China’s strong recovery from COVID-19 has enabled the central government to refocus on national priorities to deepen healthcare reform in two ways: cost-containment and digitalization. Over the short term, expect recovering demand for healthcare services in China even with minor COVID-19 outbreaks. We expect an increase in group purchasing this year as the country trades historically low prices for high volume. Over the long term, streamlining information across digital platforms will optimize decision making and direct cost-containment strategies. Public infrastructure investment will drive domestic innovation and create strong local competition for market access in the pharmaceutical and medical device industries.

NRDL update dampens outlook on imported drugs despite outperforming the previous year. 2020 NRDL negotiations showed a higher success rate and lower average price cuts than last year, but “me-too” drugs remain the target of price pressures. For the first time, the NHSA also updated old variety drugs by an average price cut of 40.5%. Significantly fewer imported drugs are included in the NRDL, as the NHSA encourages innovation in the domestic medical R&D sector.

Central government shifts focus to private health insurance to alleviate imminent financial burden. The national agenda to focus on expanding the private health insurance market gains greater traction this year as more innovative products enter the market and clearer guidelines are established for PHI products. There is huge room to grow in the PHI market. Expect increased private healthcare spending, which will help increase prescription spending and boost consumer preferences for more expensive treatments.

New DIP payment system aims to improve cost-effectiveness in the face of inconsistent patient data. The DIP uses big data to fine-tune the categorization of diagnosis and treatment pathways already established in the DRG system. This payment model would be a better fit for real-world practice and potentially accommodate online medical services. The NHSA is seeking to drive better budget control and cost-effectiveness across the system. The DIP will guide clinical and procurement decisions based on treatment patterns.

Actions for Business Professionals

  • Monitor developments of the DIP and DRG rollouts and adapt to potential shifts in stakeholder purchasing decisions.
  • Evaluate whether to shift sales efforts for innovative therapies (not included in the NRDL) to segments seeing fast adoption of PHI. Double down on developing a localized digital marketing and digital solutions strategy for China’s fast-changing digital health landscape.
  • Ensure that you are tracking pilot programs and public-private partnerships in the Chinese healthcare space as local players align to national Chinese reform efforts.
  • Pressure-test assumptions through scenario-based methodologies, preparing for changes in market access and reimbursement, healthcare financing, and government priorities.

Our experts recently held a webinar focused around China and its foundation for healthcare reform in 2021, including topics such as:

  • Demand planning and engagement models in a post-lockdown environment
  • Short-term healthcare sector outlook and public sector priorities
  • Long-term healthcare reform measures for a post-COVID19 healthcare system

Watch the full webinar presentation below:

Want even more insights on the China Healthcare outlook in 2021 and how to pressure-test your strategic plans against the shifting landscape this year? Download an executive summary of our latest China Healthcare Review today:

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