A project funded by the European Union WELCOME TO THE EU SME CENTRE WEBINAR SERIES
A project funded by the European Union
WELCOME TO THE EU SME CENTRE WEBINAR SERIES
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www.eusmecentre.org.cn
Opportunities for EU SMEs in
China's Healthcare Sector
Dr. Sara Medina
April 10, 2014
A project funded by the European Union
Our Speaker –
Dr. Sara Medina
• Dr. Sara Medina is a Member of the Board of SPI – www.spieurope.eu, an international consulting Group with
offices located in Europe, USA and Asia (Beijing, Macao and Singapore). Dr. Medina contributes to the overall
management of SPI and is responsible for managing SPI’s activities and services in China since 2004.
• Dr. Medina has coordinated projects for public and private sector clients in Europe and around the world in
the fields of technology transfer, innovation management, R&D, internationalization, sector studies,
establishment of partnerships and policy development, among others. She has expertise in a range of
industries and manages projects funded by international organizations such as the European Commission,
the World Bank and InterAmerican Development Bank. In November 2013, Dr Sara Medina successfully
completed the INSEAD Asia International Executive Programme in Singapore.
• Previous to SPI, she worked with Accenture in the consulting area, where she developed marketing and
industrial strategies for a number of distribution and manufacturing companies. Dr. Medina has a Bachelors
degree in Food Engineering from the College of Biotechnology in Portugal, a European Masters degree in
Food Studies from 5 major European Universities and a Ph.D. degree in Food and Resource Economics from
the University of Florida, USA.
• Dr. Medina has been invited as an expert at the EU SME Centre and has provided a series of training
seminars on issues regarding the China market to representatives of SMEs in Latvia, Italy, Spain, Portugal
and France. Dr. Sara Medina is also an invited member of the Access to Risk Finance Advisory Group
appointed by the European Commission, DG Research and Innovation and a Member of the Board of the
Portuguese Business Angel Association.
• Dr. Medina has published several scientific papers in international journals and participated as speaker
through various international conferences around the world, having recently concluded courses on Innovation
and Leadership at the Universities of Wharton and Harvard.
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In Today’s Webinar
I. Healthcare Sector in China
II. Opportunities and Challenges for European SMEs
III. Case Studies, Events and Useful links
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I. Healthcare Sector in China
Market Size
The structure of healthcare industry
Healthcare Industry
Medical Devices Pharmaceuticals and
Biotechnology Healthcare Services
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Market Size
• China’s healthcare market is increasingly attracting attention: it is now the third largest in
the world in medical devices, second in pharmaceuticals and its healthcare service market
is also becoming one of the largest in the world.
• China has the world’s most attractive emerging medical device market, driven by
increasing prevalence of chronic diseases, modernisation of healthcare facilities, a greater
uptake of diagnostic procedures and an ageing population.
• The population of those aged 65 and older will almost double by 2030, from the current 122
million to 223 million.
• The total healthcare expenditure is expected to increase to 6.7% of GDP in 2015.
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Opportunities in Chinese
Second Tier Cities 11
• Qinghai
Beijing
Tianjin
Shanghai
Fujian
Shanxi
Hainan
Heilongjiang
Jilin
Liaoning
Hebei
Shandong
Jiangxi
Anhui Hubei
Hunan
Guangdong Guangxi
Inner Mongolia
Shanxi
Ningxia Qinghai
Sichuan
Yunnan
Tibet
Xinjiang
Zhejiangg
Jiangsu Henan
Gansu
Guizhou Per capita GDP (in USD) (2012)
9000 or above
7000 to 9000
4000 to 6000
Below 4000
• China is not just one
large market, but
several markets in
different regions. Each
of these regional
markets has a distinct
potential and poses
distinct opportunities
and challenges.
Market Size
Medical devices
• The sales volume for medical devices was more than
200 billion CNY (33 billion USD) in 2013.
• With double-digit annual growth rates of the medical
device industry, China is expected to become the 2nd
largest market before 2020.
• The value of China’s import and export of medical
device reached 30.062 billion USD in 2012,
increasing 13.03%.
• The import value reached 12.472 billion USD,
increasing 14.56% compared with 2011.
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Market Size
Pharmaceutical and biotechnology
• The value of the pharmaceutical market will reach 62
billion USD in 2015, surpassing India, Brazil and Russia
added together by 20 billion.
• Within the 12th Five-Year Plan-period, 30 innovative
drugs, 150 diagnostic reagents, 40 new biological drugs
are supposed to be developed, and 10 clinical trials of
new drugs to be initiated.
• The growth rate is expected to reach 16.9% between
2010 and 2014. This rapid growth will contribute to China
becoming the world’s second largest pharmaceutical
market by 2015 after the US.
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Market Size
Healthcare services
• In rural areas the Chinese government has ambitious plans to make
access to healthcare services easier by constructing or upgrading
3,700 community hospitals and clinics, and 11,000 village clinics.
• By 2020, health expenses are expected to take up 6.5 percent of
GDP, one percent higher than in 2012.
• The number of hospitals with rehabilitation facilities will increase to
almost 7,800 in 2015, more than twice the number now.
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E-health Market
• 80% of the Chinese believe it is inevitable that e-health solutions will be widely
adopted very soon
• Wireless communication between patients and clinicians, through internet or smart
phone apps, in some cases combined with the usage of home electronic
diagnostic devices, may significantly improve the availability of healthcare.
• The Chinese Health Information System (HIS) is highly imbalanced among regions
and different levels of hospitals.
• The expenditure on HIS is only about 0.8% of the total health expenditure, which is
much lower than the 3-5% in developed countries.
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Major Life Sciences Clusters
• Shanghai ZhangJiang Hightech Park is a state level innovation park and
has become the center for pharmaceutical R&D of China.
• Beijing Zhongguancun (ZGC) Life Science Park is part of the ZGC
Science and Technology Park and aims to be a national innovation base for
life sciences, new medicines, and advanced pharmaceuticals.
• Taizhou China Medical City (CMC) is a state level pharmaceutical and
biomedical high-tech industrial park in China
• Suzhou BioBay has attracted both domestic and international
pharmaceutical and medical companies, which focus on drug discovery,
diagnostic medical devices, and nanomaterials.
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Key Growth Drivers
Government support in enhancing social welfare system
While meeting the healthcare demands of its urban population, the government has
endeavored to improve the current social welfare system and build a more
comprehensive healthcare system in rural areas by constructing and upgrading
county level hospitals, urban community health centres, community health clinics and
township health centres.
Increasing disposable income and demand
Along with China’s continuous economic growth, the general public’s living standard
and purchasing power have improved dramatically.
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Key Growth Drivers
An ageing population
Ageing population has become a pressing issue for many countries in the world
including China. In 2013, 123 million people in China, or 9 percent of the
population, are over 65.
The attraction of imported high-end products
High-end medical devices are mostly imported from abroad and endow a certain
prestige on the institution using them; it is not uncommon to see hospitals or
clinics compete on how many pieces of advanced equipment they have.
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Regulatory Environment
In China, policy and regulations in the healthcare sector are managed by
the Ministry of Health (MOH). The MOH sets up national policies in health
related issues, such as food safety, and the coordination of healthcare
resources, amongst other things. Three sub-sectors regulatory environment
as follow:
• Medical devices: relatively easy market entry compared with the
process for pharmaceuticals. This is a key area for opportunities and
competition for EU SMEs.
• Pharmaceuticals: As with other markets, the legal environment favors
big pharmaceutical companies because of the length and resources
required for drug registration.
• Healthcare services: the legal environment is semi-open, existing as a
grey area for non-Chinese service providers.
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Healthcare Reform
Source: Healthcare reform 12th Five-Year Plan; McKinsey analysis
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Healthcare Reform
• Healthcare reform plans to expand medical insurance coverage, strengthen
public health infrastructure and improve rural healthcare services will increase
access to newer therapies.
• For the pharmaceutical industry, the single biggest factor shaping the landscape
is the healthcare reform plan of 2009. This reform plan is anchored on the two
pillars of accessibility and affordability, wherein the government has pledged
approximately 124 billion USD over three years to undertake a two-phase plan.
• The reform of hospitals in China is expected to accelerate, driven by the
emergence of clearer policies governing the payment mechanism between
payers and providers.
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12th Five-Year Plan on
Healthcare Industry 22
Healthcare focus activities – 12th Five Year Plan
• Basic medical insurance system: increase basic medical insurance participation
to ensure the entire population has basic medical coverage
• Public healthcare service system : improve healthcare monitoring and specialist
healthcare service infrastructure such as rural emergency and mental
healthcare
• Medical service system: improve capabilities of country level hospitals and
strengthen the development of provincial maternal hospitals, local general
hospitals in outer regions and county level Chinese medicine hospitals
• Drug and healthcare information system database: develop a healthcare
information database for grassroots institutions
• Training of general practitioners: develop standardized training of general
practitioners
II. Opportunities and Challenges for
European SMEs
Medical devices
1. Home-use medical devices
Care and rehabilitation equipment in general are predicted to
have good market potential due to the ageing population.
2. Mid to low-end medical equipment
Second tier and third tier medical institutions are important for
consumers of mid to low-end medical equipment.
3. Implantable devices
Some Chinese locally-made products are becoming new
players in the segment. EU SMEs could enter this segment by
working with local Chinese partners.
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Opportunities for EU SMEs
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Medical devices – Distribution channels
Due to the fact that China’s healthcare service is dominated by state-owned public
hospitals and professional public healthcare institutions, public procurement is the
primary method for the purchase of medical equipment.
The private purchase market is emerging for home use medical devices. The main
distribution channels are drug stores and supermarkets, hospitals, dedicated sales
counters, self-run shops and dealers & agents.
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Opportunities for EU SMEs
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Medical devices – Leading players
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Opportunities for EU SMEs
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Pharmaceuticals & biotechnology
1. Generic drugs
When original branded drugs’ patents expire, pharmaceutical companies can
produce generic drugs identical to these branded drugs. Hence, there are
opportunities for EU SMEs who can find out which patents are about to expire and
have the R&D capabilities to reproduce the product.
2. Innovative drugs
EU SMEs with technology and formulas for innovative drugs can use various
approaches, including technology transfer, to enter the Chinese market. Chinese
pharmaceutical companies generally favour this kind of cooperation as it is high
value-added.
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Opportunities for EU SMEs
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Pharmaceuticals & biotechnology
3. Vaccines
The Chinese government has provided preferential taxation policy for bio-
technology companies. Since this is a relatively new segment, EU SMEs are
encouraged to work with a reputable Chinese partner to gain access.
4. Biopharmaceuticals
Chinese biopharmaceuticals are aware that they need foreign technology and
expertise to make further progress. Multinationals now seem to aim to join forces
with Chinese players by sharing their technology in return for access to the
lucrative Chinese market.
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Opportunities for EU SMEs
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Pharmaceuticals & medical research – Distribution channels
China has a highly fragmented drug distribution system. Direct sales and marketing
at doctors is not developed in China.
There are more than 10,000 national and provincial wholesalers that sell the drugs
through hospitals, clinics and retail pharmacies, which then sell to patients.
It was estimated by Business Monitor International that up to 80% of all Western-
style drugs are distributed through hospitals and clinics, whilst the remaining 20%
are distributed through retail pharmacies.
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Opportunities for EU SMEs
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Healthcare services
• Currently, the main players in the Chinese healthcare service industry are public
hospitals.
• Sino-foreign joint venture hospitals are targeted at providing professional services to
the high-end market, such as tumor centers or maternity and childcare services
targeting foreign people in China and wealthy Chinese people.
• There are more than 60% of the Sino-foreign joint venture hospitals located in Beijing,
Jiangsu, Shandong, Liaoning and Guangdong. The investment is mainly from the
USA, Japan, Hong Kong, Macao and Taiwan.
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Opportunities for EU SMEs
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Healthcare services
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Opportunities for EU SMEs
China’s healthcare service
infrastructure .
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Healthcare services
1. Private hospital provision
Sixteen pilot cities have been selected for providing private hospital
services, and a more detailed government work plan on privately
funded hospitals is still expected. It is suggested that EU SMEs
maintain an ongoing monitoring of the latest policy developments.
2. Professional training/consulting in hospital management
and clinical governance
EU SMEs can work with such domestic training providers and jointly
deliver programmes. Supplying expert advice and innovation
consultancy to government, universities/institutes/hospitals are also
an opportunity.
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Opportunities for EU SMEs
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Healthcare services
3. Rehabilitation sector
Chinese government is strongly boosting the rehabilitation sector,
almost doubling the number of rehabilitation facilities by 2015.
EU SMEs may provide opportunity to provide local governments
with integrated projects
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Opportunities for EU SMEs
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Challenges
• Registration Requirements
For device manufacturers who are entering the Chinese market for the first time, it
may take up to three years for clinical trials and testing before it is able to advertise
and market its products. With this long registration process, EU SMEs may lose the
opportunities because they cannot access the market quickly enough.
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Challenges for EU SMEs
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Challenges for EU SMEs
Challenges (Cont.)
• Distribution channels
Between medicine producers and end users, distributors have significant impact on
how well the newly developed medicines are distributed. It is rather difficult for
medicine producers to directly approach customers. Thus, having a good
relationship with distributors, especially local distributors, will allow EU SMEs to gain
a good position in the highly competitive market.
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Challenges for EU SMEs
Challenges (Cont.)
• Ambiguity of regulations
Although China has been encouraging private investments into the healthcare
services segment, no clear regulations/policy papers have been published. The
legal environment for foreign companies in this segment is still grey. EU SMEs
should continue to monitor the latest developments.
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Challenges for EU SMEs
Challenges (Cont.)
• The lack of long-term care insurance
China is urgently looking for concepts that will work in the Chinese situation, and
shows a great openness to learn from foreign experience. A challenge is the lack of
long-term care insurance as well as the lack of standardization, which makes the
business model for elderly care still underdeveloped.
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III. Case Studies,
Events and Useful links
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Case Studies
Medigreen – Entering the Chinese market
• Medigreen is a company based in Bulgaria that offers non-toxic anti-viral and anti-
bacterial disinfectants targeting mainly hospitals and other medical institutions.
• Medigreen was established in 2009 in Bulgaria by Via Group, a diversified
investment group with businesses in the areas of aviation, petro-chemical, solar
energy, float glass production, detergents and real estate.
• Medigreen has been conducting market research in China since 2009. To approach
the market, the Bulgarian company has contacted consultancies and law firms in
China in order to get help with obtaining a business license and the registration
process.
Please find the case study in EU SME’s Knowledge Centre:
http://www.eusmecentre.org.cn/content/medigreen-%E2%80%93-entering-chinese-market
Case Studies
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Bluepharma- Entering the Chinese pharmaceutical market
• Bluepharma is a Portuguese pharmaceutical company based in Coimbra, Portugal.
• At the end of 2010, the company paid its first visit to China. A year later, with the help
of a Portuguese consultancy and a Chinese partner, Bluepharma was very close to
obtaining the registration of their first product in China and launched in the Chinese
market in 2013.
Please find the case study in EU SME’s Knowledge Centre: http://www.eusmecentre.org.cn/content/bluepharma-%E2%80%93-entering-chinese-pharmaceutical-market
The 71st China International Medical Equipment Fair/The 18th International
Component Manufacturing & Design Show
April 17th – 20th, 2014, Shenzhen
http://www.cmef.com.cn/en/index.htm
BIOTECH CHINA 2014
April 24th -26th, 2014, Shanghai
http://www.biotech-china.com/english/01.asp
The China (Shanghai) Medical Devices Exhibition (CMEH)
June 11th – 13th, 2014, Shanghai
http://www.cmedexpo.com/english/index.asp
The 15th Beijing International Medical Devices Exhibition 2014
September 16th – 18th, 2014, Beijing
http://www.cmedexpo.com/beijing/english/index.asp
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Events
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Useful Links
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China Health Labs & Diagnostics: http://www.chinahealthlabs.com/
China Biotech Information Network ;http://www.biotech.org.cn/
China Pharmaceutical Net: http://www.pharmnet.com.cn/
China Medical Health Information Network: http://www.ylwsxx.com/
China Medical Equipment : http://www.pharmnet.com.cn/ylqx/
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