3 Key Objectives of Chinese Government Healthcare Spending

In the latest installment of China’s 5-year plan, the government laid out a series of initiatives that will make China one of the largest pharmaceutical markets in the world.  China’s pharmaceutical market is expected to grow from $46 billion in 2009 to $178 billion in 2019, and this massive growth is largely being driven by the ongoing healthcare reforms.

These government initiatives are creating massive opportunities for companies with their fingers on the pulse of these programs.  Here are three key government objectives and the impacts they are having on our clients:

1) Key Objective – To Provide Universal Healthcare Insurance

Under the healthcare reform, the government introduced two new basic healthcare insurance schemes, NRCMS and BMIUR, to expand coverage among the rural and the poor urban population, respectively.  In addition to a much larger population with access to health insurance, reimbursement rates have also increased; which is likely the cause of higher per capita spending on medical examination and treatment in hospitals countrywide.

2) Key Objective – To Improve Healthcare Services at Grassroots Level

As of February 2012, around 2,200 county hospitals and 33,000 primary healthcare institutions have been renovated as part of the healthcare reform, with approximately 70% of township hospitals and 85% of community health centers having been upgraded.  In 2010, 627 new hospitals were set up in China, and because of improved spending on healthcare facilities, about 70% of counties have at least one hospital at the secondary level-A.  With all of this new construction, there has been a sharp uptick in utilization and demand for diagnostics and examinations.

3) Key Objective – Public Hospital Reform

Introduction of reforms in the public hospital system has been the toughest challenge for the Chinese government; the government’s reform plan includes separation of ownership and management and a gradual elimination of drug margins.  This has led to the government announcing policies that promote private sector investment in hospitals.  Specifically, the tendering process is now much more in the hands of individual hospitals and lower-tier clinical facilities, which could be a boon for healthcare companies that are able to leverage their geographic reach and local knowledge into a competitive edge during this process.

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