Switzerland-based pharma firm Roche has partnered with reinsurance company Swiss Re in China to provide a supplementary health insurance package that may make expensive drugs more accessible to China's emerging middle class.
IHS Global Insight perspective | |
Significance | Roche (Switzerland) has partnered with compatriot reinsurance firm Swiss Re to provide an affordable health insurance package that supplements the provision provided under China's national Basic Medical Insurance schemes. |
Implications | The scheme has enrolled 6 million customers at present, with 12 million forecast to join by the end of next year following the expected involvement of China Life Insurance. |
Outlook | Increasing the role of private insurance in China has received high-level government backing, and is likely to become more of a feature of the health market in future. |
Roche (Switzerland) has developed a novel partnership with compatriot reinsurance firm Swiss Re to indirectly boost access to its cancer drugs in China, Bloomberg reports. Rather than providing drugs through charitable patient-access schemes, Roche is partnering with compatriot reinsurance firm Swiss Re on the provision of a private insurance package for China's middle classes, offering top-up coverage in addition to the public Basic Medical Insurance (BMI) schemes.
Under a partnership devised in 2010, Roche is providing health data to Swiss Re which the latter uses to tailor insurance policies, with prices ranging from a basic USD50 offering to several thousand dollars. Foreign firms are banned from directly selling retail insurance in China, and Swiss Re has been re-insuring five locally based insurers to sell the policies. To date, 6 million people have signed up, and Swiss Re expects this figure to be doubled over the next year with the expectation that China's largest insurer China Life Insurance will become a partner. Enrolment rates are forecast to increase by 20%.
Roche's chief executive officer (CEO) Severin Schwan describes the arrangement as "creating a market", and foresees greater potential for private insurance provision in China, as quoted by Bloomberg. Schwan states that, whereas "the old theory was that there are only two segments: the rich, who can afford it, and the poor, who cannot", Roche and Swiss Re are now addressing the needs of China's new "emerging middle class".
Outlook and implications
China's national health insurance offering has expanded dramatically in recent years: from 23% coverage in 2003, coverage expanded to 95% of the population by 2010, provided by the two urban BMI schemes or the New Rural Cooperative Medical Scheme (NRCMS). The BMI insurance benefits are variable from region to region, however, with reimbursement rates generally very low and copayments high by developed world standards: patient out-of-pocket expenses accounted for 37% of total health spend in 2010 (World Bank). The depth of coverage provided can be lacking, with average inpatient reimbursement rates for those with NRCMS insurance only 41% in 2010. The BMI schemes also fail to cover a number of chronic diseases, although addressing this lack has been made a priority (see China: 24 September 2012: China Releases Details of Planned Insurance Coverage Expansion for Chronic Diseases).
The opportunity for private insurance in assisting with health provision was underlined recently by newly appointed premier Li Keqiang, who indicated the government's willingness for private insurance to play a complementary role alongside BMI schemes (see China: 26 July 2012: China's Premier-in-Waiting Signals Greater Role for Private Insurance). Pledges to increase the role of private insurance were first made in China in a 1996 five-year plan, but rising incomes and an ageing population may now be making this a more realistic option. Private health insurance accounted for around 2% of total health expenditure in 2010, but forecasts predict the private industry could grow by 10–26% annually to reach around CNY700 billion (USD111 billion) by 2020 in a best-case scenario.
The Chinese market has a number of specific demands, and foreign firms are still not permitted to retail health insurance packages. The two market leading Chinese insurance firms are China Life Insurance and Ping An, and the potential of Roche and Swiss Re's involvement in China's private insurance market will be greatly enhanced by partnering with China Life. The two firms state that the model devised in China could also be expanded to other countries in Asia, with Thailand and Indonesia potential markets.
Roche now views China as a crucial business driver. Overall revenues from the country increased by 38% during 2011, and there is a significant need for personalised medicines such as Herceptin (travutuzumab), which recently gained the additional indication of gastric cancer in China (see China - Switzerland: 19 October 2012: Roche launches Herceptin for gastric cancer indication in China). Sales of Herceptin in China grew by 128% during 2011, despite the fact that Herceptin retails for a price of CNY24,900 (USD3,955) for 440mg (source: 315jiage.cn), higher than the US retail price of USD3,135 (source: IHS Global Insight, although excluding potential discounts).