Prepared by Michael Ryde,

Beijing Embassy

The Healthcare Market in China

opportunities, challenges and strategies

28 October 2010, Medicon Valley Alliance Annual Meeting

Michael Ryde, Commercial Counsellor, Teamleader health, Danish

Embassy in Beijing
Trade Council of Denmark, Ministry of Foreign Affairs
micryd@um.dk
 Prepared by Michael Ryde,
Beijing Embassy

AGENDA

Introduction to China
The Chinese healthcare system
The market
The challenges
Trade Danish Council in China
Innovation – R&D in China
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0 INTRODUCTION TO CHINA
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Beijing Embassy

1 THE CHINESE HEALTHCARE SYSTEM

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Beijing Embassy

Pre Reform Era Post Reform Era New Reform Era

(1949-78) (1978-2005) (2005->

Centrally planned Decentralization – Improve healthcare

Healthcare shifted to system through
local bodies Healthcare Reform

Barefoot Doctors Permission granted for Focus on quality

profit making
hospitals and clinics
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Beijing Embassy

Today

• Hospitals public owned

• But self financed – allowed to make profits:

• Mostly private pay
• Partly reimbursement from public insurance
schemes

• 90% of medicine sold from hospital

pharmacies
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Beijing Embassy

Key problems in Chinese Health system

• Access difficult
• Low quality
• Expensive
• Inefficient distribution
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Beijing Embassy

Highlights of the health care reform

from 2008

Value: RMB 850 Bn (USD 123 Bn) over 3 years

• More county hospitals, health clinics, better
hardware

Introducing gatekeepers - GPs

• Referrals to medium to large size hospitals
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Beijing Embassy

2 THE MARKET
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Beijing Embassy

Pharmamarket at USD 34bio in 2010

Growth rates approx 20%

Michael Ryde
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Beijing Embassy

This growth brings pharma market

to #2 in year 2020

Michael Ryde
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Beijing Embassy

Imported medical devices at USD 1.6bio

in 2009. Growth rates approx 20%
Imported medical and diagnostic devices
Value(USD)
2.000 50%
Millions

Annual growth rate

1.800 45%

1.600 40%

1.400 35%
31%

1.200 30%

1.000 25%
19%
800 20%
14%
600 15%

400 10%

200 5%

0 0%
2006 2007 2008 2009
Medicaldevices include ultrasound
Year scanner, other electrical diagnostic
devices, MRI device and endoscopy ,
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Beijing Embassy

2.
IVDMARKET
MarketANALYSIS
at USD 2bio in 2009
-Global IVD Market Size
Future growth rates approx 20%

Source: McEvoy & Farmer -China IVD Summit, 27 Oct 08

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Beijing Embassy

Chinese Health Care market will continue to

grow by approx 20% for many years

• GDP per capita low but growing fast, approx 10

p.a.

• Share of GDP used on Health will grow

• China 2007: 3.6%
• OECD avg: 8.9%
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Beijing Embassy

Medical Insurance Systems in China

Basic Medical Insurance for

Employees:
330 mill covered (approx)

Urban Residents Basic Medical

Insurance System:
60 mill covered (approx)

New Rural Cooperative Medical

Scheme:
830 mill covered (approx)
03.11.2010
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Beijing Embassy

Conclusion:
Chinese Health Care market very attractive

• Market size and growth

• Reimbursement system for 1.3bio people
• Drug prices comparable with West
• Efficient drug patent protection
• Demand for innovative, quality products
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Beijing Embassy

But …. also no easy money

Complex
Fragmented
Tough competition
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Beijing Embassy

3 THE CHALLENGES
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Beijing Embassy

Key Challenges – complexity, size

• Registration at SFDA
• Medicine: >5 years
• Medical Device: Clinical Trials, product testing, 1-2
years)

• Market Access
• Hospital listing (by hospital 750 tier IIIa hosp)
• Bidding (city/province)
• Reimbursement (national/city/province)

• Close follow-up required

• Distributor
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Beijing Embassy

Market very different from the West -1

China
Super private
Patients essentially pays and decides themselves
– with some reimbursement
(eg medicines)
Decisions driven by profits/income (hospitals,
doctors, pharmacies)
Almost all hospitals are government owned but
driven on profit basis
• 42% of hospitals income come from sales of medicine.
• Doctors consultations are under-priced (20rmb)
• Top doctors earn very little (2000 rmb/month)
Pharmacies are controlled by hospitals (90% of
sales)
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Beijing Embassy

Market very different from the West -2

China

There are 60-80 top class hospitals where

patients wants to go; Queues everywhere
Immature market. Scientific medical knowledge
only one element in making a product successful.

Commercial Affairs/Distribution strategically

important
• Estimated impact on sales is 20-25% due to pharmacies relations
with doctors

Quality of products often low

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Beijing Embassy

Market very different from the West -3

China
KOLs very influential – “famous”; Influential on
other doctors and especially on governments
decisions
Many levels – all requiring their share

Slow take off in general even if price/benefits

is “right”
Endless market in the long run but short/medium
term curbed by lack of disease awareness,
treatment options
Patients have money in their pockets (cfr 30-
40% saving rate for bad times)
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Beijing Embassy

Market very different from the West -4

China
Product life cycle long – many old products among
top products
Generics not a major threat (branded generics,
local companies, private decision making, ie no
substitution)
Complex, non transparent market access – not
necessarily difficult (requires time, relationships)
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Beijing Embassy

TC-China Focus Areas in Chinese Healthcare

Market

• Pharmaceuticals
• In-vitro Diagnostics
• Rehabilitation equipment

• Sourcing finished generic pharmaceuticals

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Beijing Embassy

4 THE DANISH TRADE COUNCIL IN

CHINA
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Beijing Embassy

6 Commercial Advisors
At three missions in China

Michael
Christa
Ryde
Liu

Tracy Wu
Thomas
Højlund
Christensen

Bin Zhu

Bonnie
Hou
74
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Beijing Embassy

The Danish Trade Council in China

Services:
• Partner search
• Market research
• GA activities
• Company Virtual representative in China

Export Start Packages

• <DKK 50mio turnover
• 50% discount on our services
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Beijing Embassy

5 INNOVATION – R&D IN CHINA

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Beijing Embassy

Priorities in Life Sciences Industry Chinese

(NDRC’s 11th Five-Year Plan, 2006-2010)

 Bio-tech breeding  Green agricultural bio-product

 Bio-energy  Pharmaceutical innovation

 Bio-materials  Biomedical engineering

 Modern TCM  Microbe manufacturing

 Vaccines & diagnosis reagent

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Beijing Embassy

Multinational companies have established

own R&D units in China

Shanghai is the hottest R&D spot especially in

pharmaceutical
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Beijing Embassy

4 Compelling Reasons for Investing in R&D

in China

Access to talent Access to R&D results

Drivers to do R&D in China

Access to markets Lower costs

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Beijing Embassy

THANK YOU

Michael Ryde
Commercial Counsellor, Teamleader Health
Danish Embassy in Beijing
E-mail: micryd@um.dk