Roche Holding AG has found a way to sell cancer drugs to millions in China who couldn’t otherwise afford them: first sell them insurance.
The world’s biggest maker of tumor medicines is getting together with reinsurer Swiss Re to sell a Swiss-engineered private insurance that’s on track to garner 10 million clients this year, says Harald Sprenger, Roche’s director of private insurance and market-access strategy in China. Both partners expect a 20 percent enrollment jump next year.
The collaboration between Roche and Swiss Re, the world’s second-biggest reinsurer, is carving out a new business in China for private insurance aimed at cancer, a disease blamed in more than a quarter of the country’s deaths. Advanced tumor medicines can cost about 10 times an average Chinese person’s income.
“We’re creating a market” in China, Roche Chief Executive Officer Severin Schwan said in an interview on Oct. 23. “The biggest hurdle in emerging countries is access.”
Roche of Basel, Switzerland, provides health data needed to set up the policies. Swiss Re, based in Zurich, does the statistical heavy lifting and then re-insures local insurers who sell the policies. So far about 6 million people have enrolled, Sprenger said in an interview on Oct. 25. The goal is to have 12 million by the end of next year.
“The old theory was that there are only two segments: there’s the rich, who can afford it, and there’s the poor who cannot afford it at all,” Schwan said in the interview in Paris. “Now what you have is an emerging middle class. This emerging middle class is able to make a contribution.”
Cost of Drugs
The cost of the insurance can range from about $50 a year for a basic product to several thousand dollars for the most complete coverage, according to Swiss Re.
The average annual wage of urban workers in China, the world’s third-biggest market for drugs, has almost quadrupled in the past decade to reach 41,799 yuan ($6,681) in 2011, according to government statistics. A one-year course of Roche’s cancer medicine Herceptin costs between $27,000 and $59,000, while Avastin can cost as much as $106,000 in the U.S. Roche won’t disclose prices for China, though it says they’re similar to those in the U.S.
Roche and Swiss Re first dreamed up the program in 2010. International companies aren’t allowed to sell retail insurance in China, Schwan said, though they can provide re-insurance. So Roche’s Swiss partner had to approach local first-line insurers in China to get the program started.
Pay When Sick
Now the partners work with five local insurers and are in talks with China Life Insurance Co., the nation’s biggest insurer, which should join the program at the start of next year, according to Swiss Re. The insurance is a supplement for public coverage, which pays for about 70 percent of hospital expenses and doesn’t cover costly outpatient drugs like Herceptin for breast cancer.
State funding for China’s health insurance programs has sextupled to 240 yuan per person in the past five years, government data shows. While that’s enough to cover basic treatment, about 13 percent of Chinese households last year had to foot so-called catastrophic health expenses accounting for more than 40 percent of their income, according to a study published in The Lancet in March.
China aims to raise subsidies for in-hospital expenses to as much as 75 percent by 2015 and is considering whether to include lung cancer under a new insurance program for the seriously ill, the Xinhua news agency reported on Nov. 5, citing health minister Chen Zhu.
‘Wait for Death’
The Roche-Swiss Re program is a new concept for China. While other drugmakers have set up access plans for expensive medicines, those programs are a form of charity and some rely on the patient to pay the full drug price for a period of time, such as six months, before donating it, said Tony Mok, an oncology professor at the Chinese University of Hong Kong.
Cancer is a growing problem in China. More than a quarter of the country’s deaths are due to malignancies, and the rate is expected to rise for the next 10 to 25 years, said Qiao Youlin, director of the Department of Cancer Epidemiology at the Cancer Institute in Beijing.
An investigation in Yangcheng county, in the coal-mining province of Shanxi, found that before China introduced public health insurance in 2003 only a third of people could afford full cancer treatment, according to Qiao. Another third of people in the survey sought treatment with traditional Chinese medicine.
“The remaining one-third totally gave up,” Qiao said. “They could not get standard treatment, so they just go back home, suffer the endless pain and wait for death.”
Hoping for Charity
And for patients who do manage to pay, the cost can be crippling.
Tu Biqing, a restaurant worker from Sichuan province, said he spent more than 10,000 yuan ($1,601) in the first month after being diagnosed with esophageal cancer in late September. Ten times his monthly wage, the cost came out of his own savings, he said in a telephone interview from his hospital bed in Mianyang city in Sichuan.
Tu, 60, said he now fears he’ll need to ask for charity from family and friends as he becomes sicker.
“I can’t really swallow my medicine now because of my throat, but I am on transfusion,” said Tu, his voice frail and barely audible over the telephone. “It is going to be difficult to pay for it.”
While Roche and Swiss Re are expanding the program rapidly, it may be a long while before Tu and other lower-income workers can expect to benefit. Next year’s estimated 12 million clients represent less than 1 percent of China’s total population.
Flag in China
Roche itself has bought a group policy for all its employees in China, along with their families, for $50 per person per year.
The two companies may introduce the concept elsewhere in Asia, according to Robert Wiest, head of the reinsurer’s China unit. Thailand and Indonesia are possible markets, Wiest said in a telephone interview.
Though the program now makes up less than 5 percent of Swiss Re’s volume in China, it’s an important positioning tool for the future, he said. The company expects China to overtake the U.K. as the second-biggest reinsurance market within 10 years. “It holds up a flag in what is for us a very important market.”