gif of two pharmacist scales weight drugs

China Is Striving for the World’s Best, Cheapest Healthcare

Less than five years ago, Chinese healthcare was a closed-off, low-quality system where the richest left the country for medicines and treatments, and the poorest took a bad diagnosis as a death sentence. Now, the world’s second largest economy is striving to become a place where patients can get the best, newest drugs and services faster and cheaper than anywhere else.

Pressured by its growing middle class, the Chinese government has set itself an ambitious target: first-world health outcomes at a fraction of the cost that other countries, especially the U.S., pays.

To get there, China has doubled the amount it’s pouring into public hospitals in the last five years to $38 billion. It wants to see a healthcare industry valued at $2.3 trillion by 2030, more than twice its size now.

The cost control part will be much harder. Beijing wants the biggest pharmaceutical companies in the world to bend the knee, lowering their prices drastically in order to get access to its vast patient pool. In new drugs, pharmaceuticals from Pfizer to Roche have agreed to cuts of as much as 70%.

It’s an unprecedented balancing act, and the outcome will affect not just billions of Chinese patients, but the future of the global healthcare industry.

China is already catching-up to the U.S. on some important health metrics, and hopes to surpass their doctor patient ratio.

Chinese life expectancy has almost caught up with the U.S.

100

Projected

75

25

0

1950

2000

2050

2095

Source: United Nations
China targets more doctors per patient than the U.S.

2013

2017

3

Target

2013

2030

2017

2

2.5

3

Doctors per 1,000 people

Sources: China’s National Health Commission, OECD
China’s infant mortality has plunged to the same level as the U.S.

Projected

150

100

50

0

2095

1950

2000

2050

Source: United Nations
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China is pouring billions into public hospitals and has revamped its drug approval system. Some foreign drugs and medical trials are now approved quicker than in the U.S.

Fiscal subsidies to public hospitals have more than tripled

¥

270.5B

2018

¥

84.9B

2010

Source: China’s National Health Commission
Average drug approval time has been sliced to a third
Source: Boston Consulting Group
The number of drug reviewers will grow more than tenfold in six years

120

in

2014

1,600

planned

in

2020

Source: Various media reports
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It wants the best drugs and care but it does not want to pay a hefty amount that would stress the country’s medical insurance fund.

China healthcare spending as a share of GDP is less than half the U.S.’s

$20.5T

Total GDP (current US$)

2018

$13.6T

Total GDP (current US$)

2018

Sources: U.S. Centers for Medicare and Medicaid Services, National Health Commission, World Bank, OECD
The average Chinese person spends a fraction of what an American does on healthcare

$12K

6

0

2013

2013

2018

2018

Sources: U.S. Centers for Medicare and Medicaid Services, National Health Commission
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To pay for these drugs without busting the national budget, it wants global pharmaceutical companies to drop prices drastically in exchange for access to China’s vast patient pool.

This means Chinese patients are starting to pay much less than American patients for the same drugs.

For generic drugs, prices have dropped an average of 52% so far through a government bulk-buying program.

Generic drug prices in China are plummeting under a government program

ENTECAVIR

Used for treating hepatitis B

0.5mg* 28 tablets

¥17.36

¥83.16

¥672

Generic price in

China after cuts

Price

in U.S.

Original retail price in China

ATORVASTATIN

Used to treat high cholesterol

20mg* 7 tablets

¥6.6

¥180

¥58

Source: Drugs.com
New drugs are being added to the state medical insurance so patients pay less out-of-pocket

128

150

New drugs

added

120

90

60

30

0

2016

2017

2018

2019

Source: National Healthcare Security Administration
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All this activity has lured a groundswell of venture capital funding to China’s burgeoning biotech start-up space, while the biggest global pharmaceutical firms like Roche and Merck see a growing share of revenue coming from the Asian nation.

Venture capital funding for Chinese biotech firms has more than quadrupled in the last three years

$17.6B

696

deals

$18B

2018

14

2017

12

8

2016

4

2015

0

0

200

400

600

800

Number of deals

Source: ChinaBio LLC
Global drugmakers are seeing a rising share of revenue come from China

AstraZeneca

Roche

Merck

20%

15

10

5

0

2012

2014

2016

2018

Source: Companies’ financial results
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But re-making the healthcare system for the world’s most populous country won’t come without challenges. The size of the patient population in China—whether in cancer, rare diseases or simply ageing—is bigger than any other country has faced before.

China’s cancer survival rates are lower than in the U.S.

Target

100%

68%

55.5%

50

40.5%

0

2015

2030

Source: National Health Commission, Chinese media reports
Population of Chinese aged 65 and older is growing faster than the U.S.

Projected

80%

60

40

20

0

2010

2014

2018

2022

Sources: National Bureau of Statistics of China & U.S. Census Bureau projection (normalized from December 31, 2008)
China’s number of cases in rare diseases, like hemophilia, is bigger than elsewhere

136,000

20,000

Sources: Chinese local media, U.S. Center for Disease Control and Prevention
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At stake is not just the well-being of millions of Chinese people, but the future of the global healthcare industry. China has set its sights on creating a holy grail healthcare system that satisfies patients’ needs and control costs while still encouraging cutting-edge research—and the world is watching.