At a recent meeting with #kauffmanfellows at their 2016 Asia summit in Singapore, we led a number of discussions on the #healthtech ecosystems in key Asian markets. In this post, we aim to give a snapshot of the China healthtech ecosystem.

Key Highlights

  • ~$700M in venture funding invested in digital health care in China. Investor focus ranges from e-commerce to online physician-and-patient communication services to disease management apps
  • Significant potential for disruption with the healthtech market in China expected to grow exponentially over the next 5 years, reaching $110B by 2020
  • Baidu, Alibaba and Tencent are building, both organically and through investment/acquisition, new healthtech businesses which take advantage of their existing market positions. For example, Tencent co-invested in Guahao’s series D which raised $394M in 2015.
  • Success for new and existing players will be driven by new mindsets and business models
  • A number of challenges exist which will need to be addressed by the government and other implicated stakeholders
  • Healthtech across Asia is demonstrating similar promise and faces similar challenges

China Health System: Top 5 Issues

  1. Lack of access in rural areas
  2. Inefficient hospitals
  3. Heavy burden of chronic diseases
  4. Poor quality and supply
  5. Distribution channel markup

Key Drivers

One predominant driver of healthtech in China is the Chinese government’s deliberate intent to address the healthcare system’s inefficiencies and unmet needs.

Additional growth drivers include:

  • Massive adoption of mobile platforms
  • Enormous e-retail market
  • Relatively easy access to capital

Key Challenges

  • Regulatory uncertainty: no clear regulation exists yet for healthtech application such as remote consultation
  • Fragmented public hospital sector
  • Insufficient insurance coverage for drugs in retail & online channels
  • Limited relevant talent

Key Success Factors

New healthtech ventures will need to partner with hospitals, physicians and other stakeholders to realise their first mover advantage

Manufacturers such as pharma and medtech will need to harness digital tools to improve their marketing and sales efficiency, provide disease management solutions, deploy big data and analytics and enter into new partnerships to explore new business models.  These incumbents should resist the temptation of building in-house as numerous internal conflicts will negatively impact success.

Distributors and retailers must move more rapidly to avoid being displaced by the new entrants

Payers have the opportunity to remain competitive by digitising their value chain and developing new business models including digital services such as telemedicine to attract customers

Investors will need to be comprehensive in their evaluation of the growth drivers within the context of the healthcare sector including exploring novel ways to monetise a solution e.g. data & analytics

Conclusion

The healthtech revolution in China will have a massive positive impact on everyone in the healthcare ecosystem. Similar needs, expectations and challenges exist across the whole of developing Asia.

Whereas China’s healthcare ecosystem will benefit greatly from it’s government’s directives, it is likely that, in the short term, the remainder of developing Asia will need to rely on private enterprise and consumers to drive the much needed transformation.

Sources: Boston Consulting Group, McK, The Propell Group, Simon-Kucher & Partners, Health Startups Asia, Galen Growth Asia

The Propell Group