China Healthcare Market and Key Recent Policy Updates 2016 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from CITIC Capital. 1
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China Healthcare Market and
Key Recent Policy Updates
2016
This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from CITIC Capital.
1
1. China Healthcare Market
2. The Healthcare Reform and Key Recent Policy Updates
Agenda
2
China is now the 2nd largest healthcare market in the world
Total healthcare expenditure and growth CAGR (US$ bn)
● It is also the fastest growing one among the top 5
Source:WHO. Healthcare expenditures are based on 2013 data, and CAGRs are between 2008-2012.
3
5.9% 22.8% 10.7% 0.1% -0.9%
2,867
531 507 423 329
United States China Japan Germany France
But per capita spending and relative spending is still low…
Note: Healthcare expenditures are based on 2013 data, calculated with current year exchange rate to US dollarSource: WHO
4
Per capita healthcare expenditure (US$)
3,965
9,150
370
Healthcare expenditure as % of GDP
10.3%
17.1%
5.6%
China Healthcare Market – regulatory framework
5
National Development & Reform Commission (NDRC)incl. The Price Bureau
Key Stakeholders Function and Responsibility
Ministry of Finance (MoF)
National Health and Family Planning Commission (NHFPC)incl. The State Food and Drug Administration (SFDA or CFDA)
Ministry of Human Resources & Social Security (MoHRSS)
Ministry of Civil Affairs
Ministry of Commerce (Mofcom)
Setting the price of drugs and medical services
Investment in healthcare sector as well as subsidies for health insurance
Formulating industry policies, supervising the operation of state-owned hospitals, drug registration and safety/quality administration, disease prevention, etc.
Management of medical care programs and the reimbursement system
Medical aid for the poor
Regulates the distribution of medicines and medical equipment
The State
Council
• Voluntary basic medical insurance for rural residents
• Covers ~60% of population
• 40-80% inpatient reimbursement ratio
• Voluntary program for urban residents not eligible for UEBMI (seniors, unemployed, children, students, disabled)
• Covers ~15% of population
• 40-80% inpatient reimbursement ratio
China Healthcare Market – sources of funding
6
Source: NHFPC
• Urban Employee Basic Medical Insurance, a mandatory program for employees of urban state-owned and private enterprises
• Covers ~20% of population
• 75-85% inpatient reimbursement ratio
Sources of healthcare expenditure funding Key Public Plans
Government• Administrative expenses• Subsidies to public plans
(URBMI and NRCMS)
Social• Employer/employee
contributions to public plans• Commercial plans (~3%)• NGOs, donations
Out-of-pocket(OOP) expenses
100
30%
33%
37%
UEBMI
URBMI
NRCMS
China Healthcare Market – flow of expenditure
7
Source: WHO
Composition of healthcare expenditure
9%
Pharmacies 11%
Clinics
Others
Public HealthOrganizations
2%
7%
AdministrativeOrganizations
8% Hospitals
63%
County/Township/Community
Level Hospitals
City LevelHospitals
37%
63%
Treatment charges
Drug sales
60%
40%
Hospital Revenue by type
Hospital revenue of city tier
1. China Healthcare Market
2. The Healthcare Reform and Key Recent Policy Updates
Agenda
8
China is using 3% of global healthcare spending to address healthcare needs of 22% world’s total population
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3.0%
97.0%
China
RoW
China % share of world’s healthcare spend
22.0%
78.0%
China
RoW
China % share of world’s total population
Source: WHO
Significant achievements made to date – improved quality of health
10
Life expectancy at birth (years)
2000 2010 2014
767572
Maternal mortality ratio1
2000 2010 2014
27
35
58
Under 5 yr olds mortality ratio2
2000 2010 2014
11
16
37
1: per 100,000 live births2: per 1,000 live birthsSource: World Bank Group, World Development Indicators 2016
Significant achievements made to date – expanded insurance coverage
11
Basic medical insurance coverage – 2000 vs. 2014
95%
2000
20%
2014
Out-of-pocket expense as % of healthcare spend
33%
2000
59%
2014
Source: WHO, NHFPC
Significant achievements made to date – better access to healthcare
Source: OECD, NHFPC
12
Hospital beds per 1,000 population
2.92.5
4.8
Physicians per 1,000 population
OECD Median
3.2
2.6
2.1
OECD Median
But still, China is faced with serious long term healthcare challenges
13
90mn
25% Chinese population is aging very rapidly. In 1982, only 5% of the total population is aged over 65. In 2010, the number has increased to 9%. By 2050, it is expected to reach 25% (same as the level in Japan)
Burden of non-communicable disease (NCDs, cancer, cadio disease, diabetes, etc.) is increasing, due to changing lifestyle and environmental issues – currently there are 90mm people with diabetes. This will drive up outpatient visits, hospitalizations and overall medical spending
Demographic shift
Epidemiological change
100mn
Diversifying needsRapid social stratification (100mm incremental middle class population expected in the next decade) means diversifying healthcare demands –private hospitals, high-tech medical devices, patented drugs and commercial health insurance need to be developed to cater to the country’s well-to-do population
Objective of current healthcare reform is to establish a basic universal healthcare system that provides safe, effective, convenient and low-cost services by 2020
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2009, start of the “New Healthcare Reform”
2016, current year
Medication
Service Delivery
Reimbursement
2009EDL
2010cGMP
2013EDL 2012Generic Consistency Evaluation
2015Free drug pricing,Accelerated drug approval,Biosimilar guidelines,generic guidelinescGMP deadlineMultiple rounds of drug price cuts by NDRC
2009Public hospital bidding
2013County public hospital reform
2015City public hospital bidding
Separation of Rx and dispending (e.g. zero mark-up)