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China Healthcare and Life Sciences 2020

China Healthcare and Life Sciences 2020
World’s Largest Transformation: How is Big-Pharma Leveraging the Opportunity?

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  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • In state-owned hospitals, CEO is the key responsible person. So they are also the key decision-maker of the decision-making team in medical equipment purchase, instead of the expert who use the equipment as key person in western hospitals.Because CEO is not professional in techniques of the equipment to purchase, so in Chinese market, technical advantages are not as powerful as in western market. CEOs only recognize key parameter differences. So setting up industry standard and right positioning are the most important works to do in medical equipment marketing.The decision making team in China’s state-owned hospitals have a very complicated and even uncertain structure. Team members within hospital include CEO, vice CEOs, party secretary, equipment officer, user department director, related department directors, etc. Team members outside hospital include reference experts, healthcare bureau, government leader, related university dean, etc. To conquer such a big team, a sales dream-team is a must need
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk
  • On April 6, 2009, the Central Committee of the Communist Party of China (“CCCPC”) and the State Council jointly endorsed and issued the Guidelines on Deepening the Reform of the Healthcare System (”Guidelines”)1, followed by the Implementation Plan on Focuses for Deepening the Reform of the Healthcare System 2009-2011 issued on April 7, 2009 (“Implementation Plan”)2. The Guidelines focus on directions, objectives and policy structure to reform the healthcare system in the long term, while the Implementation Plan details objectives in the coming three years. Priorities of China’s health reforms include:Expansion of health insurance programs, especially rural healthcare cooperatives• Building hospitals and clinics• Reducing government expenditures for drug costs• This memorandum addresses some of the efforts to control drug costs through the national essential drug system.Regulatory Frame work is improving: Guangdong Provincial FDA’s decision to revoke the licenses of 67 medical device manufactures and nearly three hundred distributors for producing and selling sub-standard goods. Meanwhile, the SFDA – China’s premier food, drug and medical device watchdog – recently completed the draft version of the revised regulations for the supervision and administration of medical devices. These two developments give a clear signal that quality is becoming increasing important, which is good news for the multinationals and also enlightened indigenous playersNational Essential Drug System – Program ChangesOne of the major reforms in the healthcare system in 2009-2011 will be the establishment of the National Essential Drug System, which covers three primary areas:1) Establishing the administrative system to adjust the National Essential Drug List. The National Essential Drug List will be renewed periodically. Ma Xiaowei, Vice Minister of Health, said in early April 2009 that the formulation of the National Essential Drug List is the first task to establish the National Essential Drug System, and it was intended to be issued in April3. As of early May, however, the List has not yet been published. 2) Establishing a bidding process for essential drugs. Both the producer and the supplier of essential drugs used by government affiliated medical institutions may be required to participate in public bidding held by institutions designated by the provincial-level government. Enterprises in various regions and in various ownerships shall be treated equal in the bidding. Purchase/pricing of essential drugs with small dosage, and certain designated production/suppliers will be structured through bidding. The central government will set guiding retail prices for essential drugs, while provincial-level governments may set unified prices of essential drugs in the corresponding regions within the price scope set by the central government. Government affiliated basic medical institutions shall sell drugs to patients at the purchase price without markup.3) Establishing a system that encourages the use of essential drugs. All government affiliated retail drug stores and medical institutions shall have and sell national essential drugs for patients’ needs. Urban and rural basic medical institutions shall all use national essential drugs, while other medical institutions shall give priority to the use of essential drugs and follow the requirement on utilization percentage of essential drugs which will be set by the health administrations later. All the essential drugs will be covered by the basic medical insurance system, and may see higher reimbursement rates than non-essential drugs in the insurance system. 2New drugs and patented drugs will be subject to an economic evaluation to help determine pricing. The economic evaluation is intended to provide an objective analysis of quality, curative effect, cost, safety, and other clinical and economic features. These evaluations will contribute not only to drug pricing, but also to the formulation of a drug reimbursement catalogue, formulation of national essential drug list, and prescription plans at medical institutions for patients. Further, in order to control costs, new generic drugs will be required to be sold at the current lowest market price. The markup percentage in the drug distribution will also be strictly regulated. Drug pricing in China currently is under the primary supervision of the National Development and Reform Commission (NDRC) and the State Food and Drug Administration (SFDA). Hospital Purchase/Sale of DrugsAnother major reform involves restrictions on public hospitals’ purchase and sale of drugs. More specifically, hospitals will no longer be able to markup the price on drugs in sales to patients. The percentage markups of drug prices will be gradually eliminated. To protect hospitals from significantly reduced revenues, patients’ payment to hospitals for medical services will be increased, and the government will also increase subsidies to public hospitals on infrastructure construction, purchase of capital equipment, public sanitary missions, etc.. Basic medical services of non-profit medical institutions shall follow the guiding price set by the government, and medical institutions are independent to price other medical services. The central government will work out the pricing policies and measures on medical services, and the provincial-level or the municipal-level pricing authorities will set the guiding prices jointly with the administration of health, human resources and social security. Observations and Implications:The Guidelines and the Implementation Plan are another step for the Chinese government to lower drug prices. Provincial-level governments will have the power to set drug prices of essential drugs in the corresponding jurisdictions through public bidding. Essential drugs will be sold in government affiliated basic medical institutions at the purchase price without markup, while in the future, both essential drugs and non-essential drugs will be sold without markup in more medical institutions including public hospitals. Official figures suggest that currently, about half the income of China’s general hospitals may come from price markups of the drugs sold to maintain operations. The government will reinforce the financial support to those institutions to maintain their daily operations. The unified procurement of essential drugs is intended to be fair to both domestic and foreign invested drug companies, as pursuant to the Implementation Plan, “enterprises in various regions and various ownerships are equal in taking part in the fair competition” in the bidding.To promote the reform, the State Council has established the Steering Team on Deepening the Reform of the Healthcare System, which is under the leadership of Vice Premier Li Keqiang and composed of officials from 16 ministries of the State Council including the National Development and Reform Commission, the Ministry of Health, the Ministry of Finance, the Ministry of Human Resources and Social Security, etc. The Steering Team will be responsible for formulating pilot program policies and principles. More affiliated documents and regulations on operations are expected to emerge soon.dk

China Healthcare and Life Sciences 2020 China Healthcare and Life Sciences 2020 Presentation Transcript

  • Global Strategy
    Global Challenges
    Executable Solutions
    China Healthcare & Life Sciences 2020
    World’s Largest Transformation: How is Big-Pharma Leveraging the Opportunity?
    France Houdard
    Managing Director
    france.houdard@exolus.com
    February 2011
    Copyright © 2011 Exolus. All rights reserved.
  • PATENTS  PIPELINES COSTS  TALENT  EMERGING MARKETS 
    Global Framework: Big-Pharma Faces Major Opportunities & Challenges
    • Global Patent Expirations
    • Tidal wave of patent expiries this decade: USD150 billion between 2005 and 2015.
    • Pipeline Productivity Collapse
    • Big Pharma has doubled investment in R&D during past decade. Yet, the return on this investment has plummeted.
    • Today’s new drug yield is barely ½ the new drug production of 10 years ago - despite a doubling in number of compounds being placed into early-stage clinical testing.
    • Healthcare Cost Explosion
    • Massive cost balloon for Big-Pharma across entire global value chain, from Production through R&D.
    • Western Wages are 5 to 10 times Greater than Wages in China, from production operators to scientists and engineers.
    • Innovation, R&D and Clinical Trials head East
    • Extremely high priority and focus placed on national development of scientific base and capabilities in China: already 1.6 million science and engineering graduates per year in PRC (China has 10 x size of graduate pool compared to US).
    • China clinical trial benefits include Costs Savings (30-50%); Time Savings (30%); Large Technical Talent Pools; “Gene Pool” advantages in clients; broad infrastructure.
    • Emerging Markets & Middle Classes
    • Massive Fundamental shift in leading global market sizes, from developed to emerging markets – e.g., BRIC (Brazil, Russia, India, China).
    • China Middle Class growing by an additional 80 million people every 5 years.
  • China to be USD103 billion Market (2015)
    Future China: Projected to be World’s 2nd Largest Market by 2015
    Pharmaceutical Market Size Country Ranking (2000 – 2015f - USD billion)
    Sources: IMS; GSK, “Assessment of Opportunity for Pharmaceutical Manufacturers in Emerging Markets” JMCP; Monitor Analysis; Exolus
  • Future China: World Bank Projects China to be #1 Economy by 2020
    2020 GDP*
    GDP* PPP-adjusted
    France
    France
    EU-27
    UK
    UK
    EU-27
    US
    US
    Germany
    Germany
    China
    India
    Japan
    $13.4 tr
    $29.6 tr
    $28.8 tr
    $30.0 tr
    $6.8 tr
    GDP* PPP-adjusted
    2009 GDP*
    China
    6,4 trillionsde $
    3,6 trillionsde $
    Japan
    India
    Japan
    $9.1 tr
    $14.2 tr
    $4.1 tr
    $14.1 tr
    $3.8 tr
    Source: World Bank
  • 900
    800
    99
    700
    90
    600
    500
    53
    170
    355
    400
    461
    525
    239
    300
    255
    200
    157
    106
    100
    73
    35
    0
    2005
    2010F
    2015F
    2020F
    2025F
    Future China: Forward Trend in Exploding Middle Class
    China’s Middle Class: 400 million (2010) … 500 million (2015)
    Upper Middle Class
    Middle Class Income Bands for Urban Population
    Lower Middle Class
    Urban Household Income (US$ – PPP-Adjusted)
    822
    822
    756
    756
    Global > US$107,800
    684
    684
    Affluent US$3,800 - 107,800
    607
    607
    531
    531
    Urban Population (millions)
    Upper Middle US$21,501 – 53,900
    Lower Middle US$13,500 – 21,500
    Poor < US$13,500
    Sources: Urbanization Rates, Population based on UN, World Urbanization Prospects 2007; MGI Consumer Demand 2008
  • Future China: Forward Trend in Mass Migration into Cities
    China’s Urban Population: 600 million (2010) … 700 million (2015)
    China’s Urban Population versus Rural Population
    1,600
    1.45 billion
    1.4 billion
    1,400
    1.3 billion
    1.2 billion
    624
    1,200
    Rural Population (million)
    1 billion
    705
    1,000
    Population (million)
    782
    800
    833
    822
    822
    Urban Population (million)
    600
    684
    400
    531
    381
    200
    245
    Urbanization
    57%
    23%
    49%
    40%
    31%
    0
    1985
    1995
    2005
    2015
    2025
    Source: World Urbanization Prospects 2007
  • Future China: Emergence of 10+ Mega-Cities Size of Countries
    Mega-City Profile: 60 Million Population + World-Class Infrastructure
    China’s Emerging MEGA-CITIES
    Mega-Cities
    Mega-Corridors
    Deserts
    Heilongjiang
    Steppe
    Jilin
    Liaoning
    Xinjiang
    Inner Mongolia
    Beijing
    Gansu
    Tianjin
    Hebei
    Mountains
    Shanxi
    Ningxia
    Shandong
    Qinghai
    Jiangsu
    Shaanxi
    Henan
    Tibet
    Anhui
    Shanghai
    Hubei
    Sichuan
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Fujian
    Guizhou
    Yunnan
    Guangdong
    Guangxi
  • China Today: Undergoing Major Healthcare and Insurance Reform
    RMB 850 billion Investment
    Healthcare and Insurance Reform (2009 – 2001)
    • Basic Medical Security (Insurance)
    • Reduce drug expenses and medical access to urban and rural residents
    • Individual subsidy goes from RMB60 to RMB120 starting in 2010
    • Improve Healthcare Services at the Grass-Roots Level
    • Focus on establishing 2,000 provincial level hospitals and complete 29,000 township clinics and 5,000 clinics in remote villages
    • Construction and training at the township, community, and village levels
    • Construct Preliminary National Essential Medicine System
    • Drug reimbursements by hospitals and pharmacies
    • Catalogue necessary drugs produced and distributed under government control and supervision starting in 2009; covered by medical insurance
    • Basic Public Health Services
    • Citizens (urban & rural) disease prevention awareness programs
    • Gradually provide equal public health services in both rural and urban areas
    • Public Hospital Reform Pilot Projects
    • Reform public hospital administration, operations and supervision to improve service quality
    Source: Ministry of Health, National Development and Reform Commission
  • Improve Healthcare Services at the Grass-Roots Level
    China Today: Construction of New Healthcare Institutions
    Construction of Healthcare Institutions
    ren* = renovations
    Source: Ministry of Health, National Development and Reform Commission
  • Table of Contents
    • Strategic Platform Optimization
    • Today’s Burning Platform – Revenue Growth, Structural and cost Reduction
    • Foreign Investors- What do Foreign Investments cover Today in China ?
    • Market Drivers- Growth Drivers for the Bio-Pharma Sector
    • Income Growth: Forward Trend in Exploding Middle Class
    • Aging Population: One-Child Policy
    • Lifestyle Changes: Wealth tied to Disease Acceleration Activities
    • Insurance Reform: Programming to Universal Coverage by 2012
    • Costs- How China’s Labor Costs and Utility Costs compares to the countries in West
    • Opportunities- Where are Pareto Optimal Deployment Envelopes?
    • Next Generation Optimization
    • The Future – Third, Fourth & Fifth Generation Global Strategies
    • Innovation– Where is Big Pharma Migrating R&D Functions to China & What?
    • Innovation – Driving Creation of a National Innovation System
    • Innovation – Programs Created to Undergird National Innovation System
    • Clinical Trials– Value Chain Focus for Extensions to China
    • Clinical Trials – Total Savings in China Clinical Trials ? Other Benefits?
    • Clinical Trials – Drivers for Increasing Future Extensions to China
    • Shared Services Centers - Strategic Sourcing / Mega-City Overlay
    • Opportunities – VIPCO’s from Migration to Advanced Operation Models in China
    • China’s Healthcare & Insurance Reform
    • Basic Medical Security – Reduce drug expenses & Increase individual subsidy
    • Healthcare Services Improvement– Focus on Grass-Roots Level: Provincial hospital, township and village levels clinics
    • National Essential Medicine System– How is Drug Reimbursements related to Medical Insurance?
    • Basic Public Health Services– Where is Manufacturing taking Place?
    • Public Hospital Reform– Pilot Projects, focus on every field to improve hospital service quality.
    • China’s Economic Health
    - China Investor Confidence: China Ranks #1 as Most Attractive Investment Destination of Future
    - Financial & Economic Health: China Balance Sheets - Banks, Enterprises, Households
  • Big-Pharma in China: Strategic Platform Optimization
  • Today’s Burning Platform: Revenue Growth, Structural Cost Reduction
    Market Access … Revenue Growth … Global Structural’ Cost Reduction
    Revenue
    Innovation
    MARKETS
    Research
    Marketing
    KNOWLEDGE
    Development
    Sales
    Virtually Integrated Models
    IT HR
    Shared Services
    Shared Service Centers
    F&A Procure
    Distribution
    Sourcing
    Research & Development
    Production
    Production / Sourcing
    RESOURCES
    Sales / Marketing
    Cost Reduction
    DRIVING Shareholder Value
  • COST INFRASTRUCTURE TALENT  SUPPLY CHAIN  IPR
    Foreign Investors: Where is Big Pharma Producing Today in China?
    Big-Pharma Production Operations in China
    Liaoning
    Beijing
    Dalian
    Tianjin
    Changshu
    Wuxi
    Suzhou
    Shanghai
    Guangzhou
    Shenzhen
    Source: All Publically Available Information, Company Websites
  • China Healthcare Structure
    Foreign Investors: Where is Big Pharma Producing Today in China?
    AstraZeneca
    • Largest manufacturing investment in Asia that produces 80% of the products it sells in China.
    • AstraZeneca has successfully launched 3 key products in China. Iressa(gefitinib) is the first selective Epidermal Growth Factor Receptor Tyrosine Kinase (EGFR) inhibitor for lung cancer treatment. LosecMUPS (omeprazole magnesium enteric-coated tablets) is the first proton-pump inhibitor (PPI) OTC drug in China.
    Bristol-Myers Squibb
    • Sino-American Shanghai Squibb Pharmaceuticals Ltd., (SASS)manufactures: Antibiotics, Cardiovascular, Multi-vitamin Supplements, Analgesics, Metabolics and Topicals.
    • Joint Venture with 3 product lines : Ostomy care, skin care and advanced wound care.
    Eli Lilly
    • Plant focused on a wide range of products such as cancer, mental disorders and diabetes.
    • Production aside, Eli Lilly has set up a sourcing center in China, which it uses to actively source products from China and as part of a broader strategy to increasingly “outsource” active pharmaceutical ingredient (API).
    • Of note, China is now the second largest manufacturer of chemicals for pharmaceutical manufacturing in the world, second only to the USA, which has an output approximately 1.4 x larger.
    GSK
    • Plant set up to produce prescription drugs and vaccines, as well as drugs for Hepatitis A.
    • Secondary plant focusing on compounding, filling and packaging Drugs for Hepatitis B.
    • Secondary plant focusing on OTC’s such as Type II Diabetes and Hepatitis.
    • GlaxoSmithKline signed a cooperation agreement with Chinese vaccine manufacturer, Shenzhen Neptunus Interlong Bio-Technique (NIBT) to form a joint venture to develop and manufacture influenza vaccines for China, Macau and Hong Kong.
    Source: All Publically Available Information, Company Websites
  • China Healthcare Structure
    Foreign Investors: Where is Big Pharma Producing Today in China?
    Pfizer
    • Multi-functional Organic Synthesis Plant.
    • Plant for lyophilized and anti-oncology products, such as Pharmorubicin and Adriamycin.
    • Secondary plant focusing on Veterinary & agricultural antibiotic power formulation.
    • Pfizer China unveiled in 2009 its new Cephalosporin manufacturing facility at its Dalian manufacturing site.
    • Pfizer (www.pfizer.com) Pfizer plans to launch 15 novel products in China, three times the number from the past five years.
    Novartis
    • Plant focused on cardiovascular diseases, immunology and transplantation, rheumatism/bone metabolism, oncology, central nervous system, dermatology, and ophthalmology.
    • Secondary plant for animal health products.
    • Plant producing intermediates products for exports -- drugs for leukemia, epilepsy, hypertension and other diseases.
    Novo Nordisk
    • Nordisk created Novo Nordisk (China) Pharmaceutical through a joint venture with Suzhou Hongda Group. The company has a factory for enzymes and a second plant in Tianjin.
    • Production facility established for FlexPen, NovoPen and Penfill (insulin) products.
    Roche
    • Vitamin A plant.
    Wyeth
    Plant for OTC and ethical products such as antibiotics, woman healthcare, multi- vitamin & calcium supplements.
    Infant formula packaging plant.
    Source: All Publically Available Information, Company Websites
  • WEALTH + AGING POPULATION + LIFESTYLE/DISEASE + HEALTHCARE REFORM + INSURANCE REFORM
    1. Market Drivers: Growth Drivers for the Bio-Pharma Sector
    • Middle Class/ Income Growth
    • Approximately 90 million people join China’s middle class every 5 years.
    • Middle income segment are principal buyers of imported pharma.
    • Aging Population
    • Over-65 age segment: growing most rapidly (2 to 2.4 ppa), expected to reach 111 million by 2010.
    • 55+ age group: to increase by 42% in next ten years; 0-14 age segment: to decrease by 8%.
    • Lifestyle Changes
    • Lifestyle-related disease accelerating -- e.g. obesity, diabetes, cardiovascular, chronic respiratory diseases.
    • China will have 38 million diabetic patients by 2025, almost double projections of diabetes for the US.
    • 1/3 of world’s smokers are Chinese.
    • 840,000 known AIDS/HIV victims largely concentrated between 20 and 39 years of age
    • Healthcare Reform
    • USD20 billion is being spent on medical sector reform over the three years spanning 2009 to 2011.
    • Insurance Reform
    • Insurance coverage for urban dwellers has increased 10-fold in past 10 years.
    • Nearly all of China’s 1.3 billion population covered by some form of insurance by 2012.
    Source: Ministry of Health, KPMG
  • 900
    800
    99
    700
    90
    600
    500
    53
    170
    355
    400
    461
    525
    239
    300
    255
    200
    157
    106
    100
    73
    35
    0
    2005
    2010F
    2015F
    2020F
    2025F
    1.1 Income Growth: Forward Trend in Exploding Middle Class
    China’s Middle Class: 400 million (2010) … 500 million (2015)
    Upper Middle Class
    Middle Class Income Bands for Urban Population
    Lower Middle Class
    Urban Household Income (US$ – PPP-Adjusted)
    822
    822
    756
    756
    Global > US$107,800
    684
    684
    Affluent US$3,800 - 107,800
    607
    607
    531
    531
    Urban Population (millions)
    Upper Middle US$21,501 – 53,900
    Lower Middle US$13,500 – 21,500
    Poor < US$13,500
    Sources: Urbanization Rates, Population based on UN, World Urbanization Prospects 2007; MGI Consumer Demand 2008
  • 1.1 Income Growth: Significant Income Stratification across China
    Coastal Wealth Spreading Across the Country
    Per Capita Annual Income
    (USD, PPP-Adjusted)
    China Per Capita Annual Income
    (USD, PPP-Adjusted)
    Heilongjiang
    Jilin
    Xinjiang
    Liaoning
    Inner Mongolia
    Beijing
    Gansu
    Hebei
    Tianjin
    Shanxi
    Ningxia
    Shandong
    Qinghai
    Henan
    Jiangsu
    Shaanxi
    Tibet
    Anhui
    Shanghai
    Hubei
    Sichuan
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Guizhou
    Fujian
    Yunnan
    Guangdong
    Guangxi
  • 1.1 Income Growth: Healthcare Expenditure Per Capita Trend
    Healthcare Expenditure Per Capita Continues to Grow
    Healthcare Expenditure Per Capita (2005 – 2020f)
    249% Increase
    USD per Capita
    Source: PWC, Prof. Wen Tiejun, Renmin University of China
  • 1.2 Aging Population: Aging Population … One-Child Policy
    87 MM 65+Yeal Old in 2000 … 112 MM in 2010 … 340 MM in 2050
    Population under 14 Years Old (% of Total Population)
    Population over 65 Years Old(% of Total Population)
    Source: Dr. Jean-Paul Rodrigue; Exolus
  • 1.3 Lifestyle Changes: Wealth tied to Disease Accelerating Activities
    Disease Acceleration
    Lifestyle Changes
    1/3 of world’s smokers are Chinese
    Lifestyle-related disease accelerating -- e.g., obesity, diabetes, cardiovascular, chronic respiratory diseases
    China will have 38 million diabetic patients by 2025, almost double projections of diabetes for the US
    840,000 known AIDS/HIV victims largely between 20 and 39 years of age
    Source: Dr. Jean-Paul Rodrigue
  • 1.4 Healthcare Reform: Undergoing Major Healthcare Reform
    RMB 850 billion Investment
    China Healthcare Reform (2009 – 2011)
    • Improve Healthcare Services at the Grass-Roots Level
    • Focus on establishing 2,000 provincial level hospitals and complete 29,000 township clinics and 5,000 clinics in remote villages
    • Construction and training at the township, community, and village levels
    • Construct Preliminary National Essential Medicine System
    • Drug reimbursements by hospitals and pharmacies
    • Catalogue necessary drugs produced and distributed under government control and supervision starting in 2009; covered by medical insurance
    • Basic Public Health Services
    • Citizens (urban & rural) disease prevention awareness programs
    • Gradually provide equal public health services in both rural and urban areas
    • Public Hospital Reform Pilot Projects
    • Reform public hospital administration, operations and supervision to improve service quality
    Source: Ministry of Health, National Development and Reform Commission
  • 1.5 Insurance Reform: Programming to Universal Coverage by 2012
    8-Fold Increase in Insurance Coverage in 10 Years … Coverage for Nearly All by 2012
    China Insurance Reform
    Source: CCCPC, Xinhua, Public Websites
  • 2. Costs: Does First-World Infrastructure with Third-World Wages Exist?
    Asia Labor Costs: 10 – 20 Times Cheaper than in West
    Labor Costs (USD per month)
    Utility Costs
    Note: Units for Electricity $/kWh; Water in USD/m3; Waste Water in USD/m3
    Source: Wage Data from the International Labor Organization; Utilities Rates from Public Utilities (non-negotiated rates)
  • Opportunities: Where are Pareto Optimal Deployment Envelopes?
    Low Cost Bands + Emerging Mega-Cities + High-Income Geographies
    Per Capita Income / Wage Band Overlay
    Per Capita Annual Income
    (USD, PPP-Adjusted)
    Heilongjiang
    Jilin
    Xinjiang
    Liaoning
    Inner Mongolia
    1
    1
    Beijing
    Gansu
    Wage Bands
    Hebei
    Tianjin
    Mega-City
    Shanxi
    Ningxia
    Mega-Corridors
    Shandong
    Qinghai
    0.65 - 0.75
    Henan
    Jiangsu
    Shaanxi
    1
    1
    Tibet
    Anhui
    Shanghai
    Hubei
    0.8 - 0.9
    Sichuan
    0.7 - 0.8
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Fujian
    Guizhou
    Yunnan
    1
    1
    Guangdong
    Guangxi
  • Big-Pharma in China: Next Generation Optimization
  • The Future: Third, Fourth & Fifth Generation Global Strategies
    INNOVATION
    REVENUES
    KNOWLEDGE
    MARKETS
    Sales
    Engineering
    Marketing
    R&D
    IT HR
    SSC
    Virtually Integrated Models
    F&A Pro’c
    Shared Service Centers
    Distribution
    Sourcing
    Research & Development
    Production
    Production / Sourcing
    Sales / Marketing
    RESOURCES
    DRIVING Shareholder Value
    COSTS
  • 3. Innovation: Where are Key Nodes for Structuring R&D Platforms?
    “R” of R&D Seeks Universities … “D” Seeks Markets & Production
    R&D Centers
    (# Operations)
    Research & Development Centers
    (Number of Operations in Select Cities)
    > 10
    > 50
    Deserts
    Heilongjiang
    Steppe
    > 150
    Jilin
    Wage Bands
    Mega-Cluster
    Liaoning
    Xinjiang
    Mega-Corridors
    1
    Inner Mongolia
    Beijing
    Gansu
    Tianjin
    Hebei
    Mountains
    Shanxi
    Ningxia
    Shandong
    Qinghai
    0.65 - 0.75
    Henan
    Jiangsu
    Shaanxi
    1
    Tibet
    Anhui
    Shanghai
    Hubei
    0.8 - 0.9
    Sichuan
    0.7 - 0.8
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Fujian
    Guizhou
    Yunnan
    1
    Guangdong
    Guangxi
    Source: UNCTAD, WIR
  • 3. Innovation: Where is Big Pharma Migrating R&D Functions to China
    Costs Disease Diversity R&D Clinical Trials
    R&D Centers
    (# Operations)
    Research & Development Centers
    (Number of Operations in Select Cities)
    > 10
    > 50
    Heilongjiang
    > 150
    Jilin
    Wage Bands
    Mega-Cluster
    Liaoning
    Xinjiang
    Mega-Corridors
    Inner Mongolia
    Beijing
    Gansu
    Tianjin
    Hebei
    Shanxi
    Ningxia
    Shandong
    Qinghai
    Henan
    Jiangsu
    Shaanxi
    Tibet
    Anhui
    Shanghai
    Hubei
    Sichuan
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Fujian
    Guizhou
    Yunnan
    Guangdong
    Guangxi
    Source: All Publically Available Information, Company Websites
  • China Healthcare Structure
    3. Innovation: Companies Migratingup R&D Value Chain? What?
    AstraZeneca
    • Establishing a base for its new Innovation Centre China (ICC) to focus on the benefit and value of innovative medicines for Chinese patients, initially concentrating on cancer through the development of knowledge about Chinese patients, biomarkers and genetics (translational medicine).
    • AstraZeneca announced in 2007 a strategic partnership with Peking University 3rd Hospital to open its first Clinical Pharmacology Unit (CPU) in China. The unit aims to enhance local clinical research capabilities and speed up access to new medicines to benefit Chinese patients.
    Eli Lilly
    • Lilly’s China research and development operation is intended to become its largest overseas operation, and its focus will be in neuropathy, diabetes, and cancer.
    • While most foreign Big Pharma players tend to establish their own R&D centers in China, Eli Lilly decided instead to use a strategy of partnering with local discovery and development companies, as well as Contract Research Organizations (CRO’s).
    • Eli Lilly partners include ChemEplorer and PharmExplorer, who provide for pharmaceutical and biology early-stage development services. Eli Lilly also has a partnership with China’s Hutchinson MediPharma for pre-clinical targetting work in oncology and inflammation.
    • Strategy appears to be rooted in a combination of cost reduction; broadening exposure to huge, diverse and complex China market; expanding exposure and knowledge of china regulatory system; risk reduction; and broadening range of R&D leads.
    GSK
    • Research in the areas of neurodegeneration and neuroinflamation with the objective of creating new medicines for such severe disorders as multiple sclerosis, Parkinson’s disease, and Alzheimer’s disease. The center will eventually direct the global discovery and development activities within its therapeutic area, from drug-target identification to late-stage clinical studies.
    • GSK expects to employ up to 1,000 people in its Shanghai Neuroscience Research Center.
    Source: All Publically Available Information, Company Websites, genengnews
  • China Healthcare Structure
    3. Innovation: Companies Migratingup R&D Value Chain? What?
    Pfizer
    R&D center responsible for study design, data management, and analysis for global clinical trials.
    Novartis
    Novartis is building a $100 million R&D center in the Zhangjiang Hi-Tech Park in Shanghai. The center will initially focus its research on diseases particularly common in China (e.g., esophageal and liver cancer, hepatitis B and C).
    Biomedical R&D center focusing on biomedical, molecular & cellular research, DNA/RNA/Protein manipulation to fight cancer.
    R&D center focusing on biochemistry R&D for drugs used to treat leukemia, epilepsy, hypertension and other diseases.
    Novo Nordisk
    First R&D center established in China by international bio-pharmaceutical companies with the focus on biotech. Currently, the center has three research departments: Molecular Biology, Protein Chemistry, and Cell Biology. The center is strongly focused on research within therapeutic proteins.
    It also established a $10 million research and development center in Beijing with a focus on diabetes, which is a serious and growing problem in China. Novo Nordisk works with the Ministry of Health on educational campaigns.
    Roche
    First fully functional China clinical drug R&D center
    Center allows Roche to bring a new drug candidate to China, leaving the center responsible for all work necessary to take the candidate completely through the regulatory process. This includes both experiment design, and statistical analysis.
    Initially, the R&D center will focus on oncology and metabolic drugs.
    Roche has invested $11 million in creating a research and development center in Shanghai that is focused on medicinal chemistry. Another important research area is genetic epidemiology in the Chinese population.
    Source: All Publically Available Information, Company Websites, genengnews
  • 3. Innovation: China Mobilizes all Resources to Develop Talent
    China Science and Engineering: 1.6 Million Graduates per Year
    University Natural Sciences Degrees(1985 – 2005)
    USA
    China
    Thousands
    Sources: National Science Board, Science & Engineering Indicators 2008
  • 3. Innovation: Driving Creation of a National Innovation System
    19% YoY Increase in Research Spend for past Decade … RMB460 billion Total
    China National Innovation System
    1. Institutions that Drive Innovation
    CAS
    MOST
    CAE
    NSFC
    NDRC
    MOE
    MOC
    MOF
    2. Programs, Initiatives, Processes for Innovation
    4. Intermediaries / Aggregators of Innovation
    Government Programs
    863 Program
    973 Program
    211 Program
    985 Program
    NSFC Funding
    National Key Technology R&D
    Hi-Tech Development Zone (HTDZ)
    Science Parks
    Incubators
    Natural Clusters
    3. Academia, Firms, People that Drive Innovation
    Academia
    Private Firms
    Source: CCCPC
  • Ministry of Science and Technology (MOST) Programs for R&D
    3. Innovation: Programs Created to Undergird National Innovation System
    Core Programs Supporting R&D in China
    Source: MOST, NDRC
  • Ministry of Education (MOE) Programs for R&D
    3. Innovation: Programs Created to Undergird National Innovation System
    Core Programs Supporting R&D in China
    Source: MOST, NDRC
  • COST & TIME to DEVELOP 1 DRUG in WEST: 16 YEARS … USD1.3 billion
    3. Clinical Trials: Value Chain Focus for Extensions to China
    drugs
    Discovery
    Up to 1MM drugs
    Pre-Clinical Testing
    10 to 50
    4-5
    Phase I
    Phase II
    2-3
    Phase III
    1 - 2
    FDA
    1
    Market
    Phase IV
    1
    years
    0
    16
    2
    4
    6
    8
    10
    12
    14
    Source: A. DiMasi and HG Grabowski: Managerial & Decision Economics 28 (2007); Zinnov LLC
  • China Now Fastest Growing Location for Trials … 428 Trials Currently Registered
    Clinical Development
    Other 10%
    20 %
    Phase I
    Regulatory
    5%
    65 %
    Phase II & III
    Clinical Development
    40 %
    Pre-Clinical
    20%
    15 %
    Phase IV
    Discovery
    25%
    3. Clinical Trials: Total Savings in China Clinical Trials? Other Benefits?
    Source: Zinnov LLC; US National Institute of Health
  • 3. Clinical Trials: Drivers for Increasing Future Extensions to China
    COST (50%) TIME (50%) INFRASTRUCTURE TALENT  PATIENTS 
    • China cost of clinical trials approximately 50% Western costs.
    • China actively incentivizing foreign pharma companies to conduct R&D in country by offering a range of financial and other incentives.
    Costs
    Infrastructure
    • Numerous world-class medical facilities that meet global requirements for clinical testing.
    • China graduating roughly 10x science grads than the US.
    • Large pool of highly trained nurses, physicians, technical personnel
    • Strong IT skills and vast pool of IT engineers.
    Technical Talent
    Time
    • Fast speed of patient enrollment; savings up to 30% on enrollment time.
    • US FDA has established an office in China to help in oversight of trials.
    • Vast, diverse, unique diseases across China’s heterogeneous population.
    • Huge numbers of “flexible” and “untested” patients concentrated in all major cities, very quick and efficient patient recruitment.
    Patient Pool
    Sources: Exolus Research; PWC, The changing dynamics of pharma outsourcing in Asia (2008)
  • 4. Shared Services Centers: Strategic Solution Envelopes
    Efficiencies … Economies of Scale … Knowledge Sharing … Standardization
    Strategic Sourcing / Mega-City Overlay
    Shared Services
    Wage Bands
    Deserts
    Mega-City
    Heilongjiang
    Steppe
    Mega-Corridors
    Jilin
    Liaoning
    Xinjiang
    1
    Inner Mongolia
    Beijing
    Gansu
    Tianjin
    Hebei
    Mountains
    Shanxi
    Ningxia
    Shandong
    Qinghai
    0.65 - 0.75
    Henan
    Jiangsu
    Shaanxi
    1
    Tibet
    Anhui
    Shanghai
    Hubei
    0.8 - 0.9
    Sichuan
    0.7 - 0.8
    Zhejiang
    Chongqing
    Jiangxi
    Hunan
    Fujian
    Guizhou
    Yunnan
    1
    Guangdong
    Guangxi
    Source: KPMG “A new Dawn: China’s Emerging Role in Global Outsourcing”, 2009
  • FIPCO MODEL  VIPCO MODEL (CSO, CMO, CRO, PC-CRO, INSTITUTIONS)
    Opportunities: Virtually Integrated Pharma Company (VIPCO’s)
    FIPCO(Fully Integrated Pharma Co.)
    VIPCO(Virtually Integrated Pharma Co.)
    Partnerships
    Sales &
    Distribution
    Sales &
    Distribution
    CSOs
    Manufacturing
    CMOs
    Manufacturing
    Clinical
    Development
    CROs
    Clinical &
    Regulatory
    Preclinical
    Support
    Preclinical CROs
    Research
    Technology
    R&D
    Academia, Scientific, Institutions
    Source: G. S. Burrill, ‘Biotech 2008: A 20/20 Vision to 2020’, The Burrill Indiana Life Sciences Meeting, October 2008.
  • MIGRATION to ADVANCED OPERATING MODELS in CHINA: CSO, CMO, CRO
    Opportunities: Who Programming to VIPCO Extended Model?
    CSO/CRO Extended Cases
    • BoehringerIngelheim(CSO)
    • First Big Pharma to have entrusted a sole distributor for all of its products in China: Sinopharm.
    • Sinopharm is China’s largest pharmaceutical distributor by sales and the only China distributor to cover the entire PRC.
    • Boehringer Ingelheim’s sales spiked upward by 45% from 2006 to 2007; Sinopharm saw an annual growth rate of 32%.
    • AstraZeneca (CSO)
    • In a recent move, AZ licensed Cubicin, an antibiotic for skin infections, for development and commercialization on the Chinese market.
    • Pfizer (CRO)
    • Outsources to Wuxi PharmaTech: synthetic chemistry, parallel medicinal chemistry, and bio-analytical services. It also has a 3-year CRO contract with Wuxi PharmaTech to provide services in the areas of: in-vitro Absorption, Distribution, Metabolism and Excretion (ADME) services.
    • GSK (CRO)
    • Outsources to Shanghai Institute of Materia Medica (SIMM) chemistry requirements.
    • AstraZeneca (CRO)
    • Invested USD14 million in Wuxi Pharma Tech for the synthesis of 150,000 compounds.
    • AZ has contracted WuXiPharmatech, a Chinese CRO, for the synthesis of collections of drug candidates, and signed an agreement with Shanghai’s Jiao Tong University for research on the genetics of schizophrenia.
    China’s CRO Market
    Sources: Goldman Sachs: Healthcare Services: CROs, December 2007; Exolus Research
  • China’s Healthcare & Insurance Reform
  • China’s Healthcare & Insurance Reform
    RMB 850 billion Investment
    Healthcare & Insurance Reform (2009 – 2011)
    1. Basic Medical Security (Insurance)
    • Reduce drug expenses and medical access to urban and rural residents
    • Individual subsidy goes from RMB60 to RMB120 starting in 2010
    2. Improve Healthcare Services at the Grass-Roots Level
    • Focus on establishing 2,000 provincial level hospitals and complete 29,000 township clinics and 5,000 clinics in remote villages
    • Construction and training at the township, community, and village levels
    3. Construct Preliminary National Essential Medicine System
    • Drug reimbursements by hospitals and pharmacies
    • Catalogue necessary drugs produced and distributed under government control and supervision starting in 2009; covered by medical insurance
    4. Basic Public Health Services
    • Citizens (urban & rural) disease prevention awareness programs
    • Gradually provide equal public health services in both rural and urban areas
    5. Public Hospital Reform Pilot Projects
    • Reform public hospital administration, operations and supervision to improve service quality
    Source: Ministry of Health, National Development and Reform Commission
  • 1.1 Basic Medical Security (Insurance)
    Goal of Universal Coverage by 2011
    Basic Medical Security
    1.1 Expanding Urban Coverage of Basic Medical Security
    • The UEBMI covers those individuals employed by institutions and includes retirees and migrants in urban cities.
    • Those who cannot be covered by UEBMI will be entitled to URBMI (voluntary enrolment) at a lower premium to include: children, students, seniors, and the unemployed.
    1.2 Expanding Rural Coverage of Basic Medical Security
    • New Rural Cooperative Medical Scheme (NRCMS) enrolment is conducted voluntarily and measured on a per family unit basis.
    • Younger generation may opt out of the program at a later point
    1.3 Improving the Level Funding and Administration
    • Fund raising actives and standards will be increased as well as premiums paid by individuals
    • Funding provided by government subsidies will increase and have risen to RMB 120 per person under the NRCMS
    1.4 Basic Medical Security Administration
    • Increased efforts to maintain accumulated annual balances for UEBMI and NRCMS
    • NRCMS fund surplus shall not exceed 25% of the current year’s pooling fund
    Source: Ministry of Health, National Development and Reform Commission
  • 1.2 Improve Healthcare Services at the Grass-Roots Level
    Improve Healthcare Services at the Grass-Roots Level
    Improved Heath Services
    2.1 Construction of Grassroots Institutions
    • 2,000 county-level hospitals (including TCM hospitals)
    • 29,000 township health centers
    • Renovation and expansion of over 5,000 lead township health centers
    • 3,700 urban community health centers and 11,000 community health stations will be newly built or renovated
    • Construction of 2,400 urban community health centers in regions with difficulties.
    2.2 Strengthening Healthcare Workers
    • Training to healthcare professionals and practitioners; 360,000 township health centers, 160,000 for urban community health institutions and 1.37 million for village clinics
    • Rural posting for doctors to receive intermediate / senior titles and graduates encouraged
    2.3 Reforming Compensation Mechanism
    • Operational costs will be covered by government subsidies and through services charges
    • Healthcare staff will be compensated similar to that of local public institutions.
    2.4 Transforming Operations
    • Push for “initial diagnosis at community health centers” and dual referral systems
    • Establish all aspects of human resources mgmt, payments and workflows
    Source: Ministry of Health, National Development and Reform Commission
  • China Hospitals: 20,291 (2009)
    1.2 Improve Healthcare Services at the Grass-Roots Level
    China’s Hospitals
    Tier III – 1,233: Hospitals provide highest level of medical and health services including medical science research and education; 200 – 500 beds
    Tier II – 6,523: Hospitals provide comprehensive medical and health service at the community level, including medical science research and education; > 100 beds
    Tier I – 5,110: Hospitals provide precautionary, medical, and healthcare treatments including rehabilitation to the community with a certain number of populations.
    Other – 7,425: Hospitals are unrated (rural); < 20 beds
    Source: Ministry of Health, KPMG
  • Initial Diagnosis Pushed to Community Health Centers to Relieve Tier III/II
    1.2 Improve Healthcare Services at the Grass-Roots Level
    China’s Healthcare Institutions
    China’s Hospitals & Inpatient/Outpatient
    Source: Ministry of Health
  • 1.3 Construct Preliminary National Essential Medicine System
    Drug Lists … Reimbursements … Pricing … Production … Distributions
    National Essential Medicine System
    3.1 National Essential Drug List (NEDL)
    • All state owned healthcare institutions will be required to stock and prescribe drugs within the NEDL
    • The NEDL includes chemical drugs and biological products, traditional Chinese medicine (TCM), and Chinese patent medicines; 205 western, and 102 TCM products
    3.2 NEDL Reimbursements
    • All medicines in the NEDL are included in the drug reimbursement list
    • Reimbursements rates are much higher for medicines in the NEDL that of non-essential medicines.
    3.3 Monitoring Drug Pricing
    • Thepricing of essential drugs are decided by governments through a public tendering at the provincial level
    • Grassroots medical institutions will sell all NED’s with zero profit margins.
    3.4 Restructuring Drug Manufacturing and Distribution
    • Government push for industry consolidation (M&A / restructuring) of pharmaceutical manufacturing and distributors to achieve national operational scale
    • In addition, the distribution of essential drugs will also be carried out through unified channels by either drug manufacturers or drug distributors
    Source: Ministry of Health, National Development and Reform Commission
  • 1.4 Basic Public Health Services
    Standardization of Records … Disease Prevention Programs
    Basic Public Health Services
    4.1 Basic Public Health Services
    • Health records to be standardized nationwide
    • Intensify basic health knowledge by employing publicity (CCTV) and education to the public
    4.2 National Programs
    • Continue implementation efforts for major public health programs; disease prevention
    • National programs; Hepatitis B vaccinations for children under the age of 15, improving water supply and toilet facilities in rural areas etc.
    4.3 Strengthening Building Capacity
    • Improvingspecialized public health institutions such as: mental health, maternity, health supervision, family planning, etc.
    • Strengthening of major disease/plague forecasting and early warnings programs to reach the mass population effectively
    4.4 Ensured Funding
    • The central government will grant subsidies to the regions with financial difficulties through transfer payments
    • Free basic public health services will be provided to both urban and rural residents as initiatives are created (item by item)
    Source: Ministry of Health, National Development and Reform Commission
  • 1.5 Public Hospital Reform Pilot Projects
    Hospital Management … Administration … Operations … Supervision
    Public Hospital Reform Pilot Projects
    5.1 Pilot Institutional Management Systems
    • Local governments to seek out effective formats to separate government agencies from public institutions ie. government administration and business operations
    • Implement strict measures to monitor hospital budgets and expenditures and strengthen cost controls
    • Improve governance, human resource systems, implementing performance based salaries
    • Standardized training programs for resident physicians
    • Encouraged to develop multi-site practice for certified individual practitioners
    • Develop patient oriented approaches to hospital care
    5.2 Pilot Compensation Mechanism
    • Efforts will be made to limit revenue streams to service charges and fiscal subsidies and eliminating prescription drug revenues; thereby reducing escalating drug prices
    • Ensure funding by government for emergency rescue, foreign aid, assistance to rural areas; offer preferential investments TCM hospitals (including ethnic minority hospitals), women and children’s hospitals, and hospitals specialized in prevention and treatment of communicable diseases, occupational diseases, mental disorders, etc
    5.3 Pilot Healthcare Structures and Sponsors
    • Actively and steadily seek out to transform chosen public hospitals to non-public institutions
    • Private Investors are encouraged to sponsor non-profit hospitals
    • Preferential tax policies for non-profit hospitals will commence
    Source: Ministry of Health, National Development and Reform Commission
  • China’s Economic Health … Report Card
  • Senior Executives Select China as Most Attractive in World
    Investor Confidence in China #1 in World
    Top 14 Most Attractive Destinations for Future Investment (2009 – 2011)
    %
    Percent of Responses
    Source: World Investment Prospects 2009 - 2011
  • Foreign Investment Continues to Soar – Strong Vote of Confidence
    Record FDI of USD106 billion in 2010
    Foreign Direct Investment Inflows (1990 – 2010)
    USD
    Source: China Statistical Yearbook
  • Healthy Balance Sheets – Banks, Enterprises, Households
    USD2.85 trillion in Foreign Reserves … Insulation of Financial System … Clean Balance Sheets
    • China’s Financial System Healthy, Benefits from Insulation, Abundant Liquidity
    • China banks cleaned up in 1990s: Non-performing loans in 1997 averaged 40 – 50%; only 6% in 2007.
    • Financial institutions extended approximately USD1.4 tr in new loans in 2009; almost double that of 2008; and USD1.2 tr in 2010, slightly down from 2009.
    • Forex Reserves Achieve Record High in 2010: USD 2.85 trillion
    • The Central Bank has accumulated over USD 2.85 trillion in foreign reserves.
    • The accumulation of large external surpluses means financial system enjoys abundant liquidity.
    • Clean Balance Sheets for Enterprises and Households
    • State Owned Enterprise net profits as share of GDP has grown from (-1%) in 1997 to (+4.3%) in 2007.
    • Record corporate profit growth over past 5 years (industrial profits rose 38 ppa); liability ratios declined.
    • Urban incomes have nearly doubled in past 10 years.
    Source: Deutsche Bank; Standard Chartered; UBS; IMF; Other
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