Blog Serena Shao: The future of healthcare innovation in China hinges on the resolution of a two-sided dilemma

Serena Shao: The future of healthcare innovation in China hinges on the resolution of a two-sided dilemma
We interview our Head of China Healthcare Research to understand how new government initiatives in China are disrupting Chinese healthcare. 

What has been the biggest disruptor in Chinese healthcare over the past 12 months and its impact?

Serena Shao: A major opportunity is emerging for China to play a role in international drug development, including managing clinical trials. Significant investments are being made by multinational firms and the Chinese government to support basic biomedical research. Thus we see in the past 12 months that dramatic progress has been achieved in the areas of innovative biologic and chemical drugs, biosimilars and immuno therapy. Quite a few new treatments have received approvals in the past 12 months and more of these have entered into late stage clinical trials. The pace of new drug approvals has largely been accelerated for both domestic and international biopharmaceutical companies, which is a major result of the government regulation reforms we’ve seen with respect to new treatment approvals.

What disruptive trends are investors not paying enough attention to and why?

SS: Other than medical technology and clinical development, information technologies offer a second area in which China can further develop. The government is developing technical standards for health information technology and supporting its implementation. There is a significant need for China to digitize medical records because of its large population and legacy systems of paper records held by clinics and hospitals. Individuals commonly have a small booklet with records of past doctor visits and hospitalizations. Alternatively, a system that involves technology-savvy Chinese in the management of their medical data holds significant promise. Key features would include access from mobile devices, two-way interactions with medical authorities, and controlled access to data for biomedical researchers. In this way, patients would remain involved with their own care even as medicine improves from better knowledge about health outcomes and China benefits from research that builds on electronic records.

Investors need to be convinced of the viability of private insurance plans to fund private hospitals and clinics.

Technology has disrupted China’s healthcare sector in many ways. With all the talk about opportunities, what are the challenges/risks that investors should be aware of? 

SS: The future of healthcare innovation in China hinges on the resolution of a two-sided dilemma. For private insurance to grow, clinics need to offer high-quality covered services. Public hospitals, which bill patients at government-set prices, are not equipped for private insurance reimbursement. But investors need to be convinced of the viability of private insurance plans to fund private hospitals and clinics. Likewise, pharmaceutical firms need some guarantee of payment to undertake research into new drugs. Thus, clarity on the role for private insurers is essential to further development of the biopharmaceutical industry, private hospitals, and specialized clinics in China.