The healthcare sector has played a marginal role in U.S.-China relations, but that is beginning to change. China has become the world’s top producer of active pharmaceutical ingredients (APIs) and inert substances, as well as a significant exporter of medical products. U.S. drug companies and distributors are sourcing a large share of ingredients and finished drugs from China and selling them in the United States. Concurrently, China is experiencing a major demographic and epidemiologic transition, challenging the nation’s health care system. China’s median age will exceed that of the United States within this decade, and the proportion aged 65 and above is projected to increase from 9 percent in 2013 to 25 percent by 2040, totaling 300 million.
Alongside its role as a pharmaceutical producer, China is undergoing an epidemiologic and demographic transition that is fundamentally changing the country’s demand for healthcare. Chronic and non-communicable diseases are on the rise, due to an aging population and to a worrying decline in public health, caused by pollution, poor diet, and other factors. A more affluent and urbanized population is seeking better quality care. Some experts estimate China’s healthcare spending to increase from $357 billion in 2011 to $1 trillion in 2020, making China the second largest market after the United States ($3.8 trillion in 2014 when including direct and indirect healthcare costs in the USA. $5-6 trillion by 2022).
At present, China’s healthcare market is ill equipped to meet the rise in demand for care. Relative to wealthier countries, doctors and hospital beds are in short supply. Healthcare spending is only 5 percent of gross domestic product, compared to an average of 9 percent in Organization for Economic Cooperation and Development countries. To remedy this situation, the Chinese government launched ambitious healthcare reforms in 2009 that aim to extend basic government-subsidized health insurance, expand the population health benefit package, strengthen primary care by constructing new clinics, control the price of essential drugs, and reform government-owned hospitals. Fiscal spending to support these reforms totaled some $371 billion in 2009–2012.
U.S. companies that market drugs, medical devices, and healthcare services view China as an important opportunity, not only to source cheap inputs, but also to market goods and conduct research and development. An important impetus to focus resources
on China is slowing demand and changing regulation in the United States, as well as a lack of other markets that match
China in terms of market size and level of development.
Market access for U.S. drug and device makers remains restricted. Companies are concerned about being targeted by China’s recent anticorruption drive and indiscriminate use of its antimonopoly law, which ostensibly aim to lower healthcare costs U.S. companies that market drugs, medical devices, and healthcare but serve to disadvantage foreign companies. China’s process for
approving new drugs leads to excessive data transfers. Loopholes in China’s intellectual property laws allow local drug makers to reproduce U.S. patent drugs prematurely. Onerous clinical trials, combined with state interference in tendering, pricing, and reimbursement, cause delays of up to eight years for state-of-the-art U.S. drugs, and make these drugs prohibitively expensive for ordinary Chinese patients. U.S. device makers are concerned as well about proposed amendments to China’s Medical Device Law, published in March 2014. The amendment could impose hundreds of new requirements on foreign device makers, including indigenous standards for serial number tracking.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
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