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 -