Selling Hope: How the Business of Cancer Is Taking Off in China

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Lung Cancer Rates in China
China has the world’s largest number of cancer patients, with numbers continuing to balloon as the population ages, lifestyles change and environmental pollution increases. Source: Imaginechina via AP Images

One of China’s coal capitals, Datong is paying for years of heavy, gritty pollution. Cancer rates are soaring in the northern city despite efforts to vanquish the smog, and the disease accounted for a third of deaths in 2012.

By the end of the year, patients in this city bordering Inner Mongolia will get one of its province’s first privately-run, radiotherapy-equipped cancer hospitals -- built by New York-listed Concord Medical Services Holdings Ltd.

A cancer epidemic is sweeping through China, and with the investment deep in the nation’s heartland, Concord joins a string of companies racing to reach the wave of patients. There is a cancer diagnosis every ten seconds in the world’s most populous country, and the disease has spawned an ecosystem of new businesses around the rising number of affluent Chinese willing to pay for the hope of life.

Foreign hospital groups like Mayo Clinic and Cedars-Sinai Medical Center are assessing opportunities. Multinationals already on the ground -- from Roche Holding AG to General Electric Co. -- are benefiting from rising demand for oncology drugs and devices. And firms specialized in providing patients with second opinions have sprung up.

“Chinese consumers are the engine of Asia and they care about cancer virtually more than anything else: avoiding it, testing for it, treating it,” said Jeffrey Towson, professor of investment at Peking University in Beijing. “And when Chinese consumers care about something, that reverberates through the economy and the world.”

Aging Population

Overall cancer incidence in China has doubled over the past two decades fueled by an aging population, the lifestyle changes wrought by its economic boom, and a surge in environmental pollution.

The country is now home to more cases than any other, and the World Health Organization estimates that it adds 3.07 million new ones annually. Lung cancer is the most common type, and its prevalence is surging even as others such as stomach cancer that are associated with poverty level off.

Concord’s Datong investment shows how some companies are reshaping their operations to seek out potentially lucrative new opportunities in oncology. The Beijing-based company, which listed on the New York Stock Exchange in 2009, has for years supplied imaging and radiotherapy equipment to state-run hospitals. Encouraged by the Chinese government’s efforts to attract private investment to health care, the company has now begun setting up its own cancer facilities, planning as many as ten a year.

Concord in 2012 bought a 20 percent stake in MD Anderson’s Proton Therapy Center, a top ranked Texas-based facility. It now plans to leverage the brand to set up cancer hospitals in Beijing, Shanghai and Guangzhou.

“Cancer is a huge burden here and the government alone cannot fulfill the whole demand,” said Chief Investment Officer Adam Sun, without specifying the size of the company’s planned investments.

Global Rush

Spencer Koerner, who heads up Cedars-Sinai’s unit for building global collaborations, has been to China three times in the last ten months for exploratory work, and the Los Angeles-based hospital is currently in talks with four Chinese facilities for potential partnerships.

While the collaborations will cover a variety of medical specialties a lot of the focus will be on cancer, and especially lung cancer. “There are going to be a very large number of patients in China and I see a great potential for Cedars-Sinai to greatly improve outcomes and save lives as well,” said Koerner.

Mayo Clinic is supplying knowledge and expertise to a health-care company in China and considering opening a referral office in the country, said David Hayes, medical director of international collaborations. And in Boston, Harvard’s Dana-Farber Cancer Institute is exploring a variety of options to build a Chinese presence.

For Chinese patients headed for treatment overseas, local companies like Shanghai-based Mega Healthcare provide translation, visa and travel services. When Mega Health noticed that some weren’t well enough to travel, it began selling ‘second opinions’ that range from 10,000 to 30,000 yuan ($1,600 - $4,800). The customer’s medical papers are dispatched to specialists in the U.S., who study them and respond, or get on a video call, said Nicky Jin, a director.

One Child

The Chinese government faces a dilemma: it has a shortage of oncologists and its decades-long one-child policy will leave it short of caregivers as the population ages. The government has begun encouraging private investment in hospitals, sought to lower drug prices and encouraged insurance for critical illness.

Even so, “the public safety net has more holes than there’s rope,” especially in rural areas, said Ben Shobert, managing director of Seattle-based consultancy Rubicon Strategy Group. The newest, life-extending treatments are out of reach for most, who often have to make an excruciating decision between getting treatment or keeping their family’s finances afloat.

The health ministry didn’t answer calls seeking comment. Top officials have in recent years laid out ambitious pollution and tobacco control plans. In Datong, for instance, improved policies hoisted the city to the top of its province’s air-quality rankings last year. But coal still constitutes 65 percent of China’s energy mix, and it will take decades for the country to lessen its dependence on the fossil fuel.

Years of breakneck growth combined with unhealthy lifestyle factors, such as high smoking rates, are also making the cancer epidemic virtually unstoppable. Smokers may be even more likely to get lung cancer if they are exposed to high pollution levels or chemicals from coal mines, said Shelly Tse, an occupational and environmental health expert at the Chinese University of Hong Kong.

Taking Off

At hospitals, demand is ballooning for medical equipment that can help detect and treat the disease. GE says its country arm has introduced innovative technologies for cancer, provided screening devices for primary-care hospitals and trained medical teams.

Swiss drugmaker Roche Holding AG, the world’s largest seller of oncology therapies, has in recent years tested cost-sharing methods with Chinese provinces to make medicines more affordable. Roche in November said it would invest 450 million Swiss francs ($476 million) in a China-based manufacturing facility for diagnostic products, including those for oncology.

Cancer is one of the fastest-growing pharmaceutical categories in China, with a market size of about 65 billion yuan and a compounded annual growth rate of 17 percent, estimates Citigroup analyst Richard Yeh. Roche, Sanofi, Novartis AG, AstraZeneca Plc, and Pfizer Inc. sold about a third of the cancer drugs in the country in 2013, according to Yeh.

Beijing this week began a ban on smoking in public places that involves fines of up to 10,000 yuan. Even if more draconian measures to curb smoking and pollution are introduced, demand for such drugs and services are expected to keep rising.

“The public health scenario over the next 30 years is terrifying and there’s a desperate need to create actual capacity on the service side,” said Shobert, the consultant. “We’re likely going to see rates of diseases like lung cancer that are much worse than anyone can imagine.”

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