Navigating through China’s Evolving Healthcare Market Healthcare by 2020 August 2015 www.clearstate.com
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
August 2015
www.clearstate.com
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 1
Contents
Foreword ....................................................................................................................2
Executive Summary ....................................................................................................4
Growth Prospects for China’s Healthcare Industry .....................................................5
5 Key Trends in China’s Healthcare Market by 2020 ................................................ 10
Getting ready for 2020: Are you prepared .............................................................. 19
About Clearstate ...................................................................................................... 21
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 2
Ivy Teh, Managing Director at Clearstate, an Economist
Intelligence Unit business.
China has shored up healthcare spending tremendously since it announced the need to reform its inefficient healthcare system back in 2005. Since then, major initiatives have been launched and substantial investments made, resulting in the building and upgrading of thousands of hospitals and community health facilities across the nation. However, despite near to a decade of reform push, China still has a long way to go in achieving its aim of equal access to public healthcare for all its citizens by 2020. China’s struggle to meet healthcare demand led by a fast-aging population, are made more pronounced as the nation faces its slowest economic expansion in the last two decades.
Both the on-going reform and the headwind faced by its
economy are challenges that are rapidly changing China’s
healthcare business landscape. While it may be getting tougher,
China’s sheer size and the relative robustness of its healthcare
demand, ensure that it remains the priority geography for most
companies looking for growth.
Foreword
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 3
Players in the space, from pharmaceutical, medtech and health
services companies, need to understand and be ready for these
changes that will inevitable change how they operate in China
in the next 5 years. Our current paper provides the reader with
some level of clarity on the major trends that we anticipate will
have significant impact to China’s healthcare landscape. We
provided our views and predictions on how these trends will
alter the environment and made suggestions on how
companies will need to rethink their business model and more
importantly the way they engage healthcare stakeholders.
Clearstate, an Economist Intelligence Unit business, is a
healthcare market insight and intelligence consultancy that
specializes in discovering opportunities in emerging economies
for pharma, medtech and health services clients. We hope that
through this whitepaper, we are able to provide not just an
update on China’s healthcare development and future progress
but also some new perspectives to think about in terms of risks
and opportunities.
We do look forward to your feedback and will be happy to
generate continuing conversation with you on this topic.
Best regards,
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 4
Executive Summary
hina is entering a new era of economic development. The decades of rapid, double digit growth that
China has enjoyed is now transitioning to slower but more sustainable and “higher quality” growth.
This has raised concern on whether China’s healthcare market will be adversely impacted, and if it
remains a key market for multinational companies to continue to focus and invest in. In this paper,
we highlight the key macroeconomic factors at play that will drive continual and solid demand for healthcare
services and products in China. While growth will be slower, China will remain a strong growth market and in
fact, will be the fastest growth market among the Top 10 healthcare-markets globally.
The healthcare industry in China is also undergoing significant changes, driven by ongoing healthcare
reforms, opening up of government policies, introduction and adoption of new technologies such as
wearable devices and mobile apps. All of these have profoundly impacted the type of healthcare products
and services consumers need and where patients seek care. Needless to say, this also alters the competitive
landscape with the growth of local players. This paper highlights the Top 5 Trends that Clearstate
anticipates will be realized by 2020, requiring companies to rethink how they engage key stakeholders
including the government, payer, service providers, physicians, patients and even their industry peers.
C
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 5
End of double digit GDP growth: Transition to more sustainable growth
he Economist Intelligence Unit (EIU) has forecasted China’s GDP growth to be at a CAGR of 6.5%
from 2014-2018, the weakest in 24 years. Unlike previous dips due to regional or global crises, we
see this as the start of a structural shift that sees the government moving away from rapid but
sustainable growth. As Xi Jinping’s economic reform package is being implemented, China’s
economy is expected to slow as it re-balances for “healthier” growth (see figure 1).
T
0
2
4
6
8
10
12
14
16
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Rea
d G
DP
(% c
han
ge)
Growth Prospects for China’s Healthcare Industry: Slowing but still strong
Asian financial crisis, restructuring under Zhu
Post-WTO entry export boom; investment in property and manufacturing spikes
Global financial crisis and government stimulus package
Figure 1: China’s GDP Growth
Post-Tiananmen recovery and Deng’s southern tour
“Long, soft fall”: Focus on quality rather quantity of growth
Source: The Economist Intelligence Unit (EIU)
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 6
The drivers for GDP growth however, are shifting. Fears of overcapacity and excessive debt levels
have led the government to crack down on lending and investment. On the other hand, a weak global
economy, especially in the EU, will continue to exert a drag on China’s export sector. However, rapid
growth of the service sector in recent years has been lifting personal incomes and thus consumers’
expenditure. The encouraging element for the healthcare sector is that the new sources of economic
growth are coming from domestic demand.
China is urbanizing: Driving healthcare expenditures along with healthcare demand
EIU projects that China’s urban population will grow to 900 million by 2019, driven by a new
urbanization plan, the hukou reform, as well as the loosening of one-child policy in urban areas. As
urbanization intensifies, the healthcare expenditure per head will intensify along with increased public
insurance coverage on hukou holders in urban areas. As such, urbanization will fuel healthcare service
demand, particularly in smaller cities. Governments are now gearing up to increase healthcare
infrastructure and supply of healthcare services to meet expected rise in demand within the next decade.
China is aging: More than 176 million seniors are concentrated in urban areas
In 2000 just 90 million people in China were over the age of 65, representing around 7% of the total
population. By 2020 EIU forecasts the total population above 65 to reach 176 million and to surpass 300
million by 2050 – roughly equivalent to the entire population of the United States and a staggering 22% of
China’s total population (see figure 2). This means that in densely populated urban areas there will be a
heavy strain for healthcare resources and thus the need for community level healthcare.
Figure 2: China’s aging cities (% of the population aged 65+)
Source: The Economist Intelligence Unit (EIU)
2020 2010
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 7
China is “getting sicker”: Rise of chronic diseases attributed to lifestyle changes and pollution
While rates of infectious diseases have declined dramatically, there are still outbreaks of respiratory
and gastro-diseases, while the incidence of blood-borne and sexually transmitted diseases is rising. What
is of more concern is that chronic diseases now account for more than 80% of the country’s 10.3 million
annual deaths. A study by the Institute for Health Metrics and Evaluation indicates that the leading risk
factors contributing to health conditions in China are dietary risks, high blood pressure, smoking and
pollution. With increased urbanization, these factors will continue contributing to increases in chronic
diseases. The change in disease profile is driving the demand for both pharmaceutical and medical
devices in therapeutic areas such as oncology, cardiovascular along with diabetes.
China, DALYS Both sexes, All ages, 2010
Area map shows relative proportion (based on box size) of global burden of disease (DALY) attributed to each condition. (X- and Y-exis have no meaning.) Diseases are organized into disease family clusters.
Source: Institute for Health Metrics and Evaluation
Figure 3: China’s burden of diseases profile
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 8
China is getting richer: Huge base of affluent households along with rise of super rich
The number of households that can afford more out of pocket spending on healthcare is increasing
and becoming significant. In 2014, there were 32.6 million urban households in China earning more than
the median US household. By 2018, this number will more than double to reach 75 million. In contrast,
there will only be 62 million such households in the US in 2018.
The rise of “high-net-worth” and “super-rich” individuals is also driving the adoption of high end
healthcare products and services in China. Hurun estimates that there are more than 1 million individuals
with a personal wealth of more than CNY 10 million (~USD 1.6 million), and close to 70,000 individuals
with more than CNY 100 million (~USD 16 million). What is significant is that the wealthy are willing to
spend on managing their health. Studies from Hurun have indicated that the wealthy eat healthy, exercise
regularly, and consume health & wellness products. 80% of these individuals go for annual health
checkups, while 15% go twice a year. On average these individuals spend RMB 3,500 annually, almost
double the typical amount on health checkups1.
With increased income comes increased affordability and willingness to pay for more high-end
products and services. It is thus no surprise that there is continuous interest to launch more expensive
products and services that are not necessarily lifesaving, but can improve lifestyles. For instance, higher
income patients are now more willing to spend on surgical treatments of conditions such as pain
management and urinary incontinence. There are also private hospitals entering the market in China,
intent on introducing high end services to retain high-net-worth individuals who may currently be seeking
care abroad.
More importantly, the government remains committed to further investments in healthcare
A major factor for strong growth in the healthcare sector is the fact that the government will continue
to invest in providing “safe, effective, accessible and affordable healthcare”. Annual expenditures on
healthcare are expected to grow by 9.5% per year between 2015 and 2019, largely driven by the
government’s public healthcare reforms. More efforts will be made to invest in rural areas to address
inequality of health services, although the bulk of healthcare spending between 2015 and 2019 will be
directed to cities.
1 Hurun Report 2014
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 9
The Chinese government will need to achieve a balance between various priorities. Aside from
increased investment in infrastructure and training, cost reforms will continue to ensure affordability of
care. The government has to balance the push towards innovation against the need to ensure social
stability. The recent opposition by dialysis patients in Chongqing highlighted the healthcare reform’s
complexity and possible consequences for affected patients. The abandonment of the “market price”
reform of healthcare services after only six days in Chongqing, is an indicator of the need and willingness
of governments to adjust policies as required.
China’s healthcare sector has strong prospects for the next five years, and will continue to be one of the fastest growing markets globally
Despite the economic slowdown in China, the growth prospects for the healthcare sector remain
strong. The new locomotive of economic growth is private and public consumption. Multiple factors such
as rising incomes, aging populations, urbanization and increase in chronic diseases are all in favor of an
increased demand for healthcare services. EIU analysis indicates a direct correlation between growth in
disposable income and growth in healthcare spending per capita. We estimate that the demand for
healthcare services will grow at 10.6% CAGR between 2015 and 2019.
China will remain a market that cannot be deprioritized. In terms of growth in health spending per
head relative to real GDP growth, China still continues to stand out from all major developed and
developing markets. For both the pharmaceutical and medical device industry, China will continue to
have the highest growth rate globally. In terms of absolute industry size, China will surpass Japan and be
second to only the US by 2020.
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 10
long with changes in the socio-demographic and economic environment, the healthcare market
in China is undergoing structural changes due to ongoing healthcare reforms, evolving market
dynamics and, most importantly, changing needs of patients in China. Clearstate shares five key
trends that will impact the healthcare market by 2020.
#1: Gradual emergence of new service providers, although public hospitals will remain the key provider of health services
The landscape of service providers is transforming, largely attributable to some key government
policies. Aside from allowing ownership of private hospitals, another key policy permits physicians and
even nurses to practice at multiple sites. Liberalization of the private insurance sector will encourage
demand for services beyond public hospitals. At the same time, public hospitals are also under pressure
to become more efficient, driven by changes in profit models.
Even today, public hospitals are forming alliances and partnerships along with consolidation, to realize
operational efficiency and cost savings. Shenkang is a group purchasing network that operates on behalf
of 23 Class 3 hospitals in Shanghai. Class 2 hospitals are also trying to find their positioning to gain
sustainable patient volume.
The recent country-wide reform of Class 2 hospitals aims to prevent unnecessary duplication of
resources and over-expansion. It advises that only two province-level hospitals are allowed per province,
while other existing province-level hospitals will need to change ownership and/or downgrade. It is thus
A
5 Key Trends in China’s Healthcare Market by 2020
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 11
not surprising that many Class 2 hospitals are now looking to differentiate themselves by offering either
more value added services such as minimally invasive surgeries (MIS) that are less complex and/or
provide for niche areas like rehabilitation.
In March 2015, the Ningbo Health & Family Planning Commission announced the launch of the
“Ningbo Cloud Hospital” the first government-led initiative intended to integrate virtual healthcare
delivery. Using a cloud network, the Cloud Hospital aims to integrate community health centers (CHCs),
hospitals, pharmacies, insurance companies and 3rd party diagnostic labs (see figure 4). The hospital has
run a pilot with diabetes patients and mostly CHCs, offering each resident access to their electronic
medical records (EMR) online. The eventual goal of the Cloud Hospital is to provide patients with online
teleconsultations to refill their prescriptions and, in the future, get access to health awareness and
education via live casts and talks.2
China is also seeing a proliferation of new service providers, capitalizing on new government policies.
Dr. Smile Medical Group is an example, which was set up by seven specialists from Top 3A hospitals.
These doctors are partnering with three premium private hospitals in Shanghai and Beijing, offering highly
specialized medical skillsets that are otherwise hard to recruit for in the private sector. Dr. Smile started
to seek a first round of financing in January 2015, and is already planning to establish the first day surgery
2 “Ningbo cloud hospital will restructure healthcare system thanks to internet”, Xinhua News Zhejiang Channel,
http://www.zj.xinhuanet.com/newscenter/focus/2015-03/13/c_1114625945.htm, Clearstate analysis
Figure 4: Ningbo Cloud Hospital
Source: Xinhua News, EIU – Clearstate analysis
Profile: • Co-founded by Ningbo Health and
Family Planning Commission and Neusoft Xikang in March, 2015
• Aims to integrate CHCs, hospitals, pharmacies, insurance companies, 3rd party diagnostic labs using a cloud network
Key elements: • Allows each resident to have EMR
online: Residents can seek care from relevant doctors based on physical conditions
• Hospital will make appointments based on “tiered referral” system
• Online consultation system for chronic diseases, pilot being run in diabetes care
• Online tele-imaging, etc. • Health awareness and education (talks,
live casts etc.>)
“We aim to provide drug delivery service and work on reimbursement by June, increase clinics in July and launch cloud hospitals standards in August.” - Head of Ningbo HFPC
• Remote consultation
• 3rd party lab testing • 3rd party imaging
• GP care
• Insurance • Pharmacy
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 12
center in Hangzhou. Additionally, in January 2015, Jiangxi announced plans to establish the first 3rd party
medical imaging center. Started as a private enterprise, it will offer services such as x-ray, CT and MRI
scanning services. Its services extend beyond imaging as it intends to also provide nearby smaller
hospitals with tele-diagnostic capabilities. Smaller hospitals often have the equipment to run imaging
tests, but lack the staff with the skills to interpret and diagnose more complex conditions. Jiangxi Medical
Imaging Center will help alleviate this issue, while providing higher income patients with an option to seek
diagnostic imaging services in less crowded and more comfortable facilities.3
By 2020, Clearstate anticipates that public hospitals will remain the major provider of healthcare
services. However, the service provider landscape will become much more diversified and complex.
#2: Private health insurance will take off, driven by a demand from higher income individuals and enterprises
China’s private health insurance market is at a nascent stage of development, with much room for
growth. Health insurance accounts for only 8% of total insurance income in China, compared to 40% in
the US. Private insurance premiums account for 37% of the total healthcare expenditure in the US, and
for approximately 10% in developed countries like France, Canada, Australia etc., whilst in China the
figure is only 1.3%.4 The industry estimates the projected YTY growth rate to be 25-30% for the next five
3 “No need to go to hospitals for CT: the first private medical imaging center is approved in Jiangxi”, The China Daily, http://cnews.chinadaily.com.cn/2015-05/15/content_20727778.htm, Dr. Smile Medical Group Website, http://www.topdoctor100.com/ 4 Statistics of China Insurance Regulatory Commission, http://www.circ.gov.cn/web/site0/tab5179/
• GP Clinics • Health screening centers
• 3rd party diagnostic labs
• Surgery centers
• Specialized centers e.g. dialysis, cardiac
• Post-Discharge Clinic
• Surgery centers
• Confinement centers
• Rehab Center
• GP Clinics • Nursing
Homes
• High end retirement centers
Figure 5: Change in Service Landscape
Tod
ay
Prevention DiagnosisTreatment
(e.g. surgery)Post-Op
CareRehab
Management & Monitoring
Hospitals
Source: EIU – Clearstate analysis
Futu
re
Hospitals
CHCs
CHCs CHCs
CHCs
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 13
years.5 In addition to a rising awareness for higher-end services from richer individuals, many companies
are also hoping that the inclusion of private health insurance will help to retain key talent in a highly
competitive market.
Supportive government policies will be the key determinant of growth. While there have always been
high-level policies to encourage the growth of private health insurance, the translation into concrete
details has been slow. The industry is hoping that the new pilot reform to offer personal income-tax
reductions, implemented after Premier Li Keqiang’s speech in the National People’s Congress, to “actively
develop commercial health insurance” in 2014, will have a more significant impact on growth. Similar
reform programs have been successful at increasing the coverage of medical insurance in countries like
the US and Australia.
Recognizing that obstacles are being resolved, Clearstate is optimistic on the future outlook of the
private health-insurance sector. Private insurance will alleviate the financial burden of governments, and
there is real demand from both consumers and companies.
#3: Strong government support for domestic players, but only selected “local stars” will flourish
The government’s intent to support domestic players in the healthcare industry has become more
apparent in the last few years. The 12th Five Year Plan, announced in 2011, identified the medical device
industry as a priority-industry with favorable procurement policies in place for domestic companies. The
government also hopes to cultivate a few strong domestic pharmaceutical companies. In the recent
“China Manufacturing 2025”, the focus on biological medicine and high-performance medical devices was
even more pronounced, as it was identified as one of nine priority areas.
One of the most apparent forms of support has been more favourable policies for domestic brands.
On the 1st of June 2015 the National Development and Reform Commission (NDRC) cancelled the
government-set pricing for most drugs. While this encourages market competition, cheaper domestic
brands will have an advantage. Many provinces have also adjusted their tendering or purchasing
processes to either give preference to cheaper domestic brands, or enact more complex processes for
hospitals to purchase international brands.
5 Estimate by People's Insurance Company of China, http://finance.ce.cn/rolling/201411/20/t20141120_3942186.shtml
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 14
United Health Imaging is an example of a company that has benefited from government resources
and support. Founded in 2011, it has more than 1,700 employees and a sales volume of more than RMB
600 million in 2014, from eleven imaging products. Aligned with the government’s vision to move from
“Made in China” to “Created in China”, United Health Imaging intends to become a global industry leader
within 15 years. It has enjoyed a good start by focusing on provinces that have implemented favourable
procurement policies, while gaining access to top hospitals nationwide. There are three main areas that
benefit from government support, mainly in product development, market access and brand awareness.6
The reality is that government support alone is not enough for leading companies to flourish.
Companies such as United Health Imaging are able to enjoy such traction because it inherently has strong
quality products with solid development capabilities. A quick scan of the medical device sector to identify
other “local stars” include players such as Mindray, Leadman, BSBE, Neusoft, Microport, Shinva and
Wego. Similar to United Health Imaging, these players exhibit some key traits: They enjoy high market
share in China, even within the “premium” segment with high brand awareness and reputation among
customers. Most of them compete by offering “good value for money” through stable technology
products that are reasonably priced, particularly relative to multinational competitors. While they might
not conduct truly innovative R&D work, these companies are fast in finding unique needs in China’s
market and in quickly improving design or product features. In short, they all have strengths in
introducing “quality and value-priced” products quickly into the market. Some companies such as
Mindray and Microport are already having success in replicating this capability in international markets.
Despite government support, smaller “me too” domestic companies will face challenges to survive.
Hospitals today expect “good enough” quality along with lower pricing, as they are under pressure to be
more accountable while keeping costs down. Even the local stars will need to continually improve their
competitiveness, forming new partnerships to win not only in China but to achieve their ultimate goal of
entering international markets.
6 United Health company website, http://www.united-imaging.com/zh/, Clearstate analysis
Figure 6: Support and Strengthening of Local Stars - United Imaging Hospital
- Collaboration with leading research institutes to build R&D capability
- Gain access to top hospitals to establish as reference sites and to improve product development
Product development
- Enjoys favourable policies in certain regions e.g. quota system whereby public hospital need to apply for license to buy international brands
- NFHPC initiated catalogue of quality domestic branded medical devices
- Favored in certain hospitals for e.g military hospitals and government led procurement such as Shanghai Shenkang
Market Access
"Medical equipment is necessary to develop a modern healthcare industry. Now, some high-end medical devices are so expensive that the grassroots healthcare institute and ordinary people can hardly afford (them)." China will "accelerate the localization of high-end devices, lower the cost, and promote national brands,“ - President Xi Jin Ping (May 24, 2014…2 days before NHFPC’s announcements)
Brand Awareness
Source: United Imaging Website, EIU – Clearstate analysis
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 15
#4: Definition of “Health” extends beyond just treatment with more emphasis on wellness and health-management
Like their global peers, consumers in China today no longer see healthcare as merely treating
illnesses. Rather, it incorporates the prevention of illness in the maintenance of physical and mental
wellbeing. This change in mindset is being driven by factors such as the rise of mobile apps and the
convergence of diagnostics and therapeutics. Governments and manufacturers are also actively
promoting health prevention, such as screening programs for key chronic diseases. With higher income,
consumers are now shifting from critical to lifestyle treatments.
Philips is a company that has identified this as a key trend, and has combined its healthcare and
consumer-lifestyle business to form the new “healthtech” market. It intends to capitalize on the
convergence of professional healthcare and consumer end-markets across the health continuum,
targeting an addressable market of more than 100 billion Euros in revenue. The objective is to provide
end to end products and solutions from prevention to treatment to recovery to home care. Even in China
today, Philips has introduced products that integrate homecare with hospital care. Philips works with
physicians to allow patients to rent “Actiwatches” that can be worn at home. The watch collects data on
sleep patterns that can be used for screening and diagnosis purposes. For patients, that means that they
no longer have to stay in the hospital overnight and that they can reduce the need for manual sleep
logbooks. For hospitals, this solution increases efficiency and turnover, and also shortens waiting time for
hospital monitoring equipment. For Philips, the intent is to provide patients with solutions to be used at
home and also within the hospital. Clearstate anticipates that consumers and patients will be open to
more lifestyle and health-wellness products, spurring demand for higher-end products and services.
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 16
Figure 7: Extended View of Health – Case Study of Philips
In September 2014, Philips combined its healthcare and consumer lifestyle business to form “healthtech” market
• Capitalize on the convergence of professional healthcare and consumer end-markets across the health continuum
• Addressable market: >100 Billion Euros in Revenue • Reshape and optimize population health management by leveraging health data and
delivering care with cloud based digital health platforms
Benefits to patients
• Improves convenience: Reduce need for patients to keep sleep log books
• Improves user experience and comfort: No need to stay in hospital overnight, or undergo complex testing
Benefits to hospitals
• Increase hospitals turnover/efficiency
• Shorten waiting time for hospital monitoring equipment
• Effective utilization of medical resources
• Better clinical outcomes
Actiwatch
Philips works with physicians to allow patients to rent Actiwatches to be worn at home for 7-10 days, to collect data on sleep patterns, which can be used for screening purposes and as reference for diagnosis
Home care products
• Air purifier & humidifier for better sleeping/breathing environment
• SleepMapper – a mobile and web-based system to enhance therapy experience
• Asthma management product i.e. peak flow meters, mask
Hospital care products
• Sleep diagnostic systems • Sensors for airflow, limb movement, snore
etc.
• Sleep studies management software • Sleep recorder • Etc.
Healthy Living Prevention Diagnosis Treatment Recovery Home Care
Source: Philips Website, EIU – Clearstate analysis
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 17
#5: M-Health will proliferate with consumer-driven Apps accelerating faster than Hospital related Apps
The proliferation of m-health is a factor towards health & wellness. China is expected to become the
2nd largest m-health market globally, with a phenomenal growth of 59.6% between 2015 and 20187.
Some unique elements in China are at play: Lack of access to quality healthcare-services, tense physician-
patient relationships and concentration of resources have resulted in physicians’ limited ability to provide
sufficient time beyond treatment and diagnosis. Chinese consumers are hungry for reliable and credible
information about health-management and are extending the prevalent use of internet and mobile apps
to do so. Mobile health can also be used in more rural parts of China to help resolve accessibility
challenges.
Despite the optimistic outlook for m-health, there are still some challenges to overcome. The
prohibition of diagnosis and treatment via the internet and lack of reimbursement and coverage of online
services are two major issues. The majority of e-health players and mobile apps are likely to go through
extensive consolidation, due to a lack of differentiation, and also the general lack of management know-
how about launching and sustaining such apps. For instance, there are more than 500 apps on diabetes-
management in the market, offering highly similar services and features. There are also many apps that
link consumers with hospitals, such as booking of appointments or hospital payments. While these apps
are indeed of value, it has been a challenge to integrate them with hospitals’ financial and management
systems on a sufficient scale to be meaningful.
By 2020, Clearstate anticipates that Chinese consumers will be widely using mobile apps for a
multitude of functions. Solutions that provide consumers with the information to choose and find the
right diagnostic tools and treatment options and to assist them in managing individual or family
members’ health will be of particular value. Linkages to wearable devices will also become more common
and widespread.
7 China mHealth Market Research Report 2014 by Analysis International
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 18
In contrast, apps that require integration with hospitals will take longer to take off, limited by a lack of
hospital buy-in. Hospitals will be more willing to participate in programs that improve integration and
accessibility of care, e.g. use for teleconsultations between hospitals, use for improving rural healthcare,
etc.
Figure 8: Rise of m-Health
• Apps that are consumer driven will flourish, especially those that:
• Improve patient awareness via medical education and information
• Address information gaps to empower patients e.g. help choose doctors, hospitals, etc.
• Manage personal health e.g. chronic disease management
• Drug distribution
• Adoption of apps/websites that improve physician training and education especially in community level hospitals will grow
• Apps that improve patient/physician interaction via online communities will become popular
Consumers Physicians Hospitals
• Apps requiring extensive integration with hospital systems will take longer to succeed due to difficulties in hospital buy in
• Use of m-health likely driven by governments to improve rural health e.g. improve access of care, address inequality of care, public health
• Selective use of teleconsultations due to restrictions on diagnosis and treatment
Source: EIU – Clearstate analysis
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 19
ooking ahead, the healthcare sector is poised to undergo further dynamic changes. Despite a
generally optimistic outlook, the honest reality is that the market is also becoming much tougher
than before. Continual growth will be realized through unearthing whitespace opportunities and
responding to changing market conditions.
A common theme is to be prepared to engage with current stakeholders differently. Companies are
now forming more strategic public private partnerships with governments, be it at national or provincial
level, in order to provide expertise and value beyond just lower prices. The government and private
payers are also actively collaborating with healthcare companies and the various governments to find
new ways to improve clinical outcomes, while ensuring more effective use of current resources. With
diversity of service providers and how physicians practice, sales and marketing teams will be challenged
to execute differentiated sales approaches and marketing engagement techniques for sub-customer
segments. Pharmaceutical companies have always been at the forefront of engaging patients. With many
medical device companies also starting to consider how to engage patients, the real challenge is how to
engage them effectively in a differentiated way, with direct impact to either brand awareness and/or
product usage. Indeed, this has driven companies to involve broader industry players, with collaboration
between payers, pharma, medical device companies and even healthcare IT companies, to engage
patients and leverage analytics more effectively.
As we prepare for 2020, companies should consider how well they are prepared today to embrace the
changing environment.
L
Getting ready for 2020: Are you prepared
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 20
Are you prepared?
Industry players Partnerships to provide more integrated care e.g. use of analytics, etc.
Government Improve government relationships by providing value in products/services and support with key priorities
Service providers
Provide segmented solutions based on specific needs and priorities
Physicians New engagement methods for different roles and skillsets of doctors, especially
with multi-site care
Patients Understand when patient
engagement is required and how to provide new products &
services
Payers Consider partnerships to improve
access and/or improve compliance, patient management
Source: EIU – Clearstate analysis
Figure 9: New Ways of Engaging Stakeholders
Navigating through China’s Evolving Healthcare Market Healthcare by 2020
©Clearstate Pte Ltd 21
About Clearstate
Clearstate (www.clearstate.com), a business of the Economist Intelligence Unit, is a research consultancy
specialising in the domains of healthcare and life sciences, advising on growth strategies in emerging
economies.
Clearstate is the go-to research consulting partner for clients seeking greenfield growth opportunities in
fast-expanding emerging economies. By leveraging The Economist Intelligence Unit’s depth of country
expertise, we offer visibility and credible forecasts on the direction of emerging economies’ opaque
healthcare environments.
We have a strong reputation among our clients for our depth of industry knowledge, our collaborative
approach and our innovative solutions. We are recognised for consistently listening and working in
partnership with our clients to deliver comprehensive and granular answers that go beyond the obvious.
About the Authors
Chee Hew is the Head of Greater China at Clearstate, and is an experienced consultant in the Healthcare
and Life Sciences sector in North America and Asia Pacific, with more than 15 years of experience in
business and operational strategy consulting, leveraging strong market research capabilities. She has
more than 15 years of healthcare consulting experience, specifically in China.
Lesley Shao Ying is an analyst at Clearstate Greater China, based in Shanghai. She has more than four
years of experience in conducting market research in the education and healthcare sectors.
The development of this whitepaper benefited significantly from the support provided by:
Cynthia Chen, Analyst, Clearstate Greater China
Chen Chen, Economist, Economist Intelligence Unit
Contact: Chee Hew, Head of Greater China