Blood-Cleaning Burden Shows China’s Medical-Cost Struggle

Guo Xiaoting holds a plastic bag to the light to check for signs of trouble in its contents, a yellowish liquid drained from her abdomen. It’s part of a blood- cleaning process the 25-year-old from central China has repeated at least twice daily since her kidneys failed five years ago.

“If the liquid is murky, I might have an infection and need to see a doctor,” says Guo, sitting on a bed in the living room of her one-bedroom home in Lvliang (pronounced “Lu- liang”) city in Shanxi province. “Luckily, that’s not happened.”

Infections may be catastrophic for Guo and her husband, who are already struggling with medical bills larger than their income. China, with four times as many chronic kidney disease sufferers as the U.S., spent twice as much on health care last year than in 2008 and health insurance coverage more than tripled to 96 percent of citizens last year compared with 2003. Still, surging rates of kidney disease, diabetes and other long- term ailments are ratcheting up costs for families like Guo’s.

“It’s a huge burden, and it’s going to get worse with the aging population and things like diabetes,” said Wang Tao, a kidney specialist at Peking University Third Hospital in Beijing.

China has about 1.5 million patients like Guo whose kidneys are so damaged they stop working, requiring life-long dialysis or transplants. That number may double to 3 million within a decade, spurred by diabetes, which damages the organs, according to Shandong Weigao Group Medical Polymer Co. (1066) The maker of renal- care products based in Weihai City, Shandong Province, announced March 18 a joint venture with Terumo Corp. (4543), Japan’s largest medical device maker, to improve access to dialysis in China.

Supply Gap

The market for blood purification treatments there is worth about 10 billion yuan ($1.6 billion) a year, according to Jason Siu, a health-care analyst with OSK (Asia) Securities Hong Kong Ltd. It could expand sevenfold if services are extended to all China’s end-stage renal disease patients, Siu said in a March 15 telephone interview.

A petite woman with a three-year-old daughter, Guo is one of about 120 million people in China with chronic kidney disease, a condition mostly sparked by infection, excessive blood-sugar caused by diabetes, or high blood pressure, which Guo also suffers.

Guo says she can only afford to filter waste from her blood twice a day, instead of the three times her doctor advises, increasing her risk of heart disease and stroke. Like most people in China, her medical bills are rising even after the government increased health-care spending to 174.8 billion yuan last year from 82.6 billion yuan in 2008. It earmarked 203.5 billion yuan for 2012, a 16 percent increase.

Catastrophic Costs

Thirteen percent of Chinese households last year footed so- called catastrophic health expenses -- accounting for at least 40 percent of their income -- compared with 12 percent in 2003, the Lancet medical journal reported March 3. Health costs as a share of total household expenditure increased to an average of 13 percent from 11 percent in the same period.

The government of China tested an insurance program last year covering catastrophic spending for specific, expensive-to- treat medical conditions, such as childhood leukemia and congenital heart disease, said Sarah Barber, leader of the World Health Organization’s health sectors development team in China. The plan may be expanded, said Barber, who was a co-author on the Lancet paper, in an e-mail.

Guo’s monthly medical bills, including home dialysis and mineral supplements, total 4,500 yuan, she says. In contrast, she earns 600 yuan a month as a waitress, while her 29-year-old chef husband, Yang Pingping, brings in 2,000 yuan.

Waste Extraction

In the five years she’s needed kidney dialysis, Guo was able to apply for a 40 percent reimbursement only once when she claimed for three months of treatment worth 14,000 yuan in mid- 2011. “We’re still waiting for the money to be reimbursed,” says Guo, whose family help pay to ensure she receives the life- saving treatment.

Guo relies on peritoneal dialysis, a procedure in which a tube fitted into the abdomen is used to create a fluid-filled cavity that relies on osmosis to extract waste and excess water from the blood. The government wants to promote home-use of the procedure as a cheaper alternative to hemodialysis, which is usually done in the hospital two-to-three times a week.

The savings will enable more people to get treated, Health Minister Chen Zhu told a meeting on kidney-disease treatment in Beijing last June.

$69 Billion Market

Hemodialysis is about 10 percent more costly in China compared with peritoneal dialysis, said Yu Xueqing, director of the Institute of Nephrology at Sun Yat-Sen University’s First Affiliated Hospital in Guangdong province. “The difference is not as high as Western countries as fees for doctor and nurses are much lower,” he said, adding that the gap will widen as medical labor costs increase.

The global dialysis market was worth $69 billion in 2010, Germany’s Fresenius Medical Care AG (FME), the world’s biggest provider of kidney dialysis, said in its latest annual report. The Bad Homburg, Germany-based company dominated with a one- third share, followed by Baxter International Inc. (BAX) of Deerfield, Illinois, and Stockholm-based Gambro AB (GAMBA).

Fresenius Medical made one in two hemodialysis machines used in China -- the company’s second-largest market for the equipment after the U.S., supplying more than 6,000 units. Sales of its product there are growing more than 40 percent, the company said yesterday in an e-mailed response to questions.

Pilot Project

Fresenius Medical is building its first dialysis clinic in the region, a center in the eastern province of Jiangsu that will care for about 40 patients when it opens midyear, it said. It has agreements to provide dialysis machines and disposable products to 52 clinics, and plans to drive growth in China primarily through partnerships with local clinics and management contracts, Fresenius Medical said.

Peritoneal dialysis “continues to grow very nicely, particularly in emerging markets like China,” Baxter Chief Financial Officer Robert J. Hombach told a March 14 Barclays Capital Global Healthcare Conference.

The company has been working with doctors and the government in China to make the treatment more cost-effective and accessible. That includes local manufacturing and an education programs with Peking University Third Hospital, said Sanjay Prabhakaran, Baxter’s general manager for China and Hong Kong, in an e-mailed response to questions.

In-Patient Preference

Besides Shandong Weigao, local manufacturers include Bain Medical Equipment (Guangzhou) Co., and Beijing United Jie Ran Bio-Tech, OSK’s Siu said.

Patients need a better understanding of peritoneal dialysis and to be more comfortable receiving treatment outside the hospital for it to take off in China, said Alexander Ng, associate principal at consultancy firm McKinsey & Co. in Hong Kong. They also need sound knowledge of the procedure to pick up any complications, he said in a telephone interview.

“With rising rates diabetes in Asia, especially China, the presence of end-stage renal disease will rise dramatically over time,” said Juliana Chan, professor of medicine and therapeutics at the Chinese University of Hong Kong. China has more than 90 million people with diabetes.

The increasing rate of dialysis is almost entirely due to diabetes, said Chan, who is also chief executive officer of the Asia Diabetes Foundation. “If you have diabetes and end-stage renal disease, within five years 80 percent will die anyway even with dialysis, because of heart disease, stroke, leg ulcers,” she said.

That’s a cause of concern for patients like Guo.

“Our dream is to save enough to start our own eatery, to have more income to support the family and give a better life for our daughter,” her husband, Yang, said. “But it’s impossible, as all our savings are spent on my wife’s illness.”

To contact Bloomberg News staff for this story: Daryl Loo in Beijing at dloo7@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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