Civica
Financial intelligence for Asia's healthcare markets
 
 
Remember me:

Analysis: Medtech in China – the impact of reforms

In part one of a two-part series, Bart Van den Mooter, CEO of the TforG Group, and Helgert van Raamt, vp partnerships and new business at TforG Group, look at the impact of reforms on medtech in China.

The Chinese medtech market is one of the largest and fastest-growing in the world, growing at a rate of 12% in 2016 alone. Going forward, one of the key factors that will shape the development of China’s medtech market is the regulatory landscape, including rules governing the industry, government policies relating to the sector and reforms in the space.

There are a few changes expected in the next few years, for example: the government assuming a greater burden of healthcare expenses, the implementation of cost controls through packaged pricing and limiting the markups added by distributors.

There are other regulations and trends affecting China’s healthcare policy, too, as there are ways to handle them.

In June last year, the Office of the Chinese Ministry of Human Resources and Social Security issued The Guidance on the Long-term Nursery Reimbursement Pilot Policy. The policy aimed at providing financial support or care provisions for people with long-term disabilities.

Fifteen pilot cities were selected for the first trial of this policy. It stipulates that the government should raise money by optimising the structure of workers’ medical care accounts; that is, transferring the balance of workers’ medical care funds and regulating the rates for medical reimbursement. This should gradually establish a multi-channel and dynamic financing mechanism.

For long-term care costs and covering related provisions, the reimbursement fund will cover 70% of the total payment.

In the near future, the Chinese government is committed to providing full medical reimbursement coverage for all Chinese citizens. To achieve this goal, the government will improve its management mechanism and involve other social organisations – such as commercial insurance institutions – to handle such services.

The government will simultaneously establish a multi-level, targeted social security system. While some high-end needs may be supplemented by commercial insurance, the government will be responsible for the remaining parts.

At the initial stage of the policy, the medical reimbursement fund will bear most of the financing obligations, without increasing the burden on businesses or individuals. In the long term, individuals and businesses should bear corresponding portions of the payment to ease the financial pressure off the government.

It also makes sense for companies to prepare to compete with the local industry; this involves being able to gauge the chances of profitably surviving the battle in this market segment.

There are 6,000 local Chinese companies, although a majority of these are active in the lower-tech areas. That notwithstanding, they still demonstrate a sizable local manufacturing and sales force that has distinct advantages within the market.

The Chinese (medtech) regulatory system – including the reimbursement process – is required not only to satisfy the standard requirements, which we are acquainted with from most other countries in the world, but is also intended to have other impacts.

As with most regulatory implementations, the central purpose of the Chinese healthcare measures is control. From this central objective, other impacts are achieved and other objectives are brought forward. The key elements include: controlling the financial aspects of healthcare provisions and reimbursements; the adaptations and alterations of the patient care paths that develop in correlation to reimbursement measures; and protection of the local industry.

The preparation efforts required for working with the Chinese administrative system, both in regard to understanding and dealing with it, makes resource deployment shift from the middle or end of the cycle to the beginning or middle of the cycle.

Registration and other pre-launch activities are not abnormal, but the unusually lengthy and complicated trajectory to obtain the proper reimbursement is quite China-specific. While comparable markets, such as Japan, have set up barriers at registration levels, China has an additional minefield at the level of reimbursement, embedded in a difficult tendering and bidding mechanism.

These bidding-related challenges and other factors to consider are:

1) Discrimination. Different employment/status-based categories of people have very different reimbursement conditions; that is, employees, residents, military, the elderly, retirees and so on. all have differing reimbursement entitlements.

2) Regionalism. Reimbursement conditions vary between provinces, cities and even towns.

3) Differences across all factors that determine reimbursement. Different regions and different insurance types have different threshold fees, upper limits and barriers to providing treatments and diagnostics.

4) Concentration of new products in key locations. Key cities and hospitals play an important role in China. It is common for new products and techniques to first be tried out in the key cities and hospitals prior to being considered for nationwide procurement.

Separately, the private sector is expected to play a bigger role in acute care. Despite the fact that this process is proceeding slower than expected – since no specific action plans have been put into place – the number of private hospitals and clinics is increasing rapidly.

Tomorrow we will look at the opportunities in the market.

This piece first appeared on BRINK Asia.

Posted on: 27/07/2017 UTC+08:00


News

First REIT, the SGX healthcare real estate investment trust owned by Indonesia’s Lippo Group, has reported a 0.9% rise in distribution per unit (DPU) of S$0.0214 for the third quarter of the year.
Metlifecare, New Zealand’s second-largest listed retirement village operator, plans to spend NZ$240 million (US$167.2 million) to develop a waterfront retirement village at Scott Point, in the Auckland suburb of Hobsonville.
Thonburi Healthcare Group, the country's third largest hospital operator, has inked an MoU with Korea’s Green Cross MS and Green Cross Laboratories.
At its annual general meeting at the end of last week, Gordon Ballantyne, new chief executive of Healthscope, Australia’s second largest private healthcare operator, said that he expected current private hospital market conditions to continue in the short term.
Hong Kong-listed healthcare company China Wah Yan Healthcare plans to consolidate its shares. The move has been pushed onto the company to comply with trading requirements.
Monash IVF Group, Australia’s second largest fertility treatment provider, has appointed David Morris as the CEO and managing director effective from 13 November. After eight years, James Thiedeman stepped down in May.
SGX-listed Singapore Medical Group, a multi-disciplinary specialist healthcare services provider has announced its latest acquisition.
Malaysia's Top Glove is on the acquisition trail. The world’s largest rubber glove manufacture has signed an MoU to buy all the ordinary shares of Eastern Press for M$47.25 million (US$11.18 million) in cash. Eastern Press is principally engaged as a printer and supplier of packaging material. It is also the major supplier of packaging material to Top Glove's subsidiaries in Malaysia.



Analysis

Is there a case to be made for a merger between Metlifecare and Summerset Group, New Zealand’s second and third-largest listed retirement village operators? First NZ Capital reckons so and analyst Arie Dekker makes an eloquent case for it in a new research note.
Stephenson Harwood’s Tom Platts, Ben Hickson and Su Wai Phyo report on key changes implemented by the Myanmar government to facilitate much-needed foreign investment in the country’s healthcare sector.
In the lead-up to the UN’s International Day of the Older Persons on 1 October, Jason Sadler, president, Cigna International Markets, looks at the impact of an aging population on the world’s healthcare system and the role that digital technology will play in meeting this new challenge.
By 2042 there will be more over-65s in Asia than the populations of the Eurozone and North America combined. We look at the business opportunities this creates.
Albert Wong argues that biomedical technology should not be ignored and explains how the Hong Kong Science and Technology Parks Corporation can support it.
Jacob Pope explains why medical tourism remains one of the region’s most significant industries.
APACMed’s Fredrik Nyberg looks at how local and multinational IVD companies are developing novel solutions for Asia’s unique needs.
It is perhaps a curious line in the sand to draw, but the new hospital in Dunedin, the second-largest city in the South Island of New Zealand, is gearing up to be a significant battle in the use of private-public partnership funding in the APAC region.


Civica

Podcasts

AON

Hedge Fund Focus

HealthInvestor Asia twitter feed
HIA Indices