Digital Health Consulting
Digitalization is the buzzword of the modern day, and with good reason. Digitalization increases efficiency and productivity, vastly improves communication, and smoothens business processes in virtually every sector. An increasing consumer demand for seamless and efficient digital services has industries that have not traditionally been 'digital' rushing to incorporate more such processes into their repertoire. Among these digital laggard sectors are typically government, construction, agriculture, and - perhaps surprisingly - healthcare.
The widespread lack of digitalization in healthcare is surprisingly given the many strong incentives to digitize. A McKinsey study found that the application of technologies such as patient self-management solutions, digital channels (eg for physician contact), and other digital solutions can produce net economic benefits of 7-11% of total healthcare expenditure.
This synthesis of digital technologies and healthcare, known as digital health, is the future of healthcare. Digital health is an umbrella term that applies to all sorts of different digital solutions to both public and private health. Be it telemedicine, augmented and virtual reality, wearable technologies (think of that smart watch that tracks your running data), even your corona tracking app; all sorts of health-related digital technologies fall under digital health.
The Chinese healthcare sector, and particularly its digital health sector, has been booming. Especially as China is set to be the only large economy to avoid a recession in 2020, the eyes of European digital healthcare companies are frequently turning to the Middle Kingdom to generate business growth. Below we listed some opportunities and some challenges that European companies might face as they try to penetrate the increasingly lucrative Chinese digital health market.
Plenty of Healthcare Growth Ahead
China's healthcare sector is now the second largest in the world, trailing only the bloated healthcare sector in the USA. China's healthcare expenditure was worth almost 6 trillion Yuan in 2018, compared to only 500 billion Yuan in 2000. That's a growth rate well above 1000% in only 18 years!
However, per capita healthcare spending remains low in China. And compared to other large economies, China's healthcare sector takes only a minor share in its GDP. In 2019, for example, Chinese healthcare expenditure was only about 6% of GDP, compared to 10% of EU and almost 18% of US-American GDP. Yet as the country continues on its supercharged economic development, this healthcare spending will likely catch up to that of other higher-income countries.
China's digital health boom
China's digital health market was expected, before the pandemic, to be worth $ 110 billion in 2020. Today, with all the digital transformations that the pandemic necessitated, one can expect that figure to be markedly higher. A Bain & Company study found that demand for telehealth services in China skyrocketed between December 2019 and January 2020 as a result of the virus outbreak. Ping An Good Doctor, a leading healthcare services software, had a nearly 900% increase in users in this time period. Other digital health platforms, such as Chunyu doctor and Xiang Yuan, also experienced booms in online searches and new registered users.
The pandemic put digital health high on governments' agendas across the world, and the same is true for China. The difference is that China has put into action digital health reforms much more effectively than other economies.
In April 2020, the Chinese government introduced a new reform which extended insurance coverage to digital physician consultations. These consultations, which were formerly a luxury out-of-pocket expense, were encouraged in the face of the pandemic threat. Additionally, China's hospitals have seamlessly pivoted to digital channels. In Shanghai alone, over 13 certified Internet Hospitals exist, which are public hospitals that offer extensive digital services. China's top-down economic planning approach allows for economic transformations to take place at lightning speed - and this is exactly the case for digital health.
Data has been dubbed the oil, or even the gold, of the 21st century. Whichever it is, it is certainly among the most valuable resources of the present day. It is also the fundamental building block of any digital health ecosystem. And much like other valuable resources, different economies treat such data very differently.
China has a very laissez-faire approach to data protection; in simple terms, data protection barely exists. While this does raise privacy concerns, these rarely feature in Chinese discourse. In any case, it is exactly this lax approach to data that allows for rapid digital health transformations to take place. In China, one app - WeChat - processes user data for healthcare, finances, location, food delivery, and much more.
This level of centralization - impossible in Europe, where strong antitrust law prevails - allows for big data to be leveraged in entirely new and potentially innovative ways. Therefore, entering the Chinese market offers a key opportunity for European business: they can use the Chinese market to gain clinical trials and real world evidence faster than they could in Europe, where data use is especially strongly regulated under the continent's GDPR.
Challenges of the digital health market
European companies entering the Chinese digital health market will need to establish local partnerships with hospitals, physicians, or manufacturers to ensure long-term success. Finding the right partner in the PRC is both a difficult and time-consuming task. What's more, as China is a “high-context” culture, an extensive cultural know-how of Chinese business customs is a prerequisite to a business' long-term success. Especially in the innovative field of digital health, time is of the essence, so European companies cannot afford to wait too long to get to market.
The Chinese authorities are not always fully clear on which products receive approval and which do not, and for which reasons. Regulations and quotas can change with little warning, and approval processes can be slow and expensive. It is therefore imperative that European companies familiarize themselves with the Chinese regulatory environment and ideally know whom to contact for which likely queries before taking the leap to the Middle Kingdom.
... is that these challenges can be overcome with a trusted partner by your side. SILREAL has vast experience in digital health consulting. One example is a delegation trip that SILREAL organized for the German Federal Ministry of Health, where German politicians could gain insights into Chinese digital health trends.
SILREAL is deeply embedded in the Chinese and European digital healthcare spaces, can identify and communicate with the ideal partners for your current or future business pursuits, and ensure your business succeeds in the Chinese market.
Contact us today.
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Our Experience with Digital Health Consulting
Performing a go-to-market analysis on behalf of the start up incubator arm of a leading global insurance company focusing on insurtech, healthtech and mobility .
Digital Health Consulting
Analysis of the Chinese digital health market and conception of market entry strategies for a digital health service provider on behalf of a leading international pharmaceutical company.