China's much-hyped healthcare reform drive stuck in first gear
09/08/2015 22:00
By Adam Jourdan
SHANGHAI, Aug 10 (Reuters) - Li Tiantian, a Chinese doctor
turned tech entrepreneur, is a leading light of the country's
much-trumpeted healthcare reform drive. His medical networking
platform DXY.com links two million doctors across China and has
attracted funding from tech giants like Tencent 0700.HK .
DXY is exactly what Beijing has said it's looking to support
after it pinpointed remote healthcare, Internet and technology
as drivers to solve its healthcare woes in a 5-year roadmap in
March. ID:nL3N0WX1R1
The reality is rather different: DXY is curbing plans to
work with public hospitals to help connect doctors and patients
online because of a lack of support by Beijing and obstacles
working with China's huge, fragmented public healthcare sector.
"We've heard a lot of good stories from the top - Internet
+, driving force, policy changing - but see nothing happen at
the bottom," Li told Reuters. "It's not about market, capital or
even tech - these things are already developed very well ...
rather it's the regulations, laws and systems of support."
Li's position reflects wider obstacles to healthcare reforms
in technology, online drug sales, hospital privatisation and
doctors' pay, drivers that are a major lure for investors and
firms betting billions of dollars on China opening up a market
set to be worth around $1.3 trillion by 2020.
" Investors always ask: is there actually a macro tailwind,
and is the government and regulatory environment - which is very
important in China - supportive of this?" said Alexander Ng,
associate principal at McKinsey & Co.
"If there's a lot of negative voices it might make investors
back off or calculate a much higher risk premium."
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REFORM RHETORIC
China has ramped up its healthcare reform rhetoric, touting
greater access for foreign investors to healthcare services, a
bigger role for technology and pushing drug sales from mostly
state-run hospitals towards the retail market.
This has helped draw in close to $30 billion worth of
healthcare merger and acquisition investment so far this year, a
fivefold leap from the same period in 2014, according to Reuters
data. Healthcare M&A already leapt last year. ID:nL4N0V632K
But, despite the government's longer-term ambitions,
industry insiders say reforms are being held up because of
technical issues such as crumbling and fragmented IT systems to
in-fighting between regulators and push-back from the state-run
firms who dominate the sector - and don't want change.
"With so many vested interests - dealers, hospitals,
insurance departments and others - reform is not very fast,"
said Frank Zhao, chief financial officer at China Jo Jo
Drugstores Inc CJJD.O .
Privately, some health policy advisers admit reforms are
falling behind, while the public line is that reform has "hit up
against the Yangtze River", a reference to the obstacle famously
overcome by Mao Zedong's Communist forces in 1949.
The healthcare ministry did not respond to faxed queries
seeking comment for this article.
Zhao points to the expected approval for online prescription
drug sales, which he and other industry insiders say has been
delayed this year due to regulatory concerns and opposition from
state-run hospitals and distributors.
These hold-ups are a frustration for pharmacy chains like Jo
Jo as it looks to increase its business online, but also for
tech giants like Alibaba Group Holding Ltd BABA.N , which wants
to get into the online prescription drug space.
OPEN MARKET?
One big draw for investors has been China's privatisation
drive of healthcare services - touted as key to revamping an
unpopular healthcare system, blighted by crowded hospitals,
corruption and simmering tension between patients and staff.
But, despite the fast growth of private investment in
hospitals, the public sector still dominates around 90 percent
of all patient visits, according to a Deutsche Bank 2015
healthcare report. Investors cite issues with insurance schemes,
access to Chinese doctors and a still tightly-controlled market.
ID:nL3N0RR2WC
"With things still not market-led, organizations like ours
are facing huge challenges and difficulties," Hu Lan, President
and Director of hospital investment firm AMCARE Corporation,
said at a conference in Shanghai in June.
Healthcare spending as a slice of China's GDP also remains
small at around 6 percent in 2013 compared to 17 percent in the
United States, World Health Organization (WHO) data show.
Reforms to reduce hospitals' reliance on drug sales also
faces a revolt from doctors who argue this will take away a key
revenue stream at a time when medical staff are overworked,
underpaid and often violently abused by angry patients.
"Every few days you hear about a doctor being beaten or even
killed. This situation is a huge mental burden for doctors,"
said Wu Xiaobo a doctor at the Wangjing Hospital in Beijing in a
recent viral video campaign for doctors' rights.
As for DXY's Li, his firm now plans to change tack and set
up an offline clinic in the eastern city of Hangzhou this year
to pilot potential healthcare reforms - outside the state
sector.
"We were hoping we could leverage changing policy and do
something on mobile and digital," Li said. "We found it's just
too slow, so the only way to do it is out on our own."
(Reporting by Adam Jourdan; Editing by Ian Geoghegan)
((adam.jourdan@thomsonreuters.com; +86 21 6104 1778; Reuters
Messaging: adam.jourdan.thomsonreuters.com@reuters.net))
Keywords: CHINA HEALTHCARE/REFORM