1. 1 6 i n s i g h t j a n ua ry / f e b rua ry 2 0 1 5
hea lthcare
B Y SAN DY JOHNSTON, JIA XU AND JOHN LIN
T
umultuous changes in the past year
have greatly impacted China’s
pharmaceutical market, and in turn,
the activities of both domestic and
multinational companies in the
country. Events include the release of the latest
essential drug list, or EDL, in 2013, new GSP (good
supply practice) standards, a pricing review of
approximately 60 pharmaceutical manufacturers,
this time including domestics, and anti-bribery
investigations of various pharmaceutical companies.
Of these, the anti-bribery investigations have
proved the most high-profile and the most alarming
area of concern for pharmaceutical manufacturers.
This is because the behavior of China’s physicians
has significantly shifted, complicating their
willingness to work with corporate players.
Triggered partly by the anti-bribery
investigations, medical practitioners have showed a
growing reluctance to meet with sales personnel.
Similarly, they are also less willing to participate in
meetings, seminars and conferences, to accept
lecture fees and to give out any personal
information.
In response, many of the largest MNC players are
evaluating their physician interaction model in
China. Significant changes include an end to
physician speaker fee payment and sponsorship of
physicians for academic meeting participation, the
removal of revenue target-related KPIs for sales
personnel, and the restructuring of compensation
and benefits with less weight on the achievement of
revenue targets.
It’s too early to determine if and how the MNCs’
changes in practice will affect sales volumes. Recent
results suggest that for some, the impact has been
significant, while for others, less so. What is certain
is that merely amending KPIs and incentives are
insufficient methods of coping with China’s
changing pharmaceutical market.
The Chinese government has demonstrated an
ongoing commitment to expand the nation’s
healthcare system – from increasing coverage and
affordability for patients to improving service quality
and operations efficiency. However, physicians
remain overwhelmingly underpaid and overworked.
As civil servants with a capped salary, physicians in
China only take home an average of RMB5,000 to
8,000 each month despite typically caring for dozens
upon dozens of patients each day. Meanwhile, we
observe that an increasing number of MNCs are
entering the Chinese market; the government is
broadening healthcare coverage through the creation
of a multi-tiered system, whereby patients are
triaged to different levels of hospitals; and the
interaction time between the patient and doctor is
steadily declining.
Issues for MNCs
In light of these trends, the questions companies
must ask themselves are:
How do you change your operating model to
meet these changes?
What are you doing to meet the evolving
demands of physicians?
How do you adapt to decreasing interaction time
between the patient and the doctor?
Macrotrends
With the government’s push towards expanded
healthcare coverage for the country, several effects
are coming into place:
Hospital groups are forming, and significant
activities around public hospital restructuring
and privatization are taking place. With private
investment pouring into hospitals and the
public’s improved perception of these private
healthcare institutions, the question becomes:
how can MNCs take advantage of this shift?
Does the solution lie in matching premium
What can
pharmaceutical
do when
physicians refuse
to meet sales
representatives?
The Doctor is Not Available
Sandy Johnston
Jia Xu
John Lin

2. j a n u a ry / f e b ru a ry 2 0 1 5 i n s i g h t 1 7
private hospitals’ value proposition with MNC
product offerings? What does more investment
mean for physicians at these hospitals? What are
the implications for pharmaceutical MNCs’
strategy? In the short-term, for instance, these
hospitals may serve as a gateway for patients with
more money to spend on insurance coverage and
higher-end treatments.
Another key trend is the transformation of
reimbursement, with the Chinese government
piloting various schemes to control healthcare
spending. Take for example the pay-per-disease
approach, whereby medical insurance does not
cover any payments beyond a pre-defined level
per disease. A related initiative involves
reimbursement pre-payment in which medical
insurance bureaus pre-pay the allocated total
reimbursement budget to the hospitals. The
allocation amount is calculated based on
schemes, such as using per capita medical
expenses as a calculation basis. The hospital
absorbs any expenses beyond the pre-payment
budget and any savings may be kept by the
hospitals.
Physicians are rated against a number of factors
for salary and promotion consideration, ranging
from the number of patients they treat to the
quality of care and service they provide, as well as
the academic research and publications they
produce. In other words, medical practitioners
must meet a diversifying set of key performance
indicators to advance.
Physicians’ needs
We have observed in China a shift in
physicians’ clinical needs from product-centric
to solution-centric, similar to the mature
markets. The latter model concentrates on how
to provide therapies to diseases instead of merely
focusing on how to treat their symptoms. More
specifically, physicians practicing in big city big
hospitals are requesting information beyond
product efficacy and are looking to acquire
knowledge on providing better therapy solutions
to patients.
Physicians’ new needs cannot be fulfilled by a
sales force alone. Pharmaceutical companies
must consider all facets from the physician to
multichannel approaches, marketing and
medical affairs. How are corporations supporting
physicians? Can they help to offer broader
Pharmaceutical companies must change the way they interact with doctors

3. 1 8 i n s i g h t j a n ua ry / f e b rua ry 2 0 1 5
research support or improvements in operation
efficiencies, etc.?
Interaction time
As face-to-face interactions between big city, big
hospital physician and pharma sales reps decline, it
becomes worthwhile to consider mixed channels for
communication. Invest in how digital solutions – the
use of web, mobile, social networks, wireless devices,
and physician portals – can play a role in liaising
with technology-savvy physicians and potentially
with other key stakeholders. At the same time,
pharma companies should tailor the traditional sales
forces face to face approach for interacting with
physicians in the broader market.
The future
Physicians’ needs are clearly evolving, driven by
changes to the healthcare system’s performance
measures and promotion criteria and in response to
higher levels of public scrutiny.
In contrast, pharmaceutical companies’ sales and
marketing spending remains steadfastly oriented
towards face-to-face product retailing. Spending
continues to rise, along with the rise of the total sales
force. Other channel investments remain stubbornly
low and are frequently considered additive rather
than genuine alternatives.
So when will the tipping point be reached? When
will alternative channels (e.g. call center, web and
social media) actually replace face-to-face selling
and meetings?
The evolution towards multi-channel approaches
in many other markets has been slow with mixed
results, but the China market has characteristics
suggesting potential for a more rapid evolution.
These characteristics include increasing time and
compliance presence, experience, and trust in other
channels – most notable, digital. Equally, there is
potentially greater scope for product and service
bundling and outcomes/value payments. These will
take time, but they are likely to play an increasingly
important role.
Sandy Johnston is Partner at PwC in Shanghai, Jia
Xu is a Partner in Beijing and John Lin is Senior
Manager in Shanghai
Better patient
affordability
Greater hospital
operation efficiency
Broader healthcare
coverage
Improved healthcare
service quality
Effects / Implications
Healthcare institutions Payors Physicians
Hospital groups
Privatization and private
investment of hospitals
Tiered healthcare system
Primary vs. Advanced care
system
DRG (diagnosis-related
group) payment
Reimbursement budget cap
pre-payment
Drug ratio budgeting /
allocation
Clinical practices
- Number of patients treated
- Quality of treatment
Academic research
- Publications
Source: PwC