Healthcare and Life Sciences
One of the most pressing issues facing the Chinese government is upgrading the country’s fragmented healthcare system. Though China has developed at an astonishing rate over the last 30 years, the implementation of effective healthcare delivery across the country has struggled to keep pace with other reforms.
The sector faces daunting challenges: widening urban and rural disparity, an ageing population, restricted resources and outdated technologies. These difficulties provide ripe opportunities for UK companies seeking to expand in the country.
PRC Government - committed to reform
The Chinese government is firmly committed to healthcare development in its current (12th) Five-Year Plan and is pledging to invest US$6.3 billion in the biopharmaceutical sector alone. Over the last three years the government spent US$125 billion to extend basic healthcare access to 95 per cent of China’s 1.3 billion people. As living standards continue to improve, a rise in household disposable income will also drive growth.
McKinsey & Company predicts that healthcare spending in China will reach US$1 trillion by 2020, up from $350 billion today. The Chinese government itself predicts that spending in the sector will top $1.3 trillion by the end of this decade. However, even at that level healthcare spending will be a third of that of the United States and only $1,000 per person, (compared to $8,915 per person in America).
Certain areas of the sector require speedier development and the government is spending accordingly. Prevention and control of chronic diseases - such as diabetes, cancer and asthma – are one of seven top priorities of China’s healthcare reform by 2020.
Treatment needs and demographics
Rapid industrialisation, urbanisation and an ageing population are contributing to the rise in cases. The treatment burden for heart attacks, strokes, diabetes and obstructive pulmonary diseases is anticipated to rise by 50 per cent from 2010 to 2030, according to China’s health ministry. Chronic disease currently accounts for 70 per cent of the total number of diseases.
The World Health Organisation (WHO) has reported that, in 2012, China accounted for over three million newly diagnosed cases of cancer, almost 22 percent of the global total, and 2.2 million cancer deaths, 27 percent of the world’s total. In addition, the WHO estimates that around 230 million Chinese currently suffer from cardiovascular disease, and that annual cardiovascular events will increase by 50 percent between 2010 and 2030 based on population aging and growth alone. The incidence of diabetes tells a similar story - almost one-in-three global diabetes sufferers today is in China, with approximately 114 million adults afflicted by the disease.
In order to combat these issues, many of China’s 22,000 hospitals will need to be upgraded or replaced in the coming years. In addition, the Chinese government is looking at foreign-owned hospitals - the ownership of which was previously restricted or forbidden - to help the situation.
As such, the government’s goal is to increase private hospital service contribution to 20 percent of the total hospital service value by 2015, from less than 10 percent currently.
China has around 180 million people aged 60 or over – approximately 13 per cent of the population. By 2042, the over-60s will account for 30 per cent. But services are in short supply: the number of beds in nursing homes only covers 1.8 per cent of China’s elderly. In Western countries it is more like five to seven per cent. The government is aiming to add 3.4 million beds, to cover three per cent of the population, by 2016.
Due to a current lack of advanced technology, China is reliant on foreign countries to supply its medical devices, such as X-ray or ultrasound equipment. Meanwhile, the government has pledged to improve healthcare facilities in rural areas by constructing or upgrading 3,700 community hospitals and 11,000 village clinics.
This emerging market provides opportunities rarely present in the developed world. China’s advanced telecommunications sector has facilitated the spread of mHealth, which utilises mobile phones and tablet computers to provide instant access to health services and information – something particularly useful for remote regions. PwC reports that 59 per cent of patients in emerging markets use at least one mHealth application or service, compared to 35 per cent in the developed world.
In the pharmaceutical sector, there are obstacles for new players. All drugs sold in China have to be registered at the China Food and Drug Administration (CFDA), and it can take years of testing before a company can promote and sell its products.
There are however increasing opportunities to collaborate. The Chinese government is keen on what it calls “indigenous innovation” and deals in technology transfer or ‘knowledge exchange’ are welcome.
The present and future - opportunities for UK companies
After widespread consultation, in 2009, the State Council issued the current health reform plan: a commitment to spend an additional RMB 850 billion with the aim of providing affordable and equitable basic healthcare for all by 2020. The reforms focused on five areas: service delivery, identifying essential medicines, public health, insurance, and public hospital reform.
There have been significant achievements. Around 95 per cent of China’s population now has health insurance. Billions have been invested in infrastructure, equipment and training. Mark-ups on drugs dispensed at primary care facilities are banned. An approved National Essentials Medicines list, including price ceilings, has been introduced at state-run primary care facilities with the aim of reducing the prescription of unnecessary drugs and there are plans to roll out the scheme to private providers and hospitals.
Equal access to healthcare has increased. However, China still faces challenges. Chinese citizens still risk paying very high health bills. Although insurance coverage is now widespread, it does not cover all costs and the rates of reimbursement differ from province to province.
The challenges facing the healthcare sector in China provide many potential opportunities for UK organisations. The UK capabilities in healthcare-related goods and services provide an ideal match for China’s national healthcare objectives. It is for this reason that, in recent years, UK-China collaboration in healthcare has received unprecedented coverage by both governments.
The UK has a strong reputation in China for its 60-year experience of running the National Health Service, as well as a reputation for clinical excellence and strong private sector expertise.
Driven by support at a national level, CBBC, DIT and Healthcare UK teams throughout China are progressively identifying opportunities for British organisations across the country, working with open and forward-thinking regions, provinces and cities to establish frameworks for greater collaboration.