beyondbrics

The Obama administration’s health care reforms have been a central part of the US political debate ahead of midterm elections on Tuesday. But for some US businesses it could be more productive to focus on an attempt to universalise medical coverage elsewhere – in China.

Government measures announced last year will “stimulate China’s health care market and create opportunities for private payers, providers, and IT vendors,” write consultants from McKinsey & Co. What’s more, they suggest that the health care industry might have that rare quality: an area of domestic consumption that grows faster that GDP.

In an article in McKinsey Quarterly, Claudia Süssmuth-Dyckerhoff and Jin Wang estimate that health care currently represents about 5 per cent of China’s GDP. With the government extending insurance to more citizens and building the hospitals to treat them, the authors add:

If China’s health care spending simply keeps pace with projected GDP growth, it will increase to $480 billion by 2018. We, however, believe that it is likely to rise faster than GDP, as a result of better insurance coverage, improved access to high-quality care, and rising demand (tied to aging, urbanization, and lifestyle shifts). If health care spending hits 6.5 percent of GDP by 2018, the market could increase by an additional $150 billion.

The consultants argue that private insurance could become cheaper and more accessible, creating a $90bn market by 2020, and that regulatory reforms are making it easier for private hospitals to provide publicly-funded care. And they note that better health care needs better IT – a point highlighted last week when Microsoft offered its personal health management software in China. The HealthVault technology, which is already available in four other countries, will be available to Chinese patients through local partner iSoftStone.

But the opportunities for health care in China don’t stop there. The FT reported last month that the country is set to overtake Germany to become the world’s third-biggest pharmaceutical market – with growth of 25-27 per cent next year, compared to an emerging market average of 15-17 per cent.

The story went on to note that:

China – unlike some other developing countries including India, Brazil and Thailand – has encouraged higher western-level prices on many new patent-protected drugs, in a move that analysts think will foster technology transfer and strengthen domestic producers in the longer term.

Indeed, pharma companies want to go into the non-prescription market too: France’s Sanofi-Aventis is paying $520m for BMP Sunstone, whose cough medicines and other products are established in China’s retail markets. Such over-the-counter products have the benefit of being less dependent on government reforms.

The point is simple: Chinese citizens are getting wealthier; now smart multinationals can help them get healthier.