healthcare

China Healthcare Insights: Resilient growth opportunities amidst current economic uncertainties
Wilson Tan Director of Data Insights
Date: August 2012

To achieve its goal of providing universal healthcare by 2020, China requires significant levels of investments, providing continued growth opportunities
Per capita Healthcare Expenditure (USD, 2009)

7,410

2,713

309
U.S.
As a proportion of GDP

132
India

Japan

China

16.2%

8.3%

4.6%

4.2%

Sources: EIU, WHO, World Bank, Clearstate internal databases

Three basic medical insurance schemes which vary greatly and cater to differing need of rural and urban Chinese population. The provisions of these three schemes are still flawed and far from being universal
Urban healthcare coverage Responsibility for financing healthcare spending has shifted from the government and state-owned enterprises to individuals as the economic reforms of the 1980s led to more people working outside of the state sector Rural healthcare coverage The scheme currently covers around 80% of rural population , while leaving out nearly 200 million rural Chinese without any insurance New Rural Co-operative Medical Scheme (NRMCS) Voluntary insurance where the participation ratio is currently around 80% of rural population
The insured personnel pays RMB 10, while the central and the provincial government each pays RMB 20 to make up to RMB 50. The government plans to increase the premium to RMB 100 whereby the current contributions doubles from each entity.

Urban Employed Basic Medical Insurance (UEBMI)

Compulsory insurance required by the government for all working people living in urban cities
Around 221 million population is currently covered under this insurance programme. Employees pay 2% of their salary while employers pay 6%. The average urban population earning around RMB 3,000 would have an annual medical insured amount of around RMB 70,000. subjected to the specific provincial government policy.

Urban Resident Basic Medical Insurance (URBMI)

Voluntary insurance designed for non-working urban population
This is a new pilot insurance initiative to provide insurance coverage for the non-working children and elderly living in the urban cities. It was first launched in September 2007 and is currently being piloted in 79 cities. The government plans to roll out to 80% of all non-working urban population in 2009 and all nonworking urban population by 2010.

Chinas impending ageing population and changing lifestyles drives evolving healthcare needs
China: Population statistics

While China is currently the worlds most populous country, its population is growing very slowly, and negative growth is expected beyond 2030.
Beijing

China
Shanghai Distribution by Age Group (2008) Under 15 years old: 18.5% 15 to 64 years old: 72.3% 65 years and older: 8.1%

Strict government policies and a cultural preference for boys has given China a skewed sex ratio and declining fertility rate. At the same time, the population is aging; the median age will rise from 34 now to 39 by 2025.

Health demographic indicator

Population (million) Annual rate of growth Population in urban areas (%) Life expectancy at birth (years) Population median age (years) Infant deaths per 1,000 live births Total fertility rate (per woman)
Sources: CIA World Factbook; UN Population Division; UNICEF; UNFAO

2010
1,341 0.47% 45.1% 71.8 35.3 20 1.8

2025
1,429 0.30% 55.2% 76.8 38.9 17 2.0

With an aging population, healthcare focus is likely to lean towards chronic diseases in the elderly. By 2020, 11.8% of Chinas population will be over the age of 65, compared to 8.56% in 2004.
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Industrialization and poor lifestyle habits leading to the rise of chronic diseases, especially in diabetes, hypertension, cancer, and coronary heart diseases
Top ten morbidity rates of chronic diseases Hypertension Gastroenteritis Diabetes Mellitus Rheumatoid Arthritis Cerebrovascular disease Intervertebral Disc Disorder COPD Ischaemic Heart Disease Cholelith & Cholecystitis Peptic Ulcer 2003 (%) 26.2 10.3 5.6 8.6 6.6 5.0 7.5 4.6 5.7 3.7 2008 (%) 54.9 10.7 10.7 10.2 9.7 9.5 6.9 6.0 5.1 3.3
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There are an estimated 260 million cases of chronic disease in China in 2008. Over the past 10 years, both hypertension and diabetes incidence have quadrupled, while coronary heart disease and cancer have more than doubled. WHO estimates that without action, almost 400 million people will die from chronic diseases in the next 10 years.

In addition, China is increasingly affected by obesity, where more than 20% of 7-17 year old children in large cities are overweight or obese. This will be the further driver of chronic disease growth.

Hospitals, especially level 3 hospitals, are seeing disproportionately high patient volumes due to overwhelming patient preference over primary health facilities; RMB 16.5 bil budgeted for 2009-2011 to expand primary healthcare infrastructure and address the imbalance, implying a shift in growth opportunities from urban to rural / lower tier cities
China: Healthcare facilities statistics by type (2009)

Tertiary healthcare providers: 20,291 facilities

Tertiary healthcare: 1.9 bil outpatients in 2009

Tertiary healthcare: 85 mil inpatients in 2009

Primary healthcare providers: 27,308 facilities

Primary healthcare: 376 mil outpatients in 2009

Primary healthcare: 2 mil inpatients in 2009

Source: Ministry of Health, China Statistical Yearbook 2010

Outpatients

Inpatients
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Community Health Centre (CHC) facilities growing by 35.8% CAGR reaching 7,085 facilities by 2010, leading to expected rise in demand for medical consumables, monitoring and diagnostics equipment, and rehabilitation equipment
China: CHC infrastructure growth, 2004 to 2010
YOY Growth 22.5% 50.3% 52.1% 27.7% 29.2% 35.8%

7,085

The annual growth rates of numbers of CHCs increased from an annual average of ~22.5% before 2006 to an average annual rate of 39% as the government increased focused on CHC development. This strong growth trend was further boosted after 2009 due to the healthcare reform plan. ~RMB 4.1 bil was disbursed from the central government for the set up or upgrade of 2,400 CHCs in needy cities; while the rest of the 1,300 CHCs development will be borne by the local government.

5,216

4,036 3,160

2,077
1,128 1,382

2004

2005

2006

2007

2008

2009

2010(f)

Source: Ministry of Health, China Statistical Yearbook 2010

Tier 1 provinces are currently more cosmopolitan in outlook, while Tier 2 provinces are more Local, with significant differences in economic status and international exposure. Tier 2 provinces will adopt more cosmopolitan preferences, while Emerging provinces are expected continue its high growth trajectory. Growth for international brands expected to be strongest in Tier 2 provinces.
China: Conceptual province development spectrum
Growth rate (GDP growth)

Pre-take off

Rapid development

Stabilization
Tianjin

Maturity
Cosmopolitan Tier 1 provinces Leading cities in Guangdong (Guangzhou and Shenzhen) and the special municipalities are highly developed and have the characteristics of a cosmopolitan city, with international exposure, and acceptance and preference towards foreign products

Tier 2 provinces Capital cities in these provinces are highly developed but have a local flavour, with lower international exposure. Typically harder for foreign products to penetrate

Jiangsu Shandong

Zhejiang

Liaoning Inner Mongolia Fujian Jilin Sichuan Chongqing Shaanxi Shanxi

Emerging provinces Capital cities in these provinces are rapidly growing, but growth is limited to the capital cities. Cities are highly industrial and domestic products are widely preferred

Guangdong Beijing Shanghai

Legend Municipalities Provinces Economic development (per capita GDP)

Note: The province development spectrum is a conceptual map indicating the relative levels of development of the provinces, based on statistics sourced from Chinas National Bureau of Statistics and the Economist Intelligence Unit and in-depth Clearstate analysis

Healthcare infrastructure and medical expertise is currently centered around the Healthcare Hubs and Emerging Centers of Excellence. State-of-the-art medical expertise is still focused in Beijing, Shanghai and Tianjin, although scattered leaders in the medical field may be found in Guangdong, Zhejiang, Jiangsu, Xian (Shaanxi), and Wuhan (Hubei)
Better healthcare infrastructure
20,000

Per capita healthcare expenditure 18,000 (RMB)

16,000

14,000

Emerging Centers of Excellence Key cities in these provinces host hospitals well-equipped with the latest medical technology; nationally renown specialists may be present in some cities, but are scattered across specific hospitals and overall level of specialisation falls behind that of the Healthcare Hubs
Guangdong Zhejiang

Healthcare Hubs Shanghai With highly developed healthcare infrastructure, the provinces hosts the nations healthcare hubs; leading medical specialists and where healthcare facilities are equipped with cutting edge medical technology

Beijing

12,000

Tianjin

10,000

8,000

Fujian Chongqing Hubei Sichuan

Jiangsu Liaoning

6,000

Shandong Inner Mongolia Jilin Shanxi Hebei Shaanxi

Higher healthcare expenditure

4,000 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7

# of hospital beds (per 10,000 population)

Sources: China Statistical Yearbook 2010; China Health Statistics Yearbook 2010; provincial health bureaus

ABOUT CLEARSTATE

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About Clearstate
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Clearstate offers life sciences and med-tech market tracking intelligence complimented by strategic advisory services to help medical device, pharmaceutical, biotechnology, and healthcare service firms understand their current and potential markets, and implement pragmatic and innovative strategies to ultimately tap into new growth opportunities within Asia Pacific where participants are starved for actionable market information.
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Fact-based growth advisory

Clearstate analyzes substantial market data and facts through healthcarecentric framework and model to formulate pragmatic and actionable recommendations for growth in Asia Pacific.
Fact foundation
Health facts and data reflecting market realities

Value-add analytics

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Up-to-date market facts fed into healthcare analytics

Data interpretation that addresses business issues Healthcare-centric framework and analytical models
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Intimate knowledge of Asia

CHINA Largest diabetics population 92.4 million adults CHINA Healthcare reform extends coverage USD 124 billion allocated INDIA Urban health insurance uptake 37% YoY growth @ 2% penetration VIETNAM Steady rise in patient volume 45 million IVD tests with 15% CAGR JAPAN Large aged related surgeries volume 1 million orthopaedic surgeries/ annum CHINA Strong primary healthcare focus USD 625 million upgrade budget SOUTH KOREA Private sector drives growth 90% of beds and specialists MALAYSIA Hypertension is prevalent 7.6 million potential addressable pop. JAPAN Pharmacies dominated by chain 20% chains stores dominate 70% of business

INDIA Surge in cardiac disease prevalence 6 in 10 patients worldwide INDONESIA Technology upgrade & adoption ~50 CT scanners purchased a year AUSTRALIA Reimbursement cuts impact pricing AUD 416 million pathology funding reduction

Intimate understanding of the healthcare and medtech stakeholders demand needs, business growth trends, regulatory challenges and future user adoption behaviours in Asia. Being based in Asia, we can closely monitor rapid and dynamic changes in the region. We are not only healthcare analysts but locals who are born and bred in the region. We speak the language, understand the culture and work daily in the local environment.
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Extensive medical professional network

Our clients are able to access a comprehensive network of users, decision makers and key influencers of pharmaceuticals, medical devices and consumables in 14 countries in Asia. Our panel-based medical professionals network has extended to cover near to 15,000 personnel across the region.
Senior Management network Hospital C-level staff who are Key Purchase Decision Makers Specialist network Senior doctors and users who are Key Influencers in the purchase decision making Procurement Network Purchase facilitators who are familiar with the decision-making and purchase processes Technical network Medical equipment maintenance specialists who are intimately familiar with the strengths and weaknesses of the equipment and device
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Proprietary hospital profile databases

Our ongoing research needs demand that we continuously build our healthcare facility contacts and extend out understanding of each facilities profile, in terms of bed size capacity, specialization, ownership, location and medical technology usage and needs. Hospital facility profile that we have covers 14 Asian markets covering near to 70% of hospitals in the universe.
~5,200 hospital in China ~7,000 hospitals in India ~1,500 hospitals in Japan ~800 hospitals in South Korea ~600 hospitals in Australia ~400 hospitals in Taiwan ~800 hospitals in Thailand ~900 hospitals in Vietnam ~800 hospitals in Indonesia ~800 hospitals in Philippines

~300 hospital in Malaysia

complete coverage in HK & Singapore

~20,000 HOSPITAL PROFILES

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