ShortCut: China Detox | Page 2

Petri dish with a good
breeding ground
The conditions for changing China’s healthcare
system are favorable:
• The healthcare system is highly centralized,
with almost all examinations
taking place at hospitals, which are
often ten times bigger than those in the
West. These larger units can work more
cost-efficiently than doctor’s offices or
small clinics, for example due to economies
of scale when it comes to using
expensive diagnostic equipment.
• China relies on digitalization and big
data like no other healthcare system.
The rapid development of data-based
medicine is accelerated by two factors:
1) Large numbers of patients like those
found in China enable a faster and more
robust validation of ideas and tests.
2) Simple access to patient information,
since the protection of personal data is
subordinate to the common good.
• China uses multiple arbitrage for the
acquisition of know-how and technologies
in the West. Driven by very positive
capital market expectations, the high
multiple valuations provide financial
options. Chinese players use this leeway
to grow outside their home market,
as for example Creat Group/Shanghai
RAAS in its acquisition of British blood
plasma player BPL and envisaged purchase
of German peer Biotest AG.
The formula for the West
These characteristics of the Chinese
healthcare sector also provide a unique
opportunity for the West. The prerequisite
is that local pharmaceutical and health
NEW CHINESE MEDICINE
AN ALTERNATIVE FOR THE WEST?
Three characteristics of modern Chinese healthcare that those responsible
in the Western healthcare sector should look at more closely.
HIGHLY EFFICIENT
HEALTHCARE
PROVISION THROUGH
LESS FRAGMENTED,
MORE UNIFORM
STRUCTURES
care companies as well as investors, health
insurers, national ministries and healthcare
institutions regard China not only
as a market but as a potential recipe for a
healthy trimming.
National authorities should watch this
experiment closely and use their results
to draw conclusions for the rules and regulations
in their own healthcare sectors.
All other players should take an active part
in the Chinese experiment and promote
greater integration between the different
areas of the healthcare system, similar to
the current practice in China:
• Fosun acts as an integrated pharmaceutical
manufacturer with its own hospitals
and health insurance division.
• Imaging device manufacturer Neusoft
offers not only equipment but also cloud
solutions for hospitals and entire provinces.
Furthermore, investors should check their
portfolios to determine whether the market
positioning of their investments is still
WHAT WESTERN PLAYERS SHOULD DO NOW:
DATA-BASED
MEDICINE THROUGH
A HOST OF
AVAILABLE PATIENT
INFORMATION
FINANCIAL
LEEWAY THROUGH
HIGH CAPITAL
MARKET
EXPECTATIONS
in keeping with the times and examine the
threats posed by Chinese providers such as
Shanghai United Imaging in the diagnostic
imaging sector.
A glimpse at the current developments
in China – both in healthcare and other industries
– should be enough to shake up
the Western healthcare sector. The future
requires slim structures, and the Chinese
detox is a proper way to make it happen.
THE AUTHORS
ULRICH KINZEL
Managing Director, goetzpartners
PHARMA AND HEALTHCARE
COMPANIES
INVESTORS
POLITICIANS
· Gather experience in
China, e.g. in the area
of data sciences for
personalized medicine
· Adaption of these
results and introduction
of innovative business
models in the West
· Review portfolios with
regard to the developments
in the Chinese
healthcare sector
· Analyze, in which areas
Chinese companies
can achieve price- or
innovation leadership
(e.g. robotic surgery,
precision radiotherapy)
· Take a close look to
the development in
China to break up
dogmatic structures
in western countries
· Create efficient
structures to ensure
a high-quality care
in the future
GÜNTHER SCHERMER
Partner, goetzpartners
© goetzpartners, 2017
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