China’s healthcare sector continues to develop at an astonishing rate, but challenges remain.

Franck Le Deu, Rajesh Parekh, Fangning Zhang, and Gaobo Zhou

China’s healthcare sector continues to develop at an astonishing rate. The nation’s healthcare spending is projected to grow from $357 billion in 2011 to $1 trillion in 2020. Across key categories, from pharmaceuticals to medical products and consumer health, China remains one of the world’s most attractive markets, and is by far the fastest-growing of all the large emerging markets. It is not surprising that multinationals are flocking to take advantage of the opportunities, but long-term success for all participants is by no means assured. Although we remain optimistic about the overall outlook for the healthcare market in China, we believe it will become more difficult for multinationals to compete. We expect a clearer separation between winners and laggards, and
late entrants could face a struggle to achieve real traction.

At a high level of analysis, three themes will shape China’s healthcare market in the coming years: the continuation of economic and demographic trends, further healthcare reform, and the policies articulated in the government’s 12th Five-Year Plan (FYP). Some of these forces will have positive implications for multinational companies, for example, improvements in infrastructure, the broadening of insurance coverage, and significant support for innovation. Some of them will have negative implications, for example, pressures on pricing, and the rise of local champions. In some situations the forces come into direct opposition, for example, in the bid to reconcile universal healthcare coverage at low cost with rewarding innovation. To paraphrase vice-premier Li Keqiang, the country’s healthcare system reform has entered “uncharted waters.” In this context we identify eight principles that are essential for long-term success in China’s healthcare market. Although we are not suggesting that these principles comprise a one-sizefits-all prescription for success, ambitious multinationals should nonetheless consider them when formulating their China strategies for the coming decade.

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