China's health reforms are set to stimulate greater demand for medicines in China, with rural county hospitals and urban community health centres set to develop into new market opportunities for foreign pharma firms. Novo Nordisk (Denmark) and Pfizer (US) are currently working on training rural doctors in diabetes treatments as part of their strategy to develop the county hospital market.
IHS Global Insight perspective | |
Significance | More details are emerging of the increased reimbursement levels for rural patients signed up to the New Rural Co-Operative Medical Scheme, with 90% reimbursement for 20 serious illnesses effective from January. |
Implications | The policy is not a temporary one, with further expansion of reimbursement expected in future, and local media forecasting that the policy will stimulate and unlock market potential in rural county hospitals. |
Outlook | The county hospital market is seen as the next frontier for foreign pharma firms, and is seeing the adoption of different market-access strategies, with Novo Nordisk (Denmark) and Pfizer (US) leading the way. |
New details are emerging of the potential for pent-up demand for medicine in China to be released by recent health reforms, with rural county hospitals and urban community health centres set to play a bigger role in the provision of healthcare, providing pharma firms with new markets.
As announced by the Ministry of Health last week, alongside increased government enrolment subsidies, rural residents signed up to the New Rural Co-operative Medical Scheme can now receive higher reimbursement rates than previously if suffering from 20 specific serious illnesses (see China: 11 January 2013: China's MoH announces increased rural subsidy for health insurance among targets for 2013). Effective from the beginning of 2013, as reported by Xinhua, reimbursement rates for the 20 serious illnesses have been increased so that expenses from CNY8,000 (USD1,285) to CNY50,000 are reimbursed at 65%, expenses of CNY50,000–80,000 are reimbursed at 80%, and patients spending over CNY80,000 receive 90% reimbursement. The 20 serious illnesses in question are: uraemia, childhood leukaemia, paediatric congenital heart disease, breast cancer, cervical cancer, severe mental disease, multidrug-resistant tuberculosis, AIDS-related opportunistic infections, lung cancer, oesophageal cancer, stomach cancer, colon cancer, colorectal cancer, chronic myeloid leukaemia, acute myocardial infarction, cerebral infarction, haemophilia, type 1 diabetes, hyperthyroidism, and cleft lip and palate.
Outlook and implications
The new reimbursement model will see patients' out-of-pocket spending burden decrease, as the government tries to fulfil its promises to address inequities between rural-urban health provision, and particularly to ensure that rural families are no longer bankrupted by a family member's serious illness. The reimbursement model for specific diseases is one that will be built on in the future, with medium- and long-term developments expected to include greater co-ordination and shared policies between the urban and rural basic medical insurance schemes, and the removal of restrictions according to disease type. In the short term, the new reimbursement policy is expected to provide greater growth momentum, particularly to domestic pharmaceutical companies, which have suffered under the price-cutting policies of recent years, and can expect to benefit from greater volume demand for cheap generics in rural county hospitals as a result.
Foreign pharma firms look to the countryside
Rural county hospitals have been the beneficiaries of much of the government's investment in upgrading healthcare infrastructure since the start of health reforms in 2009, receiving CNY47.15 billion over 2009–11, as medical equipment and diagnostic device provision have been increased to comparable levels seen in city hospitals. The government recently pledged CNY400 billion in spending to 2020 dedicated to improving rural healthcare facilities. The roughly 10,000 county hospitals offer access to 650 million people, and foreign pharma firms are beginning to take an interest in gaining access to these markets. A report late in 2012 from Boston Consulting Group outlined the market potential, noting the role county hospitals now play in initial diagnosis and maintenance therapies for chronic diseases like hypertension and diabetes: 50% of hypertension patients were first diagnosed in a county hospital in 2012. Although the market is forecast to be worth CNY280 billion by 2015, of equal interest to foreign pharma firms is the prediction that rural patients will be able to spend more on drugs and have already shown willingness to upgrade treatments from locally produced generics to more expensive foreign-produced products for conditions such as hypertension.
A report in China Daily today (25 January) shows that Big Pharma have already recognised the potential in lower-tier cities and rural areas, and are adopting different strategies in order to establish a footprint. Novo Nordisk (Denmark) and Pfizer (US) are reported to be working with the Ministry of Health's Centre for Disease Control and Prevention to train local doctors in small cities and counties in relation to diabetes treatments. This kind of strategy is necessary in the highly fragmented and geographically dispersed county hospital market, where domestic companies have a strong presence. Novo Nordisk is the only foreign firm in the top 20 list of companies supplying county hospitals, in a market in which the top 10 firms have only a 15% share, but the government health reforms mean the stage is set for greater Big Pharma interest in the sector. Novo Nordisk's recent investment in China-based research and development facilities, as well as joint ventures between the likes of Pfizer and Zhejiang Hisun (China) are to a large extent focused on developing markets beyond the city hospitals.
Related articles
- Denmark - China: 24 September 2012: Novo Nordisk Invests USD100 Mil. in R&D Expansion in China
- United States - China: 13 September 2012: Pfizer Forms Generics JV with China's Hisun
- China: 24 February 2012: Health Insurance Subsidies for Chinese Farmers to Rise 80% by 2015