Seizing the Golden Era of China's Healthcare Industry: Innovation Works' Kai-Fu Lee and Magnesium Health's Xiaodong Zhang in Deep Dialogue

China’s healthcare industry is entering a critical period of opportunity.

First, from a technological perspective, breakthroughs and advancements in scientific technologies such as the Internet of Things (IoT) and artificial intelligence (AI) are driving robust integration between the healthcare industry and emerging technologies. Second, from a policy standpoint, the issuance and implementation of the Outline of the “Healthy China 2030” Plan since 2016 have provided significant impetus to the development of China’s broader health industry. Third, from the perspective of public awareness, the COVID-19 pandemic has heightened people’s recognition of the importance of health.

It is against this backdrop that the healthcare industry has garnered unprecedented attention.According to data from the VCBeat database, the total financing in China’s healthcare sector amounted to RMB 49.2 billion in the first quarter of 2021, with 29 deals exceeding USD 100 million each. Among these, Shanghai MediTrust Health Technology Co., Ltd. (hereinafter referred to as “MediTrust Health”), a leading brand in innovative medical payment solutions, emerged as a notable highlight by securing RMB 1 billion in its Series B financing round. Ant Group, Shanghai Biomedical Industry Fund, and Sinovation Ventures served as joint lead investors, while Huaxing New Economy Fund and Northern Light Venture Capital participated as co-investors. Boyu Capital, Yuanyi Capital, and SAIF Partners continued to provide additional support.

As the healthcare sector heats up, how should innovative companies position themselves to capitalize on the golden age of the medical industry? Recently, Dr. Kai-Fu Lee, Chairman and CEO of Sinovation Ventures, joined MediTrust Health for an in-depth conversation with Zhang Xiaodong, Founder and CEO of MediTrust Health, to jointly explore the development trends and opportunities in the healthcare and wellness industry under the new landscape.

Since the beginning of the second decade of the 21st century, digital technologies—primarily mobile internet, AI, and big data—have accelerated their penetration into the broader healthcare industry. This has given rise to emerging sectors such as internet-based healthcare, AI-driven healthcare, and innovative payment models, thereby reshaping a user-centric healthcare security system.

“Through our observations,Applying AI technology to the healthcare industry would benefit society and serve the public good..” Dr. Kai-Fu Lee stated at the conference, “For instance, determining which medication to use when ill, and identifying which drug has proven most effective for a specific individual; or deciding which insurance policy offers the greatest personal benefit. Simultaneously, it informs insurers about what products they should develop to achieve optimal coverage, and guides pharmaceutical companies on which medications yield better outcomes in specific scenarios. This will make prevention and disease treatment more efficient, thereby extending human lifespan and promoting healthier living.”

(Dr. Kai-Fu Lee, Chairman and CEO of Sinovation Ventures）

Guided by the belief that the integration of technology and healthcare can create genuine value for users, Dr. Kai-Fu Lee’s Sinovation Ventures began its strategic expansion into the healthcare sector in 2019. Its investment portfolio now spans multiple sectors, including healthcare payment solutions, innovative medical devices, AI-driven drug discovery, and precision medicine. Among these,Since its investment last year, Sinovation Ventures has participated in two rounds of financing for MediTrust Health.

“A good company requires four key elements: a founder with a unique background, promising business opportunities, a favorable environment in its chosen sector, and a strong sense of social responsibility,” stated Dr. Kai-Fu Lee. He explained that the investment in MediTrust Health was driven by founder Zhang Xiaodong’s robust comprehensive background and capabilities, as well as the broad market prospects of the innovative healthcare payment sector in which MediTrust Health operates. Furthermore, recent healthcare policies have created a supportive environment.More importantly, innovative payment models can improve the accessibility of health services, thereby generating significant social value.

Specifically, since its inception, MediTrust Health has aimed to leverage innovative medical payment models and the “Internet+” approach to connect patients, pharmaceutical companies, and commercial insurance providers, thereby promoting the deep integration of financial instruments with the healthcare sector, in order to realize its corporate vision of “universal coverage for all, healthy living for every family.”

“Medical expenses not covered by medical insurance remain a heavy burden for the general public, and the challenge of payment continues to loom over most families with critically ill patients,” said Zhang Xiaodong.“The integration and innovation of ‘pharmaceuticals + insurance’ can benefit more patients, ultimately serving the greater good of society.”

(Zhang Xiaodong, Founder and CEO of MediTrust Health)

According to data from the National Health Commission, out-of-pocket expenditures by patients in China currently account for approximately 50% of the total healthcare market size, amounting to around RMB 1.2 trillion. This proportion is even higher in the fields of major diseases such as cancer and innovative therapies, placing a greater financial burden on patients. Although basic medical insurance provides fundamental coverage, individuals remain vulnerable to falling into or returning to poverty due to catastrophic health expenses when confronted with serious illnesses.

To help address this issue,MediTrust Health’s approach is to start from the payment side, aggregate the needs of self-paying patients, and then integrate the upstream and downstream segments of the healthcare value chain, thereby enabling patients to access cutting-edge pharmaceuticals or medical services in a more cost-effective and convenient manner.

Taking “Yao Kang Fu,” MediTrust Health’s innovative medical payment and patient benefits platform, as an example, the platform provides patients with “Internet + healthcare management” services. By leveraging innovative payment models, innovative retail channels, and innovative services, Yao Kang Fu deeply integrates the value chain between chronic disease management and specialty medications. It brings together pharmaceutical companies, pharmacies, and commercial insurance providers, thereby addressing long-standing challenges such as difficulties in accessing medications, high drug costs, and lack of efficacy guarantees. At the same time, it enables pharmaceutical companies to achieve precise customer reach and efficient conversion.

To date, Yaokangfu has become one of the most influential comprehensive pharmaceutical benefit brands in China. Data shows that Yaokangfu has partnered with over 50 pharmaceutical companies, offering the most extensive coverage of high-cost oncology drugs and specialty medications for chronic diseases. Its business network covers 90% of DTP (Direct-to-Patient) pharmacies across China, spanning more than 400 cities, benefiting millions of patients, and saving them over RMB 1 billion in medical expenses annually.

Policy-level support is also driving this trend.In February last year, the State Council issued the “Opinions on Deepening the Reform of the Medical Security System,” furtherIt has been clarified that efforts will be accelerated to build a multi-tiered medical security system, while promoting reforms in payment methods and supply-side reforms in pharmaceutical and healthcare services.

“Many of the model and payment challenges in China’s healthcare industry can be alleviated through technology in the future, making new innovative payment methods and solutions highly promising,” said Dr. Kai-Fu Lee. He noted that MediTrust Health’s innovative payment ecosystem model has achieved rapid growth through practical validation, and Sinovation Ventures is very optimistic about its prospects.

Although the integrated innovation of “pharmaceuticals + insurance” is a prevailing trend, in the view of Dr. Kai-Fu Lee,The management of healthcare payments is highly complex and represents a pioneering endeavor.“MediTrust Health, led by Zhang Xiaodong, must engage with three key stakeholders—insurers, pharmaceutical companies, and patients. Building such a multi-party platform is highly complex. The interactions among these parties resemble a ‘chicken-and-egg’ dynamic, requiring continuous updates and iterations. While no such enterprise existed in China previously, similar models have emerged in the United States. Given the current macro environment, we believe China now has the opportunity to do even better.”

Dr. Kai-Fu Lee stated that the business models of digital health in China are highly innovative, having emerged in response to the country’s unique healthcare system and demands. These models must be adapted to the healthcare systems of different regions to be successfully implemented. Consequently, unlike the standardized approaches seen in pharmaceutical or medical device sales, these models are, to a certain extent, more akin to “deeply customized” solutions.

For instance, after the healthcare industry embarked on its digital transformation, the next step was to bridge “data silos.” Connecting these data “silos” is precisely where MediTrust Health excels. “Only after data integration can artificial intelligence help each patient and user select the most appropriate medications or insurance plans.”

“We are ecosystem builders in the pharmaceutical and insurance industries. In this process, we aim to empower every patient and user with our core products and value,” said Zhang Xiaodong.The role of payers extends beyond mere reimbursement; it lies in enabling the public to access high-quality medical and pharmaceutical resources.“We hope that in the future, whether healthy or living with chronic conditions, whether elderly or young, everyone can gain coverage through innovative healthcare payment solutions, thereby enjoying advanced medical and health services with peace of mind.”

To this end,MediTrust Health is continuously expanding its boundaries.For example, MediTrust Health’s rehabilitation internet hospital (also known as Hainan MediTrust Internet Hospital) was approved for practice in November 2020, becoming the first independently established internet hospital in the Boao Lecheng International Medical Tourism Pilot Zone in Hainan.

It is reported that the internet hospital will be based in Boao Lecheng and leverage the inherent advantages of digitalization and intelligence to connect with global new drugs, therapies, and medical devices, serving patients in China. Furthermore, building on MediTrust Health’s leadership in pharmaceuticals and commercial insurance, it will further strengthen the construction of healthcare service infrastructure.

Not only that, when discussing the company’s future strategic layout, Zhang Xiaodong stated that MediTrust Health would undertake new explorations and deployments in the fields of rare diseases and chronic diseases, but he also mentioned that,Future business development may not be confined to a single aspect, but rather aim to deliver comprehensive, user-centric health services, thereby supporting the establishment of a multi-tiered medical security system.

“This is highly valuable to society. Every time I see MediTrust Health’s user base grow by one million, I feel a profound sense of accomplishment, knowing that if any of these individuals unfortunately fall ill, they will receive better care, enjoy extended life expectancy, and lead healthier lives,” said Dr. Kai-Fu Lee.

Dr. Kai-Fu Lee believes that, amid the wave of industrial upgrading, Chinese tech startups are ushering in a “golden age” characterized by favorable timing, geographic advantages, and human harmony.

Specifically,China has the advantages of data and population, which are the best “fuel” for the development of platform technologies such as AI and big data.A significant proportion of China’s independently developed innovative technologies will originate from startups. In this process, each innovation track holds substantial opportunities.

AndFocusing on the field of innovative healthcare payment, the core lies in industry participants driving the continuous transformation of healthcare services toward value-based care.

In other words, health insurance players must be guided by value-based healthcare. By expanding funding sources, providing insurance coverage, integrating service delivery, and strengthening industry consolidation, they should deeply engage in the “Three-Medical Linkage” (the coordinated reform of medical care, health insurance, and pharmaceuticals). In doing so, they will serve as a catalyst for deepening healthcare reform and, while mitigating medical cost risks, help drive the transformation of the healthcare model from a disease-centered approach to a health-centered one.

Only by gaining a profound understanding of this point can innovative healthcare payment models truly deliver practical value and significance. The technological infrastructure and business model currently established by MediTrust Health are continuously expanding in accordance with this logic.

“Nowadays, many high-tech companies ‘Made in China,’ like MediTrust Health, are rising strongly and stepping onto the global stage. I look forward to MediTrust Health’s continued success, as it becomes a benchmark in China and a leading pioneer and leader in innovative healthcare payment solutions across Asia,” said Dr. Kai-Fu Lee in his closing remarks.