Pharm Outsourcing

Topics: Medicine, Health care in the United States, Health care Pages: 268 (70081 words) Published: September 5, 2013
Healthcare in China
Entering uncharted waters

Healthcare

Healthcare in China
Entering uncharted waters
September 2012

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Preface
The Chinese government is committed to improvement of the healthcare system and development of the healthcare industry as clear strategic priorities. Reforms announced in 2009 set the ambitious goal of providing universal access to effective, safe, and low-cost healthcare by 2020. The 12th Five-Year Plan, issued in March 2011, encourages innovation throughout the biomedical industry, broadly defined as covering pharmaceuticals, vaccines, medical products and traditional Chinese medicine. Its designation as a ‘strategic industry’ leads to government support through significant flows of public funds and favorable policychanges, many of which have yet to be conceived and articulated. These various policies will offer extensive opportunities for participants in every sector of the industry. Spending on healthcare for the China’s vast population is on a fast track to reach $1 trillion by 2020. Multinational companies recognize the commercial opportunities and have made China a strategic priority: for many pharmaceutical and medical products companies, the country is now a ‘top-three’ market in terms of revenue contribution, and even number one for absolute revenue growth. These companies are establishing manufacturing sites and R&D centers, along with field-forces comprising sales representatives numbering in the thousands. Decision centers with regional or even global mandates are starting to be relocated to China. For domestic players, the government is keen to see national champions emerge, and is encouraging Chinese companies to consolidate, upgrade their capabilities, and aspire to strategic alliances and international expansion. Insurance companies and healthcare providers are also beginning to benefit from the government’s resolute steps towards opening up the market. By allowing private companies to play a larger role, the government will enable a significant inflow of new entrants who are eager to tap into the primary opportunities in health insurance, private hospitals and clinics, and in the services such as healthcare IT that underpin them. Many of the ingredients are in place for the continuation of strong growth of the healthcare sector. We believe however that the path ahead will be more challenging, reflecting the ambition and the scale of the transformation under way. In the words of vice-premier Li Keqiang, China’s healthcare system has entered ‘uncharted waters’. While healthcare reform has had notable successes, such as the expansion of insurance coverage to 95% of the population, there are some real issues to resolve. Serious questions about the funding of healthcare and the role of public hospitals have yet to be settled; there are uncertainties relating to the recognition and protection of intellectual property; tensions may arise in simultaneously developing a low-cost healthcare system and promoting significant investment in innovation. In the commercial sector, the ‘uncharted waters’ include increasing pricing pressures, intensifying competition, the fragmented and uneven market-access environment, and the fundamental challenges to business models that these upheavals demand.

Healthcare in China Entering uncharted waters

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Nonetheless, China’s healthcare sector remains a remarkably positive story. In this report—Healthcare in China: Entering uncharted waters—McKinsey & Company’s Greater China Healthcare practice offers a diversity of perspectives on this substantial, complex and important domain. This compendium of articles is organized into three main themes: opportunities in the

pharmaceutical and medical products markets; the continuing transformation of the healthcare service system; and the challenges facing industry players that are building up their capabilities. We hope you will find this report an interesting window through which to...
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