China’s healthcare system, which combines private and public care, has been undergoing significant reform since 1996. Now in its third wave, the objective of the transformation is to establish an equitable and effective system for all people (universal coverage) by strengthening healthcare delivery, health security and provision of essential medicines. The target date for the latest wave was 2020, and reforms were on track. Then COVID-19 arrived.
Within this article, we explore four elements of China’s healthcare system that could be reimagined as a result of COVID-19 with David Ng, Head of China & Hong Kong Research and Head of China & Hong Kong Healthcare.
1. New innovative drugs entering the Chinese market
In the last five years, as part of the third wave of reform, China has experienced a government-led shift in focus away from traditional health supplements and prescription drugs to newer options, such as PD-1s, a cancer immunotherapy drug and EGFR-TKIs, a lung cancer drug.
The new focus has resulted in faster turnaround times for approval of new domestic and imported drugs. It has also caused an uptick in research and development into new challenger products which are now entering China’s pharmaceuticals market quicker than before and creating a more competitive pharma industry.
“If these shifts continue, we can expect to see newer drugs launch in market quicker with more affordable access,” explains Ng.
2. Startups and venture capital funding enabling localised growth
In the last quarter, venture capital funding in Asia reached $18.7 billion across 1,021 deals.1 To date, some of the largest venture capital raises have been led out of China2 and while global venture capital funding has taken an initial hit from COVID-19, Ng believes that “medtech and healthtech startups will remain in the limelight for months and years to come,” as China’s appetite to scale these industries continues to grow.
Not surprisingly, against this backdrop some Chinese medtech startups have pipelines of over 20 new drugs initiating trials in the years ahead. New drugs are mostly created through in-house development, collaboration with partners and in-licensing. At this pace, China is likely to have an influx of new options available within the next two to five years.
“It has never been more important to support and fund health and sciences startups. These companies are going to help better prevent diseases like COVID-19 and will enable us to have the knowledge, tools and resources in place to better handle them if they do.”
3. A decentralised future?
There are three tiers of care with China’s healthcare system. First, the primary care facilities that provide affordable first contact care, often in village medical centres. The second tier is made up of small township health centres which have approximately ten to thirty beds providing specialist services. These two tiers are recognised as the “rural collective health system” in China. The third tier is established hospitals staffed by senior doctors, serving between 200,000-600,000 people each.3 Regardless of the tiers, patients are free to select their preferred provider and accordingly, the larger and well-resourced hospitals often receive a disproportionate share of patients.
“In China, we see 8 per cent of the hospital system caring for more than half of the entire country’s patients,” explains Ng.
This problem was exacerbated by the outbreak of COVID-19 which saw patients grouped together in China’s main hospitals. As a result, Ng believes that “there may be a trend towards decentralization of tier-three hospitals to divert more traffic and medical professionals to smaller tier-two and tier-one providers.”
A second trend could see the larger tier-three hospitals establish tier-two and tier-one outposts under the same entity while also encouraging their doctors to practice in rotation throughout all tiers. Either of these approaches could help to enable faster responses to future outbreaks with less disruption to healthcare delivery and would reduce travel time for patients living in remote areas.
4. Competitive pricing for greater accessibility
High drug prices have been a barrier within China’s healthcare reform for some time with certain generic drugs currently being sold at higher prices compared to other markets.4 Ng explains that a solution to this has been “a Government focus on bulk-buying drugs from pharma suppliers and during this process, the Government will indicate the fixed volume of the amount of drugs sold annually and then set a price which is often 70-80% below the original selling price.
With or without COVID, China could see drug prices continue to decline in coming years, which will free up national insurance reimbursements to go to newly approved drugs. In addition to this, a similar objective could be to reduce unnecessary distribution costs in the value chain of drugs reaching the market. “This could be achieved through implementing a streamlined invoicing system, which removes the middle-man handling and under-the-table rebates which can still occur within the healthcare system,” says Ng.
Beyond the pandemic, which has tested the healthcare systems of most countries to their limits, further evolution is likely in China. It will be fuelled by the ultimate goal of universal coverage for a population with a growing appetite for next-generation healthcare, coupled with accelerated global advancements in medical technology and public health management catalysed in part by COVID-19.