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China Healthcare market: a bright future?

China Healthcare market - a bright future?

Driven by an aging population and accelerated by the Covid-19 outbreak, China’s healthcare market continues to expand rapidly. The latest China Healthcare Report by the South China Morning Post (SCMP) showed that with double-digit growth rates, China is amongst the world’s fastest growing healthcare markets. In terms of expenditure, China is already the second largest healthcare market in the world, with 3.5 trillion USD in 2018.

“China aims to significantly improve its healthcare standards to be on par with those in developed nations by 2030. This will spur innovation in the sector, provide impetus for growth in the global healthcare industry, and catapult Chinese healthcare firms onto the international stage”, said SCMP’s Executive Editor Chow Chung-yan.

One of China’s biggest challenges is, however, the rapidly aging population. According to the World Bank, China’s over-65 population was reported at 11.47% in 2019. And this number is expected to rise to 23% (310 million) by 2050.

“This will demand reform in China’s healthcare system and improved access to affordable quality drugs, particularly those able to combat the chronic diseases associated with ageing”, a recent China healthcare white paper by asset management firm Value Partners says.

Boosting drug innovation made in China

China has enacted some major medical reforms to boost its pharma industry’s maturity and growth. To improve quality and promote innovation, the National Medical Products Administration (NMPA) – China’s agency for regulating drugs and medical devices – has rolled out a string of measures. These include e.g. a faster approval process for novel high quality drugs that promise clear clinical benefits. Thus, innovative drugs can enjoy a faster inclusion in China’s National Reimbursement Drug List (NRDL).

“From a sales point of view this is crucial. In China, around 70% of drug sales derive from hospitals, which for the most part only dispense NRDL-listed drugs. Historically, the majority of the drugs in the NRDL have been generic drugs but increasing numbers of innovative drugs are now also being included. In addition, since 2017 China has been updating its registration list annually instead of every five years, thus fostering much faster adoption of innovative products”, the China healthcare white paper by Value Partners says.

The asset manager estimates the growth potential of the innovative drug market to be huge. “Domestic sales of such drugs are expected to rise significantly, jumping from 3% of total drug sales in 2019 to an estimated 15% by 2025.” According to the white paper, the top five Chinese drug makers – Jiangsu Hengrui Medicine, Sino Biopharm (SBP), CSPC Pharmaceutical, Hansoh Pharmaceutical, Fosun Pharmaceuticalcan expect to benefit from this develoment, with strong double digit percentage drug sales growth over the next few years.

China also grows more important as a strategic R&D hub in healthcare. According to SCMP China Healthcare Report, China’s combined pharmaceutical and biopharmaceutical R&D spending is forecasted to grow at a 23 percent compound annual rate until 2023, reaching $49 billion. This is 23 percent of the world’s total spending on drug discovery and testing.

Covid-19: accelerating adoption of technology in healthcare offerings

The outbreak of the Covid-19 pandemic fostered innovation in China’s healthcare sector even more. According to the SCMP report, Covid-19 accelerated the introduction of AI in CT scans, algorithms for detecting Covid-19 in genomic sequencing and AI-based research platforms for vaccines. Some Chinese hospitals used robots and IoT-enabled technology to assist medical workers, e.g. to monitor patients’ temperatures, vital signs, heart rates.

Furthermore, mobile healthcare apps like Ping An Good Doctor saw their user bases grow dramatically. With services like online and telephone consultations, the app reported a 900 percent increase in new users from December 2019 to January 2020 alone.

The market capitalization of Ping An Health is about $15 billion. Since July 2020, it has been included in the Hang Seng TECH Index in Hong Kong.