Foreign healthcare companies should be selective about opportunities in China, says Global Growth Markets
27-Sep-17, Global Growth Markets
Speaking on the "Healthy China, Healthy Profits" healthcare panel at the China-Britain Business Council (CBBC) SME Forum in Bristol, UK, CEO of research and advisory firm Global Growth Markets, Pete Read, said foreign companies looking for opportunities in China's healthcare market should be selective. Pete, who is also a Director of the West of England China Bureau, pointed out the increasingly competitive situation in first tier cities and Level III hospitals, and the success of foreign firms which have identified a niche where they have a product or service advantage.
Extracts from the "Healthy China, Healthy Profits" healthcare panel at the China-Britain Business Council (CBBC) SME Forum in Bristol, UK, 26-Sep-17:
China already has over 25,000 hospitals - is there really space for more foreign players?
Perhaps surprisingly, yes. China's healthcare system is stretched because of its inefficient structure and the number of patients using the services. There is no well-established primary care system and people go to hospitals for many complaints which would be dealt with at a local clinic or GP's surgery in most countries. As a result, public hospitals tend to be chaotic, with long queues, confusing patient flow and people touting appointments.
Is there an opportunity for healthcare providers in the UK to serve Chinese medical tourists?
Over 500,000 medical travellers left China for treatment overseas in 2016, spending more than USD11 billion. However, over 95% of them went to other Asian countries, not to Europe or the US. The quality of healthcare services in the UK are well regarded in general but there is not much awareness of individual hospitals, clinics or strengths in terms of treatment areas.
In our recent WeChat survey of 550 international travellers, healthcare came out as the top lifestyle concern among these wealthy Chinese. The single most important point to address is continuation of care, once the patient returns home.
Is it important to focus geographically?
It depends on the product or service you are selling. Something like an innovative medical technology that is sold into Level III hospitals will naturally have a focus on the biggest cities. But even outside Beijing, Shanghai and Guangzhou there are more than 1,000 Level III hospitals. It's important to find a business partner who has the right connections and knowledge of these potential customers.
On the other hand a wellness product that can be sold directly to consumers could be targeted much more widely, for example using cross-border WeChat e-commerce. There are more than a million US dollar millionaires in China, and almost half of them live outside the top ten East Coast cities.
As an SME you have two basic options: 1. Find a partner who has wide geographic coverage, if you feel you have the resources and capabilities to scale up and serve a large market demand; or 2. Identify a limited geography that has sufficient demand for your product or service and focus on that area.
Which clinical areas hold the best opportunities?
Primary care, elder care and training of healthcare professionals to UK standards, whether NHS or private sector, are priorities for the Chinese government, and the UK government is supporting the transfer of knowledge and skills actively.
Private self-pay treatments, especially elective procedures, is another huge area of opportunity, tapping into the large middle class and high net worth market segments. In particular areas such as oncology, fertility, orthopaedics, dental treatment and ophthalmology show a high demand and willingness to spend. Even though there is a very rapid development of local private providers in these areas, foreign players with expertise, new technology, brand strength or a combination of these, can identify a niche and succeed in the market.
One area we expect to see ramp up very quickly in the coming years is sports medicine. Currently many orthopaedic surgeons are generalists, and there are very few dedicated sports surgeons. But with the massive investment and ambitions of the Chinese government to develop sports from the grass roots level in schools, through to national teams winning the football world cup and other global competitions, there will be a huge increase in sports injuries, awareness of treatment options, and consequently demand for treatment.
What has distinguished successful foreign players in China's healthcare space?
Unique or superior technology can be key. For example over 50% of the diagnostic imaging equipment market is held by foreign players.
A niche approach, and being selective about market opportunities is also very important. One example of this is Mathys, a Swiss orthopaedics company with only 500 employees globally. Mathys competes successfully with major international players such as Zimmer, Smith & Nephew and Depuy Synthes, as well as low-cost local companies, by focusing on providing continuing medical education (CME) and the application of minimally invasive surgery and products, aiming to own the minimally invasive space in China.
Finally, working with the right partner, for example a distributor who has connections and relationships with the right customers and government departments, is often a must-have success factor.
GGM can help with international healthcare and medical tourism market opportunity assessment, strategic planning, market research and partnering - in China, Asia and other global growth markets. Contact us to find out more.