Medical Device Companies Look East

By Ames Gross
September 30, 2014


• Categories: 05-Quality/Regulatory

China has the second largest medical device market in Asia, valued at more than $14 billion with an annual growth rate near 15 percent. The device market is expected to double by 2025. At the same time, rising rates of cancer in China will result in a fast growing demand for cancer devices. It has been estimated that almost 4 million Chinese — out of a total population of 1.35 billion — develop cancer every year, and nearly 3 million die from the disease annually. In China, cancer is now the leading cause of mortality.

Although China has less than 20 percent of the world’s population, it accounts for more than 25 percent of global cancer deaths. Approximately 35 percent of global lung cancer cases and 50 percent of the world’s liver, esophageal and stomach cancer cases are reported in China. The majority of cancers in China are now caused by unhealthy diets, increased alcohol consumption, sedentary lifestyles, obesity, smoking and environmental pollution.

A rapidly aging population will further increase China’s cancer burden. China’s population is becoming wealthier and more urbanized — meaning that more Chinese are looking for greater access to medical care and are demanding better quality medical products and services. By 2025, China’s urban middle class population is expected to represent almost 70 percent of the country’s total population. However, Western medical companies that want to make the most of the Chinese cancer sector’s many opportunities need to develop a clear, focused strategy for the Chinese market.

Cancer treatment and diagnostics in China

Over the past decade, China has invested heavily in improving healthcare — including strengthening the country’s cancer system. Since 2009, the government has spent almost $300 billion on healthcare reforms. This has included upgrading healthcare facilities and products as well as expanding medical insurance coverage, making better care more affordable for hundreds of millions of its citizens. The Chinese government is expected to spend another $600 billion on healthcare by 2025. Additionally, Chinese medical insurance has expanded to cover almost 75 percent of inpatient care expenses for eight common cancers, although such insurance is still limited.

China has increased the number of cancer educational outreach programs for both Chinese citizens and doctors in smaller cities and rural areas, emphasizing early screening, diagnosis and treatment of cancer. China has also concentrated on building research centers, hospitals and clinics focused exclusively on cancer care. China now has almost 220 cancer hospitals, along with 1,400 radiation oncology centers that are often housed in general hospitals.

Local Chinese governments are increasingly working with Western hospitals and medical companies to launch treatment and research partnerships. For instance, Seattle’s Fred Hutchinson Cancer Research Center and Shanghai’s Center for Drug Control together established a Breast Health Resource Center in Shanghai. Common cancer treatments in China include radiation, surgery and chemotherapy, in addition to combination treatments. There are some cancer treatment centers in China that have levels of care equivalent to care found in the West. These facilities — concentrated in Beijing, Shanghai and several other top tier cities — are aimed almost exclusively towards China’s wealthy elite, and are procuring top-of-the-line cancer diagnostic and treatment systems.

Healthcare facilities outside of the top tier cities are also purchasing increasingly advanced equipment. It is now common for provincial level hospitals to offer gamma knife surgery, particle knife technology, brachytherapy capability, interventional therapy, cryosurgery, gene therapy, high intensity focused ultrasound (HIFU) as well as fast expanding telemedicine capabilities.

Growing privatization

Over the past several years, the Chinese government has been promoting private investment in healthcare facilities, including cancer centers. Chinese private cancer diagnostic and treatment facilities offer better levels of care than public hospitals and clinics — and more often purchase higher quality, Western cancer medical devices. For example, in 2015, China’s Concord Medical Services (Beijing) will start construction on a premium cancer hospital in Shanghai, for which Concord plans to procure advanced equipment for cancer diagnosis and treatment. Concord already has more than 140 radiotherapy and cancer diagnosis centers around China — and in 2011 signed an agreement with GE to promote GE’s products in Concord’s treatment centers.

The Chinese State Council’s 2014 healthcare reform plan relaxes caps on foreign investment in hospital partnerships. The number of U.S. cancer hospitals partnering with Chinese healthcare providers has been increasing in recent years. For instance, Fox Chase Cancer Center (Philadelphia, Pennsylvania) has entered into a strategic alliance with Chang’an Hospital (Xi’an, Shaanxi Province) in order to develop Chang’an’s oncology department. The MD Anderson Cancer Center (Houston, Texas) and the Carlyle Group (a large investment company based in Washington, DC) have partnered with China’s Concord Medical Services to set up multidisciplinary cancer treatment hospitals around China.

As wholly owned Western cancer hospitals and joint venture cancer hospital partnerships increasingly enter and expand in the Chinese cancer market, these facilities will want to equip their Chinese hospitals with cancer diagnostic and treatment devices that are used in the West.

Conclusion

The Chinese cancer diagnostic and treatment market is projected to continue its rapid expansion due to the growing burden of cancer — attributed in large part to ongoing lifestyle changes and an aging society that is also better able to afford advanced cancer care. Thus, Western medical device companies should see expanded opportunities to market their products to the increasingly large Chinese cancer market. At the same time, success in China will require medical companies to develop China specific strategies, which will be discussed in detail in next week’s article.

Don’t forget to read the second segment of this article, “China’s Rapidly Expanding Cancer Market.”