Roche VP Luo Yongqing Advocates for Kaiser-style Integrated Healthcare Model in China

Aug 25, 2016 16:50 CST Updated 16:50

Recently, at Taikang Insurance’s 20th Anniversary Celebration and the 2016 Health & Medical + Internet Insurance Innovation Forum, Mr. Luo Yongqing, Vice President of Roche Pharmaceuticals, shared in-depth insights on the integration of internet insurance and the healthcare industry from the perspective of medical payment. The following is a summary of the key points compiled by VCBeat.

The pharmaceutical industry is a traditional, R&D-driven sector and a key participant in the healthcare value chain. Roche, a multinational pharmaceutical company with over a century of history, has a market capitalization exceeding $200 billion. It is the world’s largest oncology drug company and the global leader in in vitro diagnostics.

Currently, China’s healthcare system faces numerous challenges. We have relatively low rates of disease awareness and diagnosis, as well as a shortage of high-quality medical resources. However, the most critical issue is affordability. For instance, the five-year survival rate for lymphoma in China is only 33%, compared to 69%–85% in the United States. What accounts for this significant disparity? On one hand, accessibility is limited, as many innovative drugs marketed overseas have not yet been launched in China. More importantly, however, patients lack sufficient financial capacity to afford treatment. If the affordability barrier could be addressed, I believe the 31%–69% gap in survival rates could be substantially narrowed.

In terms of healthcare expenditure, out-of-pocket payments account for approximately 32%, government and other social sources cover 66%, and commercial health insurance constitutes only 2%. In contrast, commercial health insurance accounts for 35% in the United States and around 8% in developed EU countries as well as the UK and the US. This indicates that their government-funded and social insurance systems are highly developed, covering the majority of healthcare costs.

Basic medical insurance primarily provides fundamental coverage. For many drugs used in the treatment of malignant tumors that are still paid out-of-pocket, the financial burden on patients is extremely heavy. In 2014 and 2015, Roche Pharmaceuticals commissioned a consulting firm to conduct a study, which found that the annual cost of treating late-stage resectable rectal cancer in Shanghai approached RMB 300,000. Even under the well-covered urban employee basic medical insurance scheme, patients would still need to pay RMB 220,000 out-of-pocket. According to the World Health Organization’s standard, if a household’s expenditure on disease treatment accounts for 40% of its disposable income, it is classified as catastrophic health expenditure. To afford an annual out-of-pocket payment of over RMB 200,000, a household would need an annual income of at least RMB 400,000. Clearly, many households do not reach this income level. This reveals a substantial unmet need.

Moreover, in the past few years, the growth of expenditures from the basic medical insurance fund has surpassed the growth of the fund itself, with the New Rural Cooperative Medical Scheme (NRCMS) showing a negative 27% balance. If we do not have additional funding mechanisms, the medical insurance fund will face significant challenges. At the same time, it is evident that under these circumstances, the government-led basic medical insurance fund alone cannot resolve patients' payment issues, and commercial insurance must play a crucial role.

Currently, the government has recognized this issue and has gradually introduced a series of policies from 2012 to 2015 to support the development of commercial health insurance. In 2015, an individual tax-preferential program was launched, allowing for deductions on personal income tax. In practice, an increasing number of commercial insurance companies have participated in this initiative. It is known that 16 insurance companies are involved in the operation of critical illness and major disease insurance, covering 700 million people across 27 provinces.

In terms of service provision, a variety of insurance companies are involved, including domestic players such as Taikang Online and Changchun Life Insurance. Roche partnered with Swiss Re and Munich Re as early as 2012 and has now established strategic collaborations with more than 20 insurance companies in China. The collaboration between pharmaceutical companies and insurers goes beyond merely providing products; it also enhances disease management and standardized treatment. In summary, insurers and healthcare providers need to work together to address the issue of patients’ limited ability to pay, particularly given the low survival rates among cancer patients.

The United States has the Kaiser model. As a representative of integrated healthcare models, Kaiser Permanente operates its own health insurance plan, physician groups, and hospitals, forming a comprehensive, self-contained healthcare system. We strongly hope to see the emergence of such a Kaiser model in China, along with Chinese counterparts to Kaiser Permanente.