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You are here » Home Page » News » Healthcare spending in China expected to reach $1 Trillion by 2020

Healthcare spending in China expected to reach $1 Trillion by 2020

2013-09-04 source own

Healthcare expenditure in China will possibly increase by 3 times to be worth to $1 trillion each year by 2020 based on an ageing population and government endeavors to widen medical insurance coverage, according to a recent report by McKinsey & Co.

China will commit more spending on drugs, medical devices and hospital medical treatments whilst it boosts overall expenditure to 7% of gross domestic product, from 5.5%, or $350 billion, in 2010. This will likely make it the 2nd largest medical marketplace worldwide by 2020 after the U.S, which in 2009 spent $2.5 trillion or 17.6% of its GDP, on health care, stated the consulting company.

“This is going to be a major priority for China in the over the years . The government is seeking to enhance social harmony so therefore closing the gap on health care is a great portion this. China is a marketplace which is still significantly early on in its development. China’s Healthcare coverage tends to be better served in Urban areas so a fairer spread of Healthcare to its rural regions is important to ensure social harmony across all of China’s population.

China’s government boosted its actual spending on health care to 737.9 billion yuan ($116 billion) in 2011, up from 359.4 billion yuan in 2008, the Ministry of Health declared in an Aug 17th statement. China is looking to increase medical health insurance coverage above 95% of the public as well as adding diseases and illnesses such as lung and gastric cancer to an insured list, the ministry claimed.

Relatively easy Days Over

International drug makers such as Pfizer Inc ( PFE ), Novartis AG ( NOVN ), and GlaxoSmithKline PLC ( GSK ) have recruited a lot more sales representatives and increase product lines in China, on the lookout for growth to neutralize losses of patent protection on best-selling drugs elsewhere. Those aspirations are increasingly being curbed by Chinese government policies geared towards lowering medical expenditure.

In a recent interview with China Daily Joseph Jimenez, CEO of Novartis stated “ China to remain a top priority for Novartis, Our growth strategy is to win in this industry by being the best at science-based innovation. This means building a strong pipeline of innovative healthcare therapies to address patient needs. It also means continuously rejuvenating our diverse portfolio. We are focused on excellent execution of our launch products and on building our presence in emerging markets.”

China is a key part of this strategy as this market is expected to grow an estimated 15 to 18 percent annually. In 2012 alone, we increased our sales 24 percent in China and we expect this strong growth trajectory to continue.

“Back in the early 2000s , it seemed reasonably easy for multinationals to increase business by 25 to 35 % a year in China,” stated Le Deu, who leads McKinsey’s Greater China Healthcare practice. “To some length those effortless times are no longer. The current climate is becoming harder when it comes to intricacy and requirements for good results.”

Multinational drug makers trying to grow their business in China have to deal with a far more challenging environment in the midst of policy modifications such as how drugs are priced and purchased by the government, based on the report. They are going to need the right local partners which will enable them to better compete.

There could be “a sequence of large deals over the following coming years” as international drug businesses surged to partner with Chinese manufacturers, McKinsey stated. “The days of companies standing alone in China have expired,” the report’s writers wrote .

Major Deals

Companies which have announced deals include Pfizer , which declared in February it would own 49 % of a $295 million venture with Zhejiang Hisun Pharmaceutical Co ( 600267 ) to create off- patent drugs in China , whilst Merck & Co ( MRK ) inked a deal with Nanjing-based Simcere Pharmaceutical Group ( SCR ) last year to manufacture cardiovascular medicines.

Multinational companies also have to move their focus towards a lot more innovative products which are partially researched and developed in China , because they will have the ability to reach the market sooner, offsetting the competition from local manufacturers supplying generics, Le Deu believed .

“They’ve had a lot of good results with mature products which are mostly off-patent in various other marketplaces. But with time those products will come under elevating pressure, therefore it’s more essential to provide innovative , patented drugs launched in China,” he stated.

Economic Slowdown

Even when China threatens to publish its weakest growth in thirteen years with a financial slowdown, the government is probably not going to shrink health care spending. The Chinese government has encouraged additional methods to support exports in addition to helping meet economic goals, while a slowdown in industrial companies’ profits was confirmation that the nation’s slowdown is deepening.

China hopes by 2020 to increase life expectancy to 77 years, from 74 .8 years in 2010 , together with lowing the infant mortality rate to below 10 % from 12 % in 2011, based on a health- care strategy report circulated at a convention in Beijing on Aug 7th. China also wants to reduce smoking rates especially amongst its male population to 40 % by 2020, from 53 % in 2010 .

China is the world’s largest cigarette marketplace, China may be affected by reduced economic growth because of cancer along with other chronic diseases which are negatively affecting the labor pool force, Health Minister Chen Zhu said in an interview in April.

Sources and Information:

McKinsey & Co report:
Statement by Joseph Jimenez, CEO of Novartis

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