios (such as superbug infections or emergency care) and cannot replace mainstream market solutions.
Ⅲ.The "Third Way" that is more in line with China's national conditions
If traditional sterilization is too slow and risky, and disposable products are too expensive and inconvenient, then 'reusable endoscopes + disposable protective covers' represents the third optimal solution that best aligns with China's healthcare context (DRG cost control + efficiency priority).
This is a remarkably simple business logic, akin to applying a screen protector to a smartphone, or more precisely, installing a disposable protective cover for a high-precision camera lens.
From the perspective of hospital administrators, we can conduct a comparison using the dimensions of cost vs. risk vs. operational convenience:
Traditional decontamination protocol:
• Direct costs: 30-40 CNY per session (including enzyme solution, disinfectant, labor, and depreciation)
• Time cost: 40-60 minutes (standard)
• Hidden costs: Endoscope damage (a single endoscope typically fails after 2,500–3,000 uses, with repair costs ranging from 60,000 to 100,000 yuan per repair)
• Risk level: Moderate (risk of substandard disinfection)
Single endoscopy:
• Direct cost: 1000-3000 yuan per session
• Time cost: No need for decontamination
• Approval difficulty: High-value consumables face challenges in hospital approval
• Legal risk: High (less clarity compared to traditional endoscopy, which may affect diagnosis)
Protective case solution:
• Hospital costs: 0 yuan (patients pay out-of-pocket in some provinces, while medical insurance covers the cost in others)
• Time cost: 1 minute for replacement (this 1 minute is precisely the time required for the endoscopist to prepare the report)
• Approval difficulty: Low-value consumables have relatively simple approval procedures for hospital admission.
• User-friendly operation: Endoscopy can be completed in just 5-20 seconds with minimal procedural changes
The conclusion is unequivocal: The value of the protective cover protocol lies in addressing the core challenge of endoscopic reuse—cross-infection. A clinical study conducted by JD Capital demonstrated that patients undergoing endoscopic procedures exhibit a significant association between nosocomial infections and high-risk factors such as age>60 years, comorbidities, and prolonged hospital stays. The protective cover protocol ensures aseptic conditions for each examination through physical isolation, thereby providing a safer and more efficient diagnostic and therapeutic environment for these high-risk patients.
Between the inefficiency of traditional decontamination and the high cost of a single-use approach, protective covers offer a "third way" that best aligns with China's national conditions. Particularly in the current context of increasingly stringent DRG cost control, this solution, which reduces risks without increasing hospital costs, presents an excellent opportunity.
This is not merely about cost reduction, but represents a paradigm shift in hospital operational efficiency and revenue structure.
Taking the Department of Otolaryngology as an example, if a hospital has only two endoscopes without protective covers and strictly follows disinfection protocols, it can only handle 10-12 patients per day. With protective covers, approximately 20 patients can be processed within two hours. For the hospital, this not only eliminates the single disinfection cost of 30-40 yuan but also avoids expensive endoscope repair expenses (which are often caused by improper chemical disinfection or operational errors during the process). Additionally, it translates to significant incremental outpatient revenue.
More critically, as low-value consumables (some provinces have included them in the medical insurance catalog, while others classify them as self-paid items), the protective case is typically borne by patients or bundled into the examination fee, without incurring additional departmental operational costs for the hospital.
IV. Redefining the Product: The Underestimated Optical Component
Since the logic is so clear, why hasn't this market exploded for so long? Why did giants like Medtronic, which once tried to enter the China market, fail miserably?
JD Capital identifies the core issue as a cognitive bias: many people regard protective covers as ordinary low-value consumables, when in fact they are sophisticated optical components.
If the endoscope protective cover is redefined from a traditional 'low-value consumable' to an 'optical component', what are its core technical specifications?
According to JD Capital, the key factors are light transmittance, anti-fogging performance, and adhesion. These three indicators determine whether the product can truly function in clinical environments.
Transmittance determines image clarity, which is the most fundamental requirement. Fog resistance relates to the ability to maintain continuous clear vision during actual use, particularly in human environments with temperature and humidity variations. Fit not only affects patient comfort but, more importantly, determines the sealing effect as well as fog resistance, anti-glare, and anti-adhesion to human mucus.
JD Capital's industry research reveals that the key distinction between premium and budget protective cases in fog-proof technology stems from material science and nano-coating techniques.
Specifically, the material of the protective cover must meet multiple requirements simultaneously: low friction coefficient (to ensure effortless insertion), sufficient flexibility (to accommodate endoscope bending), and excellent light transmittance (to guarantee image quality). Although the technical threshold is not excessively high, achieving a balance among these multiple properties and attaining clinical-grade stability necessitates extensive practical validation and process optimization.
Meanwhile, in terms of manufacturing capabilities, the performance of custom-developed ultra-thin injection molding machines by enterprises determines product stability and consistency. For instance, a leading domestic protective cover manufacturer, as understood by JD Capital, has developed a specialized ultra-thin injection molding machine for otolaryngology products. This machine achieves integrated lens formation with a lens thickness of only 0.01 mm and a sleeve wall thickness of 0.08 mm.
This level of precision manufacturing capability cannot be replicated overnight. It requires a profound understanding of endoscopic structures, substantial experimental data support, and precise control across multiple dimensions including material properties, mold design, and process parameters.
The more challenging aspect lies in the significant variations in endoscopic structures across different departments.
In fact, the compatibility issues between protective covers and endoscopes of different brands are more complex than imagined. Manufacturers of protective covers need to adjust production parameters according to the specific brands and models of endoscopes, as each type of endoscope requires products with different specifications. Among them, otolaryngoscopes are relatively simple, resembling a tube with a lens, light, and camera at the front. However, colonoscopes have a central channel that requires water, air, or forceps, necessitating entirely different product design concepts.
As exemplified by a company familiar to JD Capital, they implemented an innovative design solution for colonoscopy sleeves: eliminating the original lens tubing entirely and creating a complex structure comprising a large sleeve enclosing four smaller sleeves. The large sleeve provides complete encapsulation, with a central sleeve housing the endoscope tube and three slender lateral tubes for air, water, and forceps respectively, while the distal end connects to the endoscope host. This design ensures complete isolation from the previous patient, as the sleeves are discarded after use, ensuring the endoscope never comes into direct contact with the patient.
This very 'cognitive bias' has created an intriguing competitive dynamic in today's low-threshold market: big players are reluctant to enter, while small players struggle to succeed.
Overseas giants like Medtronic are not without relevant products. As early as 2015, Medtronic attempted to enter China, but due to the high cost of products and the lack of rapid response to China's clinical pain points (such as compatibility with domestic endoscope models, understanding of medical insurance policies, and issues with fee schedule processing), it ultimately failed to gain market traction. For giants, the market size of protective covers is too small to serve as a strategic focus. Although some domestic companies have tried to enter the market, most remain at the "trial" stage. Clinical feedback indicates that these products commonly suffer from issues such as blurriness, fogging, and poor adhesion, and are regarded by doctors as "semi-finished products."
In this seemingly straightforward field, process stability and clinical adaptability have become significant screening criteria. In fact, a few leading domestic enterprises have established competitive barriers through years of clinical refinement. They not only master core technologies such as ultra-thin injection molding and anti-fogging, but more importantly, have developed in-depth feedback mechanisms with clinicians.
Ⅴ.Finding Billion Opportunities in the "Trivial"
From a business model perspective, JD Capital views this as akin to a "shaver and razor blade business." The endoscope serves as the shaver, the protective sleeve as the razor blade, and the disposable endoscope as the disposable shaver. In the saturated market where shavers are already highly prevalent, selling high-quality blades is far more appealing than attempting to market an expensive disposable shaver.
JD Capital's industry research indicates that mature protective sleeve products achieve extremely low marginal costs through mass production. At the retail level, pricing strategies offer substantial profit margins. For example, a top-tier tertiary hospital performing 100,000 colonoscopy procedures annually could generate millions in profits for manufacturers and distributors through protective sleeve solutions alone – a single department and consumable. This represents a classic "cash flow" business model compared to equipment sales.
However, JD Capital maintains a relatively conservative outlook on industry penetration, projecting it to reach approximately 1.9% by 2030. Behind this seemingly modest figure lies substantial growth potential.
Firstly, at the policy level, the most significant pain point in the current protective case industry lies in 'identity recognition.' Although the product is already mature, many provinces have not yet included it in the independent medical insurance fee catalog, resulting in hospitals being forced to record it as departmental costs, which undermines its adoption motivation.
Yet history often repeats itself in strikingly similar ways. When automatic decontamination units first emerged, they too progressed from being 'neglected' to being recommended by the National Health Commission. As protective covers accumulate sufficient data in real-world studies, demonstrating their efficacy in replacing traditional decontamination methods and reducing infection control risks, policy direction is highly likely to shift. Once officially endorsed, the industry will witness a milestone of favorable momentum.
Secondly, the most mature market for the current use of protective covers is otolaryngology (low risk, simple structure, moderate price sensitivity), but the true frontier lies in gastroenterology (gastroscopy and colonoscopy).
A large tertiary hospital can perform up to 200,000 colonoscopies annually. Compared to otolaryngology, the technical complexity of protective covers for digestive endoscopy increases exponentially. Clinical research data further demonstrate that the highest infection rate (71.43%) occurs post-gastroscope treatment, which underscores the significant market necessity of digestive endoscope protective sleeves in reducing risks and enhancing efficiency. Consequently, for leading enterprises with established products, once the barriers are overcome, the unit value will rise from tens of yuan to higher levels, and the market capacity will expand several-fold.
From an investment perspective, why is now the optimal time to focus on this sector?
JD Capital identifies three key drivers: First, there is a clear demand. Hospitals require efficient turnover rates, patients demand safety, and healthcare insurance needs cost control – protective covers are the only product that can meet all three requirements simultaneously. Second, as economies of scale take effect, production costs will be significantly reduced while retail prices maintain resilience. This creates substantial gross profit margins, enabling companies to achieve self-sustaining profitability without relying on external financing.
In the field of healthcare investment, we are often drawn to the glamorous 'disruptive innovations,' while overlooking the 'improvement innovations' that tackle the mundane and labor-intensive tasks in the shadows.
Endoscopy once depicted a sterile utopia, but in the reality of strained healthcare insurance, it is destined to remain a luxury. Endoscope protective covers, operating on the most basic commercial logic—affordability, speed, and safety—are reshaping the workflow of endoscopy rooms.
According to JD Capital, if the past decade was the golden age of domestically produced endoscopic equipment, the next five years will witness the explosive growth of endoscopic consumables (protective covers). While most discussions still revolve around when disposable endoscopes will drop to 100 yuan, protective covers may have already quietly captured 90% of the grassroots and outpatient markets.
In this field, there are no myths, only the utmost reverence for clinical pain points and a profound insight into the cost structure of China's healthcare.