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The business of healthcare in china   01-21-13
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The business of healthcare in china 01-21-13

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The decision to go to China is never an easy one, especially given the amount of energy and investment the country's central government is making. But how do you craft the right market access …

The decision to go to China is never an easy one, especially given the amount of energy and investment the country's central government is making. But how do you craft the right market access strategy for China? What are the right questions to ask, the best approach that build consensus within your business?

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  • 1. + The Business of Healthcare in China January 21, 2013 www.AsiaHealthcareBlog.com www.RubiconStrategyGroup.com
  • 2. +  2009 investment by China’s central government of RMB 1.13 trillion into healthcare.  12th 5 Year Plan (5YP) has RMB 4.4 trillion planned specifically for healthcare.  Government plans to add:  150,000 primary care physicians in next 5 years.The Opportunity  2,000 new county hospitals.  29,000 new township hospitals.  5,000 existing hospitals upgraded.  95% of all Chinese covered by expanded national insurance.  Expanded national drug formulary, access to new diagnostics and medical devices for treatment of chronic diseases.
  • 3. + A Sense of Scale China Government Healthcare Spending 2,500.00 40 35 2,000.00 30 25 1,500.00 20 1,000.00 15 10 500.00 5 0.00 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Billion RMB YOY Growth (%)
  • 4. + Where China’s Government Is Investing Where Chinas 2009 Healthcare Reform Went New Rural Co-Op and Urban Residents 12% Insurance 7% Insurance Subsidies for Enterprises in Difficulty 45% Indigent Patients Medical Aid 24% Public Health Awareness Investment Primary Care & Public Hospitals 9% Upgrade & Construction Drug Subsidies Other 2% 1%
  • 5. + The Opportunity  What is going on within China’s healthcare industry is likely a once in a generation opportunity.  Some estimates suggest the amount China is investing into the country’s healthcare system is the most amount in the shortest period of time any country has ever spent on its healthcare system in the history of the world.  The sheer amount of money and the number of means by which it is impacting the country’s healthcare system can easily cloud which parts are ready for foreign investment and expertise.  Some sectors are still not ready, even though the government would like to see improved infrastructure and know-how deployed there.  Before a company can determine if the market segment where they want to operate is ready, they have to consider whether they are ready to go to China and whether the capital they would like to deploy in China can be best spent there or elsewhere.
  • 6. + For Company’s New To China  China should be a strategic, not purely opportunistic, pursuit.  The decision to go to China should reflect a holistic appraisal of internal capabilities, financial resources, and risk appetite versus other domestic or foreign investment opportunities.  The process of choosing should allow key management team members and other stakeholders to ask questions, raise concerns, and feel their input has been sought and incorporated into the final decision.  If a decision to go forward in China is made, your management team should have several different market access strategies presented with a comprehensive analysis of each, along with an idea on how to properly market your services to the Chinese consumer.
  • 7. + A Disciplined Approach  Segments this analysis into four distinct questions:  Question 1: Do we, as a company (management team & ownership) have the bandwidth and cultural DNA to export our business model to China’s emerging healthcare economy?  Question 2: If yes, what is it going to take to export our business model? This is a resource and process question that isn’t specific to China.  Question 3: Could we more easily export our business to another country versus China? Here, the analysis begins to get China- specific, but also is looking at opportunity costs for China.  Question 4: If China is the right choice, what will it take to successfully export our company to China? What should we be prepared for, what can we do to avoid the typical China market entry errors specific to the healthcare industry?
  • 8. + Some Factors to Keep in Mind  How the Chinese consumer …. How China Pays for Healthcare  Rationalizes healthcare 100% expenditures. 90% 80% 38.2 35.5 44.1 40.4 49.3 53.6 52.2 70% 59.0 60.0 57.7 55.9 60% 50% 34.9 35.9 40% 34.9 33.6 29.9 32.6 30% 27.2 29.3 25.6 24.1 26.6 20% 27.2 28.6 10% 22.3 24.7 15.5 15.9 15.7 17.0 17.0 17.9 18.1 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Government Social Insurance Out of Pocket
  • 9. + Some Factors to Keep in Mind McKinsey: What Drives Affluent Chinese into Private Healthcare 25%  How they view “private” healthcare (≠ VIP). 20% 15%  How they view 10% diagnostics, devices and 5% drugs. 0%  How they view services.
  • 10. + Contact Information Benjamin Shobert Founder, Managing Director Rubicon Strategy Group, LLC Two Union Square 601 Union Street, Suite 4200 Seattle, WA 98101 Phone: 206-652-3572 Fax: 206-652-3205 Mobile: 317-777-2926 Email: bshobert@rubiconstrategygroup.com URL: www.CrossTheRubiconBlog.com or www.AsiaHealthcareBlog.com