At a recent Harvard China Review conference, IMS’s Raymond Hill, general manager, Global Consulting, provided an in-depth review of the ways in which the pharmaceutical industry can help China improve its healthcare system and, at the same time, lower its costs and improve the quality of life.

In his remarks, Ray observed that many countries around the world view a cut in drug spending as a way to reduce overall healthcare costs -- when, in fact, drug spending actually has a positive economic effect.

"For every dollar spent on drug therapies -- to combat hypertension, for example, or depression -- there is a positive economic impact on the work force: an increase in work hours, and a decrease in absenteeism," Ray told the group. "And overall healthcare costs also go down. For example, there is a reduction in hospital costs when drug therapies reduce the need for hospitalization. That’s why Chinese reformers should consider how the government can work with the pharmaceutical industry, as well as with physicians, patients and payers, to effectively manage overall healthcare costs while, at the same time, improving the health of the Chinese people."

Ray was part of a healthcare panel that was chaired by John Cai of the Harvard China Review, and included Professor Arthur Kleinman, chairman of the Anthropology Department at Harvard; Adam Wagstaff, Lead Economist at The World Bank; Roberta Lipson, chairman, United Family Hospital and Clinics in China; Zhongren Jing, vice president, Shanghai Fosun Pharmaceutical; and Li Cheng, director, Roche’s R&D Center in Shanghai.

An Attractive Market for Drug Companies
China’s economy is growing rapidly, and GDP is a good predictor of healthcare spending. It is estimated that, in just four years, China will be the seventh largest drug market in the world.

"One demographic factor in this increase is the country’s aging population," Ray notes. "As a result, illnesses such as diabetes and cancer are increasing dramatically. Clearly, China is a very attractive emerging market for drug companies."

That is why so many multinational pharmas -- AstraZeneca, Roche, sanofi aventis, Novartis, Pfizer -- are investing significantly in China, establishing research centers there, expanding their sales forces and seeking Chinese industry partners.

Pharma to the Rescue
“There are several major problems in the Chinese healthcare system that must be solved,” Ray observes. “These range from a complex supply chain that increases prices at both the hospital and patient level, to a lack of private insurance. The global pharmaceutical industry, with its prior experience in all of these areas, can help to solve some of these problems.”

Ray offered a number of ways this could work. For example, he suggested the industry should encourage the adoption of health economics programs that can contribute to better selection, allocation and pricing of drugs. "The Chinese government can set up an independent agency to perform health technology assessments on new drugs to ensure real value is being created," shares Ray. "Beyond those assessments, market-based pricing will be the best way to encourage development of a strong, innovative industry that can lead the global pharmaceutical market."

To eliminate "perverse profit-driven prescribing," Ray says prescribing must be separated from dispensing, as is the current system in China. Here, he recommends involving physicians and pharmacists in the planning and implementation of a new system -- as they are politically and economically critical to its success. "The new system should be implemented gradually," he says, "beginning with antibiotics and other high-burden therapeutic areas. And, to encourage patients to use local pharmacies, economic incentives, such as lower cost sharing, should be available."

Another key area where the pharma industry can help drive health reform: driving adoption of private insurance. “Without private insurance schemes in place, individuals do not have the support to manage through significant illnesses, and an undue cost burden is placed on the individual,” says Ray. “Addressing this problem is one way the industry can contribute to better management of healthcare costs."

He adds: "Today, China’s healthcare system is at a critical juncture. I proposed that the pharmaceutical industry can leverage its global experience to help move that system in the right direction -- toward a sound, successful cost-containment strategy that will also enhance the quality of life of the Chinese people."