Like the U.S., China’s healthcare costs have soared in recent years. Outpatient costs were 12 times higher in 2007 than in 1990 though incomes increased by only 5-7 times during the same period. Spending on healthcare amounted to about $185 billion or 5.67% of China’s GDP in 2007, yet healthcare investments have clearly not kept pace with China’s miraculous economic growth.
To address the imbalances, including wide problems in healthcare availability and quality between urban and rural areas, the Chinese government has initiated a $124 billion spending stimulus for 2009-2011. Some $52.2 billion will be allocated from the central government budget and is targeted principally at rural investments. This direct investment – rather than a more customary cost share with provincial governments – underscores the importance Beijing places on improving living standards and ensuring social stability in the countryside. The balance of $74.6 billion is aimed primarily at reducing urban hospital crowding and improving primary care, and will be provided by provincial and municipal sources.
The stimulus plan seeks to address five policy objectives:
1. Establish universal healthcare insurance. Target is to provide health insurance to 90 percent of the population by 2011, and to close the gap completely by 2020.
2. Build a basic medicine system. A new national Essential Drug List will be developed with widespread distribution, uniform prices and high reimbursement coverage.
3. Provide new medical institutions. Government investment will be directed toward the development of community health centers and local hospitals to ease the overcrowding in leading urban hospitals.
4. Bring equality in urban and rural areas. A clear focus on improving China’s underfunded public health system in rural areas, including epidemic management and disease prevention.
5. Reform Public hospitals. With public hospitals currently the dominant channel for healthcare services, pilot reforms will include changes to hospital administration and operation. After years of consideration, reforms also will include the separation of pharmacies from hospitals, and thus solve the over-prescription of drugs by money-losing hospital entities
Importantly, China’s healthcare consumers will be the chief beneficiaries of the reform program, but it is also clear that the reforms will pose opportunities for a wide range of healthcare products and service providers. Several industries and companies are poised to benefit directly from key reform measures.
The bulk of the reform program focuses on improving rural medical access and building out the public health infrastructure, so those firms that provide the infrastructure products and services for this expansion are in line to receive immediate and direct benefit from the reform program. These entities include:
ü Traditional Chinese medicine (TCM) producers
ü Pharmaceutical distributors
ü Basic medical equipment and device companies
ü Generic chemical medicine manufacturers
ü Vaccine manufacturers
ü Diagnostic regent makers
Companies that will benefit from China’s massive investment in healthcare:
China’s unprecedented economic growth over the past 30 years has come at a huge cost to the environment and this is no surprise for most of you who live in urbanized areas. In fact , 20 of the 30 most polluted cities in the world are in China. 400,000 people die of pollution related diseases each year. One third of Chinese territory is affected by acid rain and approximately 70% of its water supply is polluted.