McKinsey: China’s medtech industry post-COVID-19

A report from McKinsey & Co analyses the nascent trends in China’s medtech sector which have taken on new precedence in the industry via COVID-19.

With several countries around the world now contemplating some form of relaxing pandemic restrictions, the way in which China’s market develops could provide some indication of how economies and industries should adapt in the ‘new normal’. 

McKinsey’s report combines the organisation’s first-hand experience of helping clients in the sector with verbal accounts from company executives and a survey of 23 medtech general managers.

Assessing the situation

With the economic scale of COVID-19 worldwide, McKinsey states that surveyed executives in China expect a marked decline in healthcare budgets in the near future. 

Also, although some manufacturers of medical equipment urgently needed during the pandemic (ventilators, nucleic acid detection kits, etc) have reaped a financial gain, practically all other medtech has experienced a 40% to 80% contraction.

Since the recovery of this revenue will be dependent on factors external to the control of hospitals and physicians, it is therefore unlikely that this downturn for the industry will be addressed before the end of 2020. 

McKinsey reasons that less money will mean less choice for medtech companies, with budgets likely to be amended by the Chinese government as it seeks to restructure the country’s healthcare.

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What changes may occur?

Volume-based procurement (VBP): Originally a top-priority for China in 2020, but subsequently relegated in importance following the pandemic, 80% of medtech executives considered its return and expansion to be likely.

Moreover, “evidence suggests the pace might be faster, as the government reinforces its determination to decrease prices,” said McKinsey.

More emphasis on localisation: Already one of China’s key focuses, increased local capacity for manufacturing, particularly of medical products, could be significantly accelerated. 

Digital healthcare: Online consultations and appointment scheduling were necessary to cope with the increased strain on healthcare providers during COVID-19. After the pandemic has passed, however, both these and other digital solutions may become the norm.

“Instead of going to big hospitals, patients can go to peripheral laboratories or imaging centres to do tests, with results being transmitted digitally to the hospital for diagnosis,” postulates McKinsey.

“This may potentially open an exciting new era of offline-online healthcare in China, with established private players such as Ping An and Dingxiangyuan (DXY) likely to find a role as a digital platform partner or front office provider for public hospitals.”

To read McKinsey’s full report, please click here.

For more information on business topics in APAC, please take a look at the latest edition of Business Chief APAC

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