Overview of China’s Life Science Market
China became the world’s second-largest healthcare market in 2013 and continues to develop at double-digit rates. Recently in 2016, China’s healthcare market reached RMB 5,670.3 billion (US$853.7 billion), an increase of 12% when compared with that of 2015. Among others, the medical device market grew 20.1% to RMB 370 billion (US$56 billion) in 2016, while pharmaceutical and health products sales reached RMB 1,839 billion (US$277 billion), up 10.4% year-on-year.
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Due to its size and growth potential, China’s healthcare market is one of the most attractive in the world for foreign investors. Currently healthcare spending in China is only around 6% of its GDP, which is still at a low level when comparing with the 17% in the US, 10% in Japan and Europe, and the average 9% in OECD (Organization for Economic Co-operation and Development) countries. According to Health China Plan 2030, released by China’s State Council in October 2016, China healthcare spending is expected to reach around US$1 trillion by 2020, 6.5% to 7 % of its total GDP and reach around US$2 trillion by 2030. Every health sector – from pharmaceuticals to medical devices – will have more opportunities.
In the past few years, China’s domestic pharmaceutical consumption has grown rapidly, and the pharmaceutical industry’s sales revenue has grown at an average annual rate of 21.4%. Driven by factors such as strong economic growth, increasing urbanization and the need for medical care due to aging, China will become one of the world's largest pharmaceutical markets. By 2020, China's pharmaceutical market is expected to reach US$220 billion, and China will become the world's second largest pharmaceutical market after the United States.
Yet, China domestic pharmaceutical R&D and drug quality still lag behind international advanced level. Despite of a large number of pharmaceutical companies, the total investment in new drug R&D in China only equals the investment of one international pharmacy company. Due to the difference in quality and efficacy China’s domestic generic drugs are not sufficient alternatives to the original imported drugs. China’s demand for imported innovative drugs is high.
The Chinese medical device industry relies heavily on foreign suppliers. The majority of high-tech equipment, such as CT scanners, ultrasound and MRI equipment is imported. The U.S., Germany, and Japan are the primary sources of high-tech, high priced medical equipment.
The latest Catalogue of Industries for Guiding Foreign Investment adds intelligent medical rescue devices to the encouraged category, meaning that they benefit from special government incentives. In addition, the government endeavors to expand the hierarchical diagnosis system to 85 percent of all its cities, which should substantially increase demand from primary medical institutions for diagnosis equipment, household equipment for chronic diseases, medical rehabilitation apparatus, portable medical equipment, as well as medical imaging equipment.
Registration for imported drugs and medical devices
On October 8, 2017, the Central Committee of the Chinese Communist Party and the State Council jointly promulgated the Opinion on Deepening the Reform of the Regulatory Approval System to Encourage Innovation in Drugs and Medical Devices (“Innovation Opinion”).
The Innovation Opinion lays out several primary objectives, including an overhaul of clinical trials management, accelerating the drug and medical device approval process, promoting drug innovation and the development of generic drugs, enhancing the administration of drugs and medical devices throughout products’ life cycle, and improving technical review infrastructure.
Notably, the Innovation Opinion stipulates that qualified overseas clinical trial data can now be used in the drug and medical device registration and approval process, while drug and medical device registration approvals shall be fast-tracked.
The Innovation Opinion signaled the central government's commitment to address long-standing issues in China’s regulatory approval system for drugs and medical devices and make advanced medicines and medical technology more quickly and widely available in China and triggered an unprecedented flurry of activity by the China Food and Drug Administration (CFDA Footnote 1 ) to implement its mandates, including draft amendments to the laws and regulations governing drug and medical device approvals.
The Draft Amendments to Medical Device Regulations explicitly allow foreign clinical trial data to be used for registration of medical devices, and on January 11, 2017, the CFDA published the Technical Guidelines for Accepting Foreign Clinical Trial Data for Medical Devices, which set forth the requirements for submitting foreign clinical trial data. On the drug side, the CFDA has indicated that it will accept foreign clinical trial data as part of international multi-center clinical trials. Furthermore, the Imported Drug Decision provides that an overseas applicant intending to conduct an international multi-center clinical trial in China can simultaneously conduct a Phase I clinical trial inside and outside China, which essentially means foreign Phase I clinical trial data can be used for the approval application of imported drugs
The Innovation Opinion also stipulates that a rare disease catalogue will be set up and new products that can treat these rare diseases will be eligible for fast tracked trials.
Besides the Innovation Opinion more measures on drug and medical device registration reform are coming out, including: the new Medical Device Classification Catalogue, the pilot Medical Devices Registrant program in the Shanghai Free Trade Zone, the proposed “Drug Market Authorization Holder” (MAH) system.
For more information on the medical device regulation in China, please refer to Guide to China Medical Device Market Entry.
Private healthcare services
The General Office of the State Council issued the Opinions on Encouraging Development of Diverse Private Healthcare Services (“the Opinions”) in May 2017 to encourage private investors to participate in the medical service sector. The Opinions stated that eligible private healthcare institutions will be treated equally to public institutions and enjoy the same benefits in areas such as patient referral, charges and payments, performance assessment, as well as incentives.
Foreign investors with advanced medical technology, notable management experience, and best-in-industry operation models are encouraged to set up medical institutions through joint ventures. Foreign investors are granted pre-establishment national treatment plus negative list market-entry treatment; items subject to examination and approval are simplified and optimized.
Senior care services
China’s aging population is increasing rapidly. As of the end of 2018, there were 249 million elderly people aged over 60 in China, accounting for 17.9% of the total population, making China the only country in the world with more than 200 million aging population. It is expected that the number of elderly people in China will reach a peak of 487 million by the year of 2050, accounting for 34.9% of the total population.
The greying of China’s citizenry is expected to push costs for elderly care including operations of retirement homes and medical services up from some 7% of the country’s GDP to more than 25% by 2050. The scale of China's elderly consumer market is estimated to reach 3.79 trillion yuan by 2020. However, the current effective supply hardly meets the increasingly diverse demand. For example, as of the end of 2018, the country had only about 30,000 nursing institutions for the elderly with 3.92 million beds, along with another 3.53 million beds in community institutions.
To generate a greater supply of nursing services and improve quality as China faces the increasing pressure of an aging population, the General Office of the State Council issued the "Opinions on Promoting the Development of Senior Care Services” on April 16, 2019. The new guideline offers overseas investors national treatment when they join the sector. The market access threshold will be further lowered with cancellation of administrative approvals to enter the nursing home market. China's aging market is expected to become a new growth point for economic development.
Cell therapy and genetic diagnosis
Transformation in cell therapies is happening at an even faster rate in China than in the rest of the world. Market potential of cell therapy in China is huge and Chinese companies are moving full steam ahead. China is host to 70 percent of all CAR cell therapy trials registered in 2017 and the first four months of 2018 (150 out of 214). Of all CAR-T cell trials registered since 2001, more than half are being conducted in China. As of May 2018, there are 56 companies in China involved in the commercialization of CAR cell therapies.
Gene sequencing, which has been proved as a diagnostic tool, is also seeing rapid growth in China, with an approximate compound annual growth rate of 20-25% from 2012 to 2017, ranking the top in the world. The market size is expected to reach 15 billion RMB by the year of 2022.
However, cell therapy and genetic diagnosis are still protective industry in China. The newly released Negative List for Foreign Investment Access, as part of Catalogue of Industries for Guiding Foreign Investment in 2018 still highlights the prohibition of foreign investing in the development and application of stem cell therapy as well as genetic diagnosis and treatment technologies.
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- Footnote 1
On September 1, 2018 CFDA was officially renamed as National Medical Products Administration (NMPA).
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