Insights from Industry Leaders on the Future Trends of China's Healthcare and Wellness Sector

On August 8, the “New Engines, New Directions, New Hotspots” event—also known as the 2016 Chongshan Capital Great Health Night—kicked off in Beijing. During the Chongshan Capital Roundtable Forum, panelists analyzed and provided outlooks on the development trends and future directions of the healthcare and wellness industry. Below is a summary of the conference content compiled by VCBeat.

Li Zheng, Baidu Healthcare Division:Two Trends in Internet Healthcare

First,The future pathway for patient care will undoubtedly be a combination of online and offline services.

It was essentially a single pathway. Several years ago, Baidu committed to connecting people with information, thereby helping to establish such a pathway. Although there remains considerable room for improvement in the interaction between people and information, and numerous challenges emerged when delving deeply into the healthcare sector, it ultimately provided a viable approach for a large number of patients. The future trend will undoubtedly evolve into a new, integrated online-to-offline (O2O) pathway.

Second,Whoever truly resolves the shortage of medical supply in the future path will be the creator of enhanced future production.

Third, cost-effective healthcare. Reducing costs for patients is sure to align with future trends.

Guo Huawei, President of China-US Medical Group:Future Market Demand and the Four “Embraces” of the Internet

First, embrace the capital market.

Embracing the capital market enables rapid expansion of brand, technology, and economies of scale.

Second, embrace the Internet.

How to Embrace the Internet: It is essential to establish connections with the pain points of both clients and patients. Timely alignment with hospital needs and patient pain points will constitute the most direct demand in the future.

Third, embrace your original dream.

"Stay true to your original aspirations, remain grounded, and strive to fulfill your personal role with greater determination, achieving optimal performance and maximizing your potential."

Fourth, embrace market transformation.

Whether it is healthcare reform or the nation’s strategic direction, the ultimate goal is invariably to improve outcomes. At this juncture, identifying a development path suited to one’s own circumstances—even if it means seizing a faint glimmer of opportunity in narrow cracks—is well worth pursuing.

Hu Bo, Chairman of the Health Management and Health Insurance Committee of the Chinese Medical Doctor Association:Three Trends in the Future of Healthcare

First, from the perspective of primary healthcare, there is significant potential for development., and its added value will be very high.

Second, the added value of big data is also limitless.Whether online or offline, big data from health checkups is highly valuable and practical for guiding post-examination clients in health management, chronic disease management, and follow-up services.

Third, healthcare finance.President Zhang of the Chinese Medical Doctor Association has put forward a requirement regarding the health management and health insurance proposal submitted by our association: how to provide adequate insurance coverage for 2.8 million physicians. Therefore, in this field, we aim to not only safeguard doctors but also make significant strides in the medical finance sector.

Tian Jiaqiang, Chief Healthcare Industry Analyst at CITIC Securities:Two Key Points of the Secondary Healthcare Market

From the perspective of the entire secondary market, there was indeed a major bull-to-bear transition last year, and the market this year has been rather sluggish; however, there are two points that deserve everyone’s attention.

First, the credibility of the healthcare sector remains at a relatively high level.Compared to the low valuation levels seen in 2012, pharmaceutical companies in the secondary market are currently trading at approximately 40 times earnings. However, it is important to recognize that market expectations for the healthcare sector have become increasingly stringent. This shift is reflected in hedge funds and many secondary market positions, where cold hard data reveals a significant change: whereas the pharmaceutical sector’s weighting exceeded 10% in 2011–2012, it has now declined to just 5–6%. Data further indicates that the growth rate of the entire pharmaceutical industry, which once far outpaced GDP growth at around 20–30%, has now slowed to approximately 10%. Looking ahead, the development of the healthcare industry will demand significantly higher professional investment capabilities compared to five years ago.

Second, three relatively clear trends in industry development can be observed:

1. The government is currently promoting therapeutic equivalence evaluations for generic drugs, a development that warrants a dialectical perspective.Strict implementation would be a significant boon to established leading enterprises. However, when numerous external factors come into play, it often devolves into a mere campaign, much like the previous GMP retrofitting initiatives.

2. The promotion of the “Two-Invoice System” has gradually brought out the value of commercial platforms.In the future, an increasing number of distributors will join this commercial platform. The traditional business model underwent vertical reform; in the future, reforms are likely to be horizontal, shifting from simple distribution to a combined distribution and sales model.

3. The appeal of new technologies is declining.Compared with the past two years, when listed companies fully embraced the healthcare market, stakeholders are now becoming increasingly rational. This includes participants in the secondary market, who are seeking more substantive content rather than mere hype.

In addition to the aforementioned trends, the secondary market is also exploring new directions for industrial development, including physician groups. The emergence of physician groups is an industry that has gradually evolved under market forces and the awakening of physicians’ professional self-awareness. Rather than being driven by government intervention or guidance, this sector has demonstrated significant vitality. In the future, physician groups will play a crucial role in optimizing the allocation of medical resources. In short, physician groups are key to breaking the stagnation that has characterized medical services in recent years, marking the advent of the 2.0 era.

Li Hongjun, M&A Partner at Ernst & Young (China):Three Pillars Supporting the M&A Boom in the Healthcare Industry

First, China's consumption upgrade.People are seeking not just simple medical care, but a diagnostic and treatment process that is enjoyable.

Second, the insufficient supply and demand in China's healthcare industry.

1. Demand for high-end medical services will continue to rise.China has a population of 1.3 billion, among whom 130 million are high-spending consumers, yet only 500,000 providers offer premium medical services. This significant gap presents substantial growth potential, making high-end diagnosis and treatment a key focus for future mergers and acquisitions.

2. Internet Healthcare, Telemedicine.Internet healthcare serves as a major source of big data. Baidu focuses on downstream services, including Baidu Cloud and big data processing. However, big data from Chinese hospitals has not yet been fully leveraged. Hospital big data stems from the further upgrading of core medical information systems. Legacy systems were primarily designed to handle basic prescriptions and provide simple clinical decision support, which is insufficient to support the comprehensive development of hospitals. In the future, providers of these integrated core system solutions will have significant growth opportunities. The key lies in upgrading hospital systems to generate insights based on data analytics.

Third, Chinese insurance asset management firms are highly enthusiastic about the medical and elderly care industry., There are many medical and elderly care providers in the United States. Chinese insurance companies place great emphasis on the emerging trend of integrating real estate for medical and elderly care with providers that combine insurance services and healthcare services.