China Healthcare Market to Reach USD 1 Trillion by 2020

According to McKinsey, China's healthcare market is shaped by three macrotrends, namely continued economic and demographic development, healthcare reforms, and the direction of the 12th five-year plan.

Continued economic and demographic development: The growth in demand for healthcare will be driven by the rapid proliferation of chronic conditions such as diabetes and hypertension due to China’s aging population, shift in population to the cities, and changes in lifestyle. The demand for healthcare will be further fueled by rising income levels and more extensive insurance coverage, thereby improving the ability of patients to pay for healthcare. Additionally, conditions such as cancer, depression, and respiratory illness are highly prevalent in China, and still remain underdiagnosed and undertreated. As a result, early and improved diagnosis, coupled with higher rates of treatment and compliance with therapies, will drive a significant increase in the number of patients and lead to an improvement in the clinical benefits of drugs.

Healthcare reforms: China’s healthcare reforms, which commenced in 2009, is expected to be completed by 2020, resulting in far-reaching transformation of the country’s healthcare system. The next stage of reform is expected to significantly impact the Chinese healthcare system, including extended insurance coverage and development of primary care infrastructure. The Chinese government’s insurance programs already cover more than 95 percent of the country’s population, and it will now focus on improving the quality of its provision to patients. The government also aims to develop a primary-care infrastructure, including community health centers and community health stations, along with a three-tier rural medical network comprised of county hospitals, township health centers, and village clinics. It will also focus on improving the service standards and quality of primary care institutions (primarily by educating and training general practitioners) and establishing a two-way referral system between primary-care facilities and hospitals.

Direction of the 12th five-year plan: In the 12th five-year plan published by the State Council in March 2011, the Chinese government has identified the biomedical industry among seven strategic industries. The biomedical industry includes biologics and small-molecule pharmaceuticals and vaccines, medical devices, diagnostics, and traditional Chinese medicine. The biomedical industry is poised for rapid growth over the coming decades, as the central government remains strongly committed to its development, with local governments expected to quickly follow suit.

All these factors will have positive implications for multinational companies, although increased government intervention, higher business complexity, and intensifying local competition will have negative implications. In order to succeed, multinationals will need to increase their investments across the value chain, step up their core capabilities, and explore how they can reach new customer segments in a more creative manner through partnerships.

Related Links:
McKinsey & Company