Healthy policy?

Going very local: Novartis

It’s easy to get a thousand prescriptions, but hard to get a single remedy.”

These days the Chinese proverb is spoken with some sense of irony, given that public hospitals often resorting to prescribing unnecessary drugs to make up for inadequate state funding. The government’s ambitious plan to reform healthcare is supposed to change all that. But change is not happening as fast as many would like.

The plan to build a universal healthcare system was announced a year ago, at an estimated cost of $124 billion for the three years to 2011 (see WiC11).

The job of implementing Beijing’s policies falls to the provincial governments – but so does the responsibility for funding them. That hasn’t discouraged multinational pharmaceutical and medical device companies from looking for ways to participate. But it does concern reform advocates, who worry the provinces may not have the means to follow through.

“The government has set up the plan to establish a basic healthcare insurance network within three years – the so-called new medical reform,” Jia Kang, director of the Ministry of Finance Financial Science Research Institute, told the South China Morning Post. “The thunder is very loud, but in reality we haven’t seen so much as a raindrop. There are still divided opinions on things to be done.”

Addressing affordability and putting the basic infrastructure in place are key goals of the reforms. At present most of the population are on ‘basic medical insurance’ schemes. But treatment isn’t free, and millions still can’t afford to get sick. The situation is worse for the migrant factory workers with rural ‘hukou’ registrations – they don’t have any insurance at all in the cities in which they work (see WiC39).

But the biggest healthcare challenges are in the countryside, where hospitals are often rudimentary. The reform plan anticipates building thousands of clinics and hospitals in rural areas, but that will take time. “The gap [with urban hospitals] probably will not be closed in the next 30 years,” Huang Jiefu, vice health minister told the China Daily.

The State Council’s latest guidelines, published earlier this month, outlined the key proposals. The plan is that the government will take on more of the funding burden, reducing cases in which patients themselves are expected to pay a ‘medicine surcharge’. The initial focus is on raising the reimbursement rate for inpatient care to 70%, and ensuring that hospitals pay out when the patient checks out.

But provincial governments may not have the money to make many changes any time soon. Many depend on land sales to meet their budgets. What happens when the land runs out or if Beijing’s efforts to contain house prices start to take effect (see WiC57)?

However, even if universal coverage is still some way off, major medical companies seem confident that serious money is going to be spent. China is currently estimated to spend just 4.5% of GDP on health. That’s half the EU average and leaves huge room for growth. It’s the kind of potential that is leading to deals like Charles River Labs’ $1.6 billion acquisition of Wuxi PharmaTech this week.

Swiss pharma giant Novartis has also started lobbying the provincial capitals. Currently, hospitals are required to purchase supplies from an ‘essential drugs list’. Most of the 307 drugs listed are developed domestically and have their prices set by Beijing.

But provinces can now add drugs according to need – and that gives Novartis’ sales reps a chance. “The policies of each province are different,” Pan Jiening, president of Novartis China, told Sanlian Life Weekly, “we are considering giving our offices in each province greater decision-making power.”

Investment in new hospitals also looks set to benefit both General Electric and Siemens, which are developing more affordable versions of devices like x-ray and MRI machines to meet anticipated demand.

For foreign healthcare companies, ‘a thousand prescriptions’ may turn out more like a thousand prospects ­– and perhaps many more.

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