China’s Healthcare in the New Normal

4 min read.

No doubt, the COVID-19 pandemic ravaged economies and strained healthcare systems around the world. China was one of them, being the first country to face the deadly virus and the first to begin its road to recovery. Although its healthcare industry currently leads the world in double-digit growth and is the second-largest healthcare market by expenditure, COVID-19 shone a light on gaps in the system and opened up new opportunities for innovation. As the Chinese slowly return to life as per normal, it is undeniable that the healthcare system has moved on and embraced a new direction of development. This article explores the emergence of telehealth, structural shifts in both domestic and global supply chains of healthcare products, as well as the future direction of China’s healthcare sector.

 China’s healthcare industry boasts one of the fastest growth in the world.
Credit: China Money Network

The boom of telehealth

Given the ongoing COVID-19 pandemic, going to a local hospital to consult a doctor for symptoms of the flu seems like an even scarier idea than the symptoms themselves. In order to meet healthcare demands for causes unrelated to COVID-19, online medical services, or telehealth, have been brought to the forefront of China’s healthcare industry. According to a Time article, China’s telehealth sector is predicted to be worth almost $30 billion this year, and is said to have the ability to transform Chinese healthcare. It could potentially reduce strain on urban hospitals and provide a stop-gap solution for rural dwellers, for whom healthcare was previously inaccessible.

China already has over a thousand telehealth companies, including some run by tech giants JD.com, Baidu, Tencent and Alibaba, according to data firm Tianyancha. JD Health, the healthcare subsidiary unit run by JD.com, reported receiving 10,000 online consultations per day prior to the pandemic. This number has since skyrocketed to 150,000 after the pandemic caused local hospitals and clinics to be swamped with suspected COVID-19 patients. JD Health’s own pharmacy has also enabled the delivery of medicine directly to patients’ homes. Xin Lijun, CEO of the $7 billion-value company, has expressed confidence for the future prospects of telehealth, asserting that the convenience of telehealth will remain attractive even after the pandemic abates. 

JD Health is not alone; most if not all telehealth companies have experienced a boom in traffic due to lockdown measures. Consumer attitudes of telehealth platforms have also become increasingly positive over the years suggesting a sustained trend of digitalization in the upcoming years.

Survey results showing a positive consumer attitude towards telehealth.
Credit: Bain & Company 

Apart from the added convenience, the emergence of telehealth in the midst of the COVID-19 pandemic highlighted the pre-existing bottleneck in China’s healthcare system at large. China has a tiered healthcare system in which Class I hospitals and smaller community health centers (CHCs) provide first-contact medical care, while Class II and III hospitals provide specialist referral services. In reality, however, there has been a tremendous imbalance in healthcare provision. Many Class I hospitals constantly operate at their maximum capacity due to a perceived superiority of their healthcare services, whereas lower-tier hospitals, CHCs and clinics struggle to attract patients. As a result, the Chinese government has actively encouraged patients to seek treatment at CHCs, smaller clinics and online. According to a WHO and World Bank report, China’s healthcare is so “hospital-centric, fragmented, and volume driven”, potentially rendering it unsustainable. Against this backdrop, telehealth platforms are expected to relieve the imbalance in China’s healthcare sector and create a more patient-centric approach to healthcare.

Localization of supply chains

Before COVID-19, a full-fledged localized medical supply chain was already one of the Chinese government’s priorities. The pandemic further highlighted the pitfalls of relying on global supply chains for medical products. For example, McKinsey reported that the absence of local manufacturers for extracorporeal membrane oxygenation (ECMO), a treatment that uses a pump to circulate blood through an artificial lung back into the bloodstream, especially in children, was seen as a supply risk during COVID-19 by many observers.

To hasten the localization of medical supply chains, the National Medical Products Administration (NMPA) has recently issued a draft regulation to fast-track the process of registering new products after transferring manufacturing lines to China. Under this regulation, multinational corporations (MNCs) will be able to locally manufacture products that have already been approved for import, and enjoy drastically shortened timelines for re-registering these products. Moreover, the Chinese government has also pledged to invest heavily in R&D and innovation going forward in order to identify and better understand ways to serve the needs of the local market. In SCMP Research’s China Healthcare Report for 2020, China’s combined pharmaceutical and biopharmaceutical R&D spending is projected to grow at a 23 percent compound annual rate until 2023 to reach US$49 billion, accounting for 23 percent of the world’s total spending on drug discovery and testing.

In the future, China’s localization of its supply chains on top of its expansions in R&D would allow for China to acquire a niche higher up in the value chain, cementing its position as a major exporter of medical equipment in global supply chains. The government’s Made in China 2025 strategic plan has also identified bringing local manufacturing up the value chain for high-tech medical devices as a priority, citing a greater focus on innovation going forward. China’s medical supplies already accounted for 2.6 percent of its total exports in Q1 of 2020, and the government hopes to increase its global presence in this area.

Preventive healthcare in the new normal

Public health awareness has undeniably been amplified since the outbreak of COVID-19. This inadvertently resulted in a rise in both the R&D and sale of wearable medical devices including fitness tracker, health watches, electrocardiogram watches, blood pressure monitors and biosensors. According to China Briefing, the pandemic merely accelerated a shift from treatment to prevention in China’s fast-maturing healthcare industry, especially in light of the nation’s aging population and the rising prevalence of chronic diseases. Many companies have identified this trend and have quickly launched their own medical devices. This includes Medtronics, which has recently partnered with Fitbit to integrate health and activity tracking for patients living with diabetes via a mobile app. The app also monitors and collects information on patients’ glucose levels and helps patients manage them. 

Complementing this shift is an increased reliance on data. Medical device companies are required to leverage on data to build their products and improve their performance quality, giving rise to many partnerships with tech companies. One such example is Huma, a London-based healthcare startup which has enjoyed a growing presence in China with the support of strategic partners Tencent and Bayer. Huma has since launched Biobeats, a remote patient monitoring system that aims to predict and ultimately prevent the advent of physical and mental illnesses. It compiles and analyzes health data collected from a diverse range of measurements including heart rate variability, sleep patterns and even mood, and uses this information to compute a patient’s baseline physical and mental score, in order to offer personalized support to the patient when required.

In an interview with Derek Weng, the founder of LemonBox, a company selling vitamins and preventive health products, these views were echoed. Derek acknowledged an increase in demand for LemonBox’s service after the onset of COVID-19. He told us that Chinese consumers are becoming increasingly health-conscious across the board, and are more willing to spend time and resources on their personal health, which hints at preventive healthcare becoming a part of the new normal going forward. Moreover, with the rapid digitalization of healthcare, companies like LemonBox will be better able to tap into technology such as big data and analytics to enhance their customization service and to better tailor their products to customers.

Telehealth will likely be the new normal for many going forward.
Credit: Forbes

According to the Future Health Index, China was already set to lead the way in the adoption of digital health technology in 2019. Being first in and first out of the COVID-19 pandemic, China will likely continue to develop its telehealth industry as its economy begins to recover. Given the current rapid expansion of telehealth, on top of an increased focus on localizing supply chains, as well as a shift in consumers’ attitudes in favor of preventive healthcare, telehealth and digitalization are set to become the central components of the healthcare industry in the following years to come.