N O V E
M B E R2012
Health care in China:
Entering ‘uncharted waters’
Multinationals are flocking to take advantage of the
opportunities, but long-term success is by no means assured.
Franck Le Deu, Rajesh Parekh, Fangning Zhang, and Gaobo Zhou
partneringh e a l t h c a r e s y s t e m s a n d s e r v i c e s p r a c t i c e
China’s health-care ctor continues to develop at an astonishing rate: spending is projected to grow from $357 billion in 2011 to $1 trillion in 2020. From pharmaceuticals to medical products to consumer health, China remains among the world’s most attractive markets, and by far the fastest-growing of all the large emerging ones. It is not surprising that multinationals are flocking to take advantage of the opportunities, but long-term success is by no means assured. Although we remain optimistic about the overall outlook for China’s health-care market, multinationals will find it harder to compete. We expect a clearer paration between winners and laggards. Late entrants may struggle.
contrastThree themes will shape China’s health-care market: the continuation of economic
and demographic trends, further health-care reform, and the policies articulated in
2011戛纳电影节
the government’s 12th five-year plan. Some of the forces—such as improvements
in infrastructure, the broadening of insurance coverage, and significant support for innovation—will have positive implications for multinational companies. Others—for example, pressure on pricing and the ri of local champions—will have negative implications. In certain respects (including the bid to reconcile low-cost universal health-care coverage with rewards for innovation) the forces come into direct opposition. To paraphra Vice Premier Li Keqiang, reform of the country’s health-care system has entered “uncharted waters.”1
The forces behind the boom in China’s health-care market
Health-care companies have celebrated China’s robust market in recent years; it’s a bright spot compared with the lackluster conditions they contend with in many other countries. What a difference just a few years can make. Strong growth in the health-care ctor is fueled by favorable demographic trends, continuing urbanization, an increasing dia burden, the overall economy’s healthy expansion, and income growth (which encourages greater awareness of and access to treatments). It also reflects the government’s focus
on health care as both a social priority (as en in a 2009 health-care reform) and a strategic one (in
the 12th five-year plan’s impact on the biomedical industry). Health-care expenditures have more than doubled—from $156 billion in 2006 to $357 billion in 2011—inching clor to 5 percent of the country’s GDP. From pharmaceuticals to medical devices to traditional Chine medicine, almost every health ctor has benefited (exhibit).
The size and sustained momentum resulting from the shifts have given China new prominence for multinational health-care companies. For veral leading pharma players, such as Bayer HealthCare and Novo Nordisk, the country already ranks among the top three markets in total contribution to revenues. Others expect China to reach that ranking by 2015 and already e it as their number-one contributor to absolute revenue growth.
1 Li Keqiang made this remark during the Chine national conference on the deepening health-care reforms as China’s vice premier and leader of its overall agenda for health-care reform.
Medical-device and -equipment companies, such as GE Healthcare and Philips, have built China business that now boast annual revenues of more than $1 billion and are still expanding rapidly.
This steady growth of China’s market stands in stark contrast with tho of the United States, Japan, and Western Europe. The areas have traditionally been the focus of health-care companies but ar
e less attractive now that the industry must contend with
declining R&D productivity, the ongoing expiration of patents for many blockbuster drugs, and significant cost pressure as governments clamp down on spending. Especially in Exhibit Health care expenditures in China have more than doubled since 2006,
benefiting virtually every related ctor.
Exhibit 1 of 1
Overall 2006
2011Total health care expenditures
Per capita health care expenditures
Population with health insurance
Traditional Chine
medicine, market size 1
Vaccines, market size 1
Market
Size 1
Global ranking
Combined revenues of top 10
pharmaceutical multinationals
Number of sales reps from top 10
pharmaceutical multinationals
Market
Size 1Global ranking
Pharmaceuticals Other categories Medical products $156 billion $11943%$27 billion 9$4 billion 6,00
0>25,000$10 billion $6 billion $13 billion ~$1 billion 2~$2 billion $357 billion $261>95%$71 billion 3$8 billion 6$20 billion 31
konaValue measured at ex-manufacturer price—ie, excluding costs such as shipping and taxes.22007 data.
Source: China Health Statistics Yearbook (2006 and 2011), China’s Ministry of Health; Chinetightly
Pharmaceutical Association (CPA); R&D-bad Pharmaceutical Association Committee (RDPAC); Southern Medicine Economic Rearch Institute, China’s State Food and Drug Administration; McKiny analysis
the United States and Europe, many companies have resorted to rounds of downsizing, shrinking their R&D and manufacturing footprints, as well as their commercial operations. It is therefore not surprising that multinationals are ramping up their investments
in China, tapping into the unmet needs of its huge population, its manufacturing and emerging R&D ecosystem, and the government’s support for the biomedical industry. Early movers (for example, AstraZeneca) started investing heavily more than a decade ago. Then other large global pharma co
mpanies, including GlaxoSmithKline, Eli Lilly, and Merck embraced the China growth story, significantly increasing their commitments over the past five years. Since 2006, 13 of the top 20 pharma companies have established R&D centers in China, and veral have announced major manufacturing investments.
On the commercial side, China’s ten largest multinational pharma players now field a total sales force numbering more than 25,000, even as they have downsized sales forces in
the United States and Europe. According to recent rearch by Cegedim, China has now overtaken the United States in the total number of pharma medical sales reps employed
by multinationals. Medical-device companies are not far behind and on some dimensions even lead the way: for example, Covidien, GE Healthcare, Johnson & Johnson, and Medtronic have been tting up or expanding R&D centers and manufacturing sites, as well as pushing ambitious strategies to expand their market reach.
展览路一小China’s ri to prominence has prompted organizational changes, too. A few companies, such as Baxter, have moved their Asia–Pacific regional headquarters to Shanghai. Some have even relocated to China the global headquarters for lect units—GE’s X-ray business and Bayer’s gener
al-medicine business, for example. Roche plans to make Shanghai one
regard是什么意思of three global strategic-operations centers, alongside Bal and San Francisco. Many companies have changed their reporting lines so that China operations report directly to the chief executive or to the global head of pharmaceuticals or medical devices.
Further cementing the new status of China, it is the focus of prentations by multinationals to the health-care investment community. Executives are keen to promote the China success story as a counterpoint to flat sales and declining investments in Europe and North America.
Time for a reality check?
China is still in the early stages of its economic and social development. Extraordinary boom times have been the backdrop for significant investment. But at this point, multinationals should be prudent, stepping back and considering the forces that may influence the attractiveness of the China market in the years ahead.
Health-care reform is progressing, with significant government intervention in areas such as pricing. Competition from local companies is intensifying, and the pace of the nation’s economic growth is easing. In this context, veral questions ari. Will China deliver on
high expectations for growth? Are companies being too bullish? Are they investing at the right pace and scale? Have they adapted their operating models sufficiently to match local conditions? Have they identified and evaluated the many challenges ahead, and are they prepared to address them?
Overall, we remain optimistic about the outlook for health care in China. With expenditures projected to grow from $357 billion in 2011 to $1 trillion in 2020, it remains one of the world’s most attractive health-care markets and offers by far the largest growth opportunity of all the big emerging economies. However, we believe that it will become more difficult, even for large-scale operators, to compete. We anticipate an increasing divergence between winners and laggards, and it will become harder for late entrants to gain traction.
amigo什么意思In coming years, China’s health-care market will be shaped by three macrotrends: continued economic and demographic development, further health-care reform, and the direction of the 12th five-year plan. Here we look at each in turn.
Economics and demographics: Strong support for volume growth
济南市七里山幼儿园Growth in demand for care will remain strong for veral reasons. First, chronic conditions like diabetes and hypertension are proliferating rapidly as the population ages, many more people move
to cities, and lifestyles change. The New England Journal of Medicine reported in 2010 that there were already 92 million diabetic patients and a further 150 million prediabetics in China. By comparison, the United States has almost 27 million diabetic patients.
Also, the proportions of urban and elderly in the population are predicted to go on increasing. The McKiny Global Institute (MGI) projects that 61 percent of China’s inhabitants will live in urban areas by 2020, up from 52 percent in 2012, as 142 million people migrate from the countryside to cities. The population of people aged 65 and older will almost double by 2030, to 223 million, from the current 122 million.
Another basis for growth in the demand for care is increasing incomes and more extensive insurance coverage, both of which will steadily improve patients’ ability to pay. The urban middle-class population (defined by MGI as houholds with annual disposable income ranging from $7,000 to $27,000) is projected to increa from 29 percent of urban houholds in 2005 to 75 percent in 2020, and the upper-class group from 1 percent to 7 percent.
The third basis for growth is that many highly prevalent and burdensome conditions (such as cancer, depression, and respiratory illness) remain underdiagnod and undertreated in China. Better and earlier diagnosis, as well as higher rates of treatment and compliancesouth china a
