Jacobson points to innovative industrial parks as platforms for China's fast catch-up on innovation, and suggest that there's
potential to achieve world firsts, such as the elusive Electronic Medical Records, thanks to a scientific central approach.
"What's important for people outside of China to understand about China is the experimentation that the government does province
by province, city by city. The sheer number of experimentations means there's a huge number of opportunities for healthcare
companies, and it also means that everything shifts."
Examples include the implementation of an EDL (Essential Drug List), which Jacobson lists as one of many initiatives which
can spread to the entire country, or be shut down in six months. "You really have no idea," she continues. "And that has huge
implications on how you go to market. The government does, in fact, drive a huge amount of innovation deliberately in all
sorts of ways, to figure out what works best. Fortunately, they're willing to have really good learnings, for instance what's
happening on the EDL has led to significant quality issues."
"But now," Jacobson concludes, "[the government is] rethinking quality, with a price premium for some of the generics that
are deemed to be the highest quality, and that's something that you just don't see in any other market."
GOOD TIDINGS WE BRING
Minister of Health Chen Zhu immortalizes his enthusiasm for forward-looking policies in this excerpt from an occasional poem
he penned: "Wind and thunder move across the country, health reform brings good tidings." The Minister refers to 2009's ongoing
"Healthcare Reform Plan" which has completed its first phase, bringing upwards of 95% of the population under some form of
medical insurance, increasing accessibility and affordability, and building a network of basic healthcare facilities. Although
there is still room for improvement – of total healthcare spend, drugs account for 50% (compared to only 13% for the US) and
per capita spend remains among the lowest in the world, at USD 35 annually – China is not only a market anyone can afford
to ignore commercially, but one that is increasingly locally competitive. This trend has resulted in an oft-lamented lopsided
market split for MNCs with only 25% share, compared to locals at 75%. With the difference only growing in favour of locals,
the Minister's tidings are unlikely to be shared equally by all.
Fortunately, for foreign players, there is a bright side in China's estimated 4,700 domestic manufacturers. According to Dr.
Brian Mi, general manager of IMS Health China, "not all of them abide by the GMP quality standard. There's a big gap. This
makes local manufacturers perceived as lower quality and associated with less effectiveness and higher side effects. Because
of that, MNCs enjoy a price premium, and doctors are very willing to prescribe the branded original products – because if
the doctor mistreats a patient, it's the doctor's liability."
This, Dr. Mi says, has resulted in a quasi-evergreen phenomenon, evidenced in products like Glucobay, BMS's old oral anti-diabetic,
which continues at 30%+ growth. But as he also notes, "If you ask me what will happen in five years – with China undergoing
a second round of GMP and the government tightening up quality – I always warn MNCs that the party may be great, but it's
ending. When locals start to produce high-quality products, the government will have a very good reason to reference and lower
your price – because why shouldn't they? You don't have a patent!"