|
|
|
European Biopharmaceutical Review
|
China is a nation that is divided on its healthcare system due to its
social class segregation. The Chinese government is facing mounting
pressure to implement significant changes
China is bifurcated into two distinct healthcare and biopharmaceutical
markets. The urban market has been rapidly growing for two reasons;
young people migrating to cities in search of jobs, and government
policy mandating the physical relocation of whole regional populations
into increasingly urban settings. With these trends comes the
concomitant increase in the onset of western syndromes and diseases such
as obesity and diabetes in the urban setting. This leaves the rural
population, which, while dwindling, will remain substantially large, and
is primarily comprised of an aging population still suffering from
third-world diseases with less access to health resources. The divide
between urban and rural in China has historical roots. From 1950 to
1980, Chinese residents were either registered as ‘urban’, working
industrial jobs, or ‘rural’, working in agricultural settings. The same
resident registering system is in place today, though this line is
somewhat blurred through economic development and urbanisation.
Nevertheless, the binary healthcare system still has its implications in
modern China.
The Gap Between Urban and Rural Healthcare
China has already entered the stage referred to as an ‘aging society’ by
the United Nations, and this demographic shift will last for decades,
or perhaps the remainder of this century. The Chinese population is
ageing at an unparalleled speed as a result of longer life expectancy
and the one-child policy begun in 1980. The model used in the latest UN
World Population Prospects projects that the Chinese elderly population
will keep growing until 2050, when the population over 65 will reach 331
million – one quarter of the total – and 2.8 times of that of 2010.
Under current projections, China will become an ‘aged society’ with 14
per cent of its population over age 65 by 2025, and a ‘super-aged
society’ with 20 per cent of its population over age 65 by 2035.
Rural China will bear a much heavier burden of the elderly population
compared with urban areas. Although both urban and rural areas started
out with similar percentages of the elderly at the beginning of this
century, the numbers are projected to diverge dramatically. The
percentage of the elderly population in rural China will lead the urban
by six per cent in 2020, and by 10 per cent in 2030, and this separation
remains elevated through 2050. The rural to urban migration is the root
cause of this large discrepancy. 230 million rural residents with an
average age of 28 have migrated to the cities seeking employment
opportunities. The more developed provinces in the east currently have,
on average, higher percentages of elderly populations than the less
developed western ones. This degree of difference between the rural and
urban areas extends to within the provinces themselves. Larger gaps are
seen among the most developed coastal provinces in eastern and southern
China, including Zhejiang, Jiangsu, Guangdong and Fujian. In these
provinces, the rural elderly population is on average five per cent
higher than that of the urban population, which is much higher than the
national average of 2.4 per cent.
Historically, healthcare spending is unevenly distributed between urban
and rural China. From 2001 to 2007, rural healthcare spending grew a
meagre 2.6 per cent per year, while urban healthcare spending grew by
21.5 per cent annually.
Moreover, economic development has not occurred in rural areas as much
as in urban China, resulting today in large differences in living
standards. In 2010, the average per capita urban income was RMB 21,033
($3,375.49), approximately four times that of the average rural
resident, at RMB 5,919 ($949.91). Low income depresses rural spending on
health. In 2010, per capita spending on rural healthcare was RMB 666
($106.87), or only 28 per cent of the total RMB 2,315 ($371.50) spent on
healthcare by an urban resident.
Public healthcare resources, providing the majority of healthcare
services in China, are also heavily concentrated in urban China. There
are approximately 22,000 hospitals in the whole country, 10,000 serving
the rural area and the rest serving urban areas. Despite the similar
number of hospitals in both rural and urban China, the geographic range
and provision of healthcare resources are at opposite extremes. The
Ministry of Health grades public hospitals into three classes, with
Class 3 being the most advanced. Over 90 per cent of Class 3 hospitals
are located in the cities. Rural hospitals are disadvantaged in
resources, employing just 33 per cent of all healthcare professionals
and with 36 per cent of the total hospital beds in the country, despite
serving the majority of the population.
Bridging the Gap
In 2009, after much public debate, the government initiated its latest
round of healthcare reforms. The initial phase of the reform was to be
carried out from 2009 to 2011, aiming to expand healthcare coverage and
establish a baseline acceptable medical system throughout the country.
During this period, the government has added RMB 850 billion into the
overall effort, which resulted in large increases in public portions of
total expenditure, and a decrease in the amount of private out-of-pocket
expenditures.
The healthcare reforms constructed an insurance system with multiple
plans to cover 95 per cent of the population (see Figure 1). The Chinese
government gradually began to reshape the healthcare system in 1998 by
setting up the first programme, the Urban Employees’ Basic Medical
Insurance (UEBMI). This was established for urban employees, which
shifted programme funding from government to employer and employee
contributions. The Urban Residents’ Basic Medical Insurance (URBMI)
covers people that fall outside of UEBMI, including migrant workers,
students, urban residents without employment, and dependents of UEBMI
enrollees. The third plan, the New Rural Cooperative Medical System
(NRCMS), was first established in 2003 and is now covering the 840
million rural residents who comprise 64 per cent of the Chinese
population.
NRCMS is expanding aggressively, aiming to narrow the spending gap
between urban and rural healthcare. Programme funding is achieved
through government allocation and premiums from rural residents at
approximately 60 per cent and 40 per cent respectively. Through NRCMS,
funding per capita has more than doubled from RMB 113 in 2009 to RMB 246
in 2011. The funding target set for 2015 is at RMB 360, and at that
time total NRCMS funding will reach about RMB 400 billion, doubling even
that of 2011 and funded primarily by the government (see Figure 2).
As well as spending increases, the rural healthcare delivery system is
also receiving more attention. From 2009 to 2011, RMB 72 billion was
budgeted to improve the rural healthcare delivery system, with an
emphasis on strengthening the county level hospitals. The goal to set up
one Class 2 hospital in each rural county was first proposed as a part
of the healthcare reform started in 2009. With the new plan to further
expand the number and quality of rural hospitals through 2020, and with
support funding of RMB 109 billion, hospital projects are likely to
continue to be rolled out.
Using hospital revenue as a proxy, we project that from 2011 to 2020 the
rural healthcare market will grow at double the rate of the urban
market, despite being much smaller (see Figure 3).
Opportunities and Challenges
The current and future rural hospital projects provide a stream of
opportunities for suppliers. The construction cycle for a new hospital
is usually around two years to two and a half years. Once the
infrastructure is set up, the next order of operations is to supply
medical equipment. Subsequently, connecting flow of patient data via
hospital information systems for better efficiency quickly follows.
Therefore, hospital building projects started in 2009 now constitute
real opportunities for technology and solutions providers. In a third
stage of opportunity, we can see hospitals embracing the need to
implement new and advanced diagnostics to provide more aggressive,
proactive medical care that in the long run saves the system money.
These three areas will be the first to benefit.
Medical Equipment
The high-end medical equipment market in China is dominated by a few
multinational corporations (MNC), including GE, Philips and Siemens.
Chinese companies are focused on the mid to low tier markets, which are
made up by Class 1 and 2 hospitals in less developed areas. However, the
market landscape is already changing. Recently, domestic companies such
as Mindray, Neusoft and Anke are starting to move into the high-end
market and challenge MNC incumbents (see Figure 4). On the other hand,
MNCs such as GE and Carestream are not satisfied with only the high-end
market. GE, for instance, has started its ‘Spring Program’ to extend its
focus to Class 2 hospitals in rural areas by designing new, lower cost
products specifically for this market segment.
Healthcare Information Systems
In 2011, the Ministry of Health (MOH) released its roadmap for building
out the healthcare information system as a part of the 12th Five- Year
Plan, for which annual funding of RMB 9.2 billion will be provided to
approximately 2,800 hospitals. The recently announced ‘Health China
2020’ contains plans to invest another RMB 61 billion on healthcare
information system build-outs from now through 2020. From 2012 to 2015,
the yearly funding for healthcare IT sums up to RMB 16.8 billion, the
majority of which will be implemented at the county level. The Chinese
healthcare IT market is very fragmented, with well over 500 providers
competing for market share. No company currently holds a dominant
position in this market and most of the players are small regional
providers who are helped by the fact that uniform standards have not
been set up as a framework to guide implementation. Some notable players
in the healthcare IT industry are listed in Figure 5. Emergent leaders
will be invited by the government to participate in setting the
standards for a unified Chinese healthcare information system, which
will give them significant advantage. In the future, we expect to see
intense M and A in the industry to consolidate market share and gain
geographic positioning, through which a few winners will emerge to
integrate Chinese healthcare IT across the country.
Medical Diagnostics
Diagnostic solutions are likely go in several different directions to
fit the needs of hospitals at various levels. Class 3 hospitals are in
dire need of automated high throughput state-ofthe- art solutions in
order to deal with overflowing patients. Tests that are not
time-sensitive will be outsourced to third-party testing centres where
the greater scale brings higher efficiency. Class 1 and 2 hospitals will
pay much greater attention to cost as they generally have smaller
budgets, and serve a population with fewer financial resources in the
less developed areas. Point-of-care tests (POCTs) that can be performed
with reasonable accuracy with minimal training and infrastructure will
be popular with lower level hospitals and grass roots healthcare
organisations where it is not possible to train limited numbers of staff
to perform the large array of tests. Some of the major Chinese
companies are listed in Figure 6.
Conclusion
Although we see current events directly benefiting medical equipment,
healthcare IT and diagnostics sectors, they are by no means the only
sectors that will see market opportunities. China as a country is
growing old and will remain so for a very long time. The government is
shifting its resources in order to get ready for the coming demand and
pressure on the country’s healthcare system. Therefore, this trend will
benefit any sector player whose technology and product/service offerings
can help to provide better healthcare more efficiently. Both domestic
and foreign pharmaceutical companies are facing their own unique set of
difficulties when accessing the rural healthcare market. Domestic
companies are getting squeezed by higher costs and the government’s
efforts to control drug expenditure. The National Development and Reform
Commission implemented the Essential Drug List and the Medical
Insurance Reimbursement List to not only serve as a guideline for
reimbursement, but also to set the maximum price for pharmaceuticals.
Foreign pharmaceuticals are facing a different set of problems with
limited market access and low affordability. Currently, patented drugs
are given a pricing premium and cost much higher than rural residents
can afford. For example, a year’s cost of Roche’s anticancer medicine
Avastin can be as much as $100,000, while Herceptin costs about $50,000.
These price tags are much higher than the $10,000 which is the average
annual income for Shanghai, one of the richest cities in the country.
The current common strategy is to work with Chinese charity groups to
make the drugs available, albeit to a very small and selected group.
However, Roche is taking a lead role in developing creative solutions to
solve the affordability problem. The Swiss drug maker is partnering
with the reinsurer Swiss Re to launch medical insurance products in
China designed to support the sales growth of its anticancer drugs.
Participation in the programme ensures patients future access to these
expensive drugs when needed. The project has seen early success with
five local insurers on board and six million people already signed up
for the policies. Roche’s CEO Severin Schwan has said that “We are
creating a market”.
So while China will continue to face mounting demographically driven
healthcare pressures, the government is responding with novel insurance
programmes and deeper funding support. The market is also developing
both novel healthcare and payment solutions.
The 18th People’s Congress has just been held in Beijing and the
government is in the process of changing leadership. Despite the change,
the 12th Five-Year Plan and the recently released ‘Health China 2020’
programme clearly indicated that expansion and reform of the healthcare
system remains a top priority. This provides an environment rich with
opportunities. Gaining access requires thorough understanding of the
stakeholders in the Chinese healthcare system, reliable partners and
innovative approaches.
|
Read full article from PDF >>
|
|
 |
|
| Rate this article |
You must be a member of the site to make a vote. |
|
Average rating: |
0 |
| | | | | |
|
|
 |
News and Press Releases |
 |
ETIHAD CARGO BOOSTS CHINA CAPACITY WITH ADDITIONAL SHANGHAI FREIGHTER SERVICE
More info >> |
|
 |
White Papers |
 |
|
Financial implications of off-site visits in clinical research, perception versus reality
Illingworth Research
The concept of patient centricity is still relatively new within clinical trials. For too long, the most important person in the trial has been overlooked… the patient. Here, we explore the benefits of conducting a more patient-centric trial for the patient, site and sponsor through mobile, or ‘off -site’ visits. These advantages are much greater than purely financial, although the financial implications of running a more patient-focused clinical trial may previously have deterred some from this approach. Home nursing in clinical trials continues to be thought of as a high value “premium” service, which many sponsors decline in an attempt to remain within budget for the trial. However, is the actual cost of off -site nursing more expensive than the traditional site model?
More info >> |
|
|
