Healthcare market in China: new importance for online services
Healthcare market in china: Overview
The healthcare market in China is being diversified and under fast growth. Medical expenditures reached 357 billion US dollars in 2011, and are predicted to continue growing up to 1 trillion US dollars by 2020. Every sector playing in Healthcare market in China has benefitted from the positive increase, ranging from pharmaceuticals, medical devices, and traditional Chinese medicine to medical products and consumer health, which makes China more attractive to international companies among all the emerging economies in the world. Improvement in infrastructure construction, extension of social insurance coverage and significant support for innovation also act as strong forces to allure foreign investments in healthcare industry. However, challenges still exist, such as pressure on pricing and competition from local companies.
Healthcare reform in Chinese medical industry
Chronic imbalance of resources has been a major problem in China’s healthcare system. All the highest-quality equipment and physicians are concentrated in the largest hospitals in first-tier cities that are usually sufficiently funded and developed and possess a major share of patient flow.
Another problem is medical insurance coverage limitation. Coverage remains basic and universal outpatient coverage in basic medical insurance is still not accepted within a considerable number of provinces in China. Patients’ out-of-pocket expenses remain high due to strict reimbursement caps and low or no reimbursement of expensive drugs.
Chinese government started to address these issues in its 12th five-year plan which the State Council published in March, 2011. The goal was to establish a primary-care infrastructure including the development of community health centers and stations, together with setting up a rural medical network consisting of county hospitals, township health centers and village clinics and to improve service quality. In October 14th, 2013, the State Council released the “several opinions on promoting the development of healthcare service industry”(opinion) which also put forward goals to make the healthcare market or industry in China an important force in promoting the sustainable development of society and reach a scale of 8 trillion RMB by 2020. Meanwhile, the opinion also targets at establishing China with a healthcare service industry system covering the entire lifecycle.
As for insurance coverage constraints, existing insurance plans are limiting pharmaceutical spending to certain percentage and unable to meet the needs of a rapidly aging population. Currently Chinese government is in great effort to broaden insurance coverage and shift its focus to improve the quality of its provision to patients. Reimbursement co pays will continue to decrease while annual maximum will continue to increase. Chinese government also provides funding to cover 800 million people through programs such as New Rural Cooperative medical scheme. More provinces will introduce universal outpatient coverage to extend the coverage area and more diseases will be included in reimbursement programs for treating outpatients who suffer from chronic diseases.
Healthcare market in China and online services: the increasing trend
Three drivers will continue pushing healthcare market in China into its prosperity: the continuation of economic and demographic growth, ongoing healthcare reform and Chinese authority’s support of healthcare industry through its policies stipulated in its 12th five-year plan to identify seven strategic industries.
To take advantage of great opportunity and avoid certain risks as well as benefit from the experience of local companies, foreign investors have started new strategies to win the healthcare market in China by teaming up with their competitors in pharmaceuticals, consumer health, vaccines and medical devices. Via partnership to some extent international companies are trying to cope with issues like low level of reimbursement for premium product and cost pressure.
Since Internet and mobile app have become more popular in people’s daily life and all types of services people need are provided through all kinds of online and mobile services, which, upon the demand of users, are designed to satisfy the needs, healthcare is one of the industries that takes full use of online platform to attend to customers’ concern about health. Chinese Food and Drug Administration (FDA) have granted approval to pharmaceutical companies in May, 2014 to enable them to launch online platforms and sell prescription drugs over the Internet. Yihaodian, Jingdong Mall and Tmall all applied to FDA for licenses and prepared to start their prescription drug business online after pharmacies permission was issued from government authority. According to sales data from Tmall, 120 online pharmacies providing prescription drugsover its ecommerce platform achieved 326 million US dollars in 2013, and the sales revenue will continue on the rise as predicted. Furthermore, based on statistics from China Medical and Pharmaceutical Material Association, pharmaceutical online transaction rose up to 250% from year 2010 to 2013, with the number of online pharmacies rising from 35 to more than 130 during that same period and continuously soaring up to 250. The reforms and expansion taking place Healthcare market in china will definitely set online pharmaceutical services for continued growth.
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