China's IVD Market: An Opportunity For Surplus Revenue Growth

China's IVD Market: An Opportunity For Surplus Revenue Growth

China’s IVD market reached $3,200 million in 2017, in line with growth estimates published by Kalorama and elsewhere, and the fast pace of market growth is expected to continue. Supporting growth will be a modernizing healthcare infrastructure and steady migration from manual to automated processes. This was the conclusion of Kalorama Information’s recent report, IVD in China.  China as an IVD market opportunity is defined by its standing next to other populous countries with demonstrated economic promise for over the past decade – Brazil, Russia and India; collectively with China referred to as one of the important, rapidly growing “BRIC” nations. The country and its healthcare system are confronted by challenges shared by less developed countries, but also burdens common among developed middle-income and affluent countries such as diabetes, cardiovascular disease, and diseases of aging.

As an in vitro diagnostics (IVD) market, China trails only the populous, developed economy markets of the United States, western European countries, and Japan. As the figures below indicate, there is expected marginal growth in China's IVD market compared to the overall IVD market.  

China's IVD Market Snapshot


The market in China can be defined in terms of several IVD disciplines including reagents, consumables, calibrators and controls of the following sub-segments:

Clinical Chemistry: routine lab testing; substrates, enzymes, homogeneous immunoassays, proteins, ISE (non-POC), HBA1c (non-POC), includes urinalysis and blood chemistry testing.
Immunoassays: hormones and thyroid function, tumor markers, allergy, anemia, neonatal tests, prenatal tests, interleukins, PCT, toxicology and common infectious diseases (HIV, hepatitis, influenza)

Microbiology and Molecular Testing: manual and automated tests, culture media (to be prepared or ready to use), latex tests, transport media, blood culture, sensitivity discs, Gram and other stains, MTB culture, Mycoplasma, Ureaplasma, nucleic acid testing.

Point-of-Care Testing: all POC tests for cardiology, toxicology, coagulation, diabetes, infectious diseases, including POC and non-POC blood gas and electrolytes, and glucose self-monitoring tests.

Histology/Cytology: PAP, HE, IHC, ISH, FISH, primary and secondary antibodies. Included in the report are trends influencing the industry and country-level data including incidence of disease, life expectancy, population demographics, economic status, healthcare utilization and other market influences.

Population Trends in China

The People’s Republic of China is the world’s largest country with more than 1.4 billion people. Of these, more than 1.39 billion live in mainland China and about 7 million live in Hong Kong. At present, the Chinese population is growing at an annual rate of 0.5% per year. The government's goal is to stabilize the population and population growth early in the 21st century, with some current projections estimating a population of about 11 billion by 2050.

At the end of 2017, the median age of the population was roughly 37 years for men and women combined, with about 12% of the total population aged 65 and over. The world’s population of older people represents the fastest growing age segment and is centrally relevant to healthcare challenges worldwide, there is no exception with the population in China. By 2050, approximately 348.1 million people in China will be above the age of 65. This trend is important because an aging population in China will increase healthcare costs, forcing major increases in public spending that could impair economic growth. It also creates important opportunities for the providers of products and services utilized by older persons, including healthcare.

The distribution of the population is expected to shift toward the 65 and over population to account for 27% of the total Chinese population by 2050, up from less than 3% in 2010. Both the 15-64 population group the 0-14 population is declining considerably, accounting for 60% and 13% of the population in 2050 respectively; this is down from 73% and 18%, respectively, in 2010. The two most impactful reasons for the changing demographics include:
1. Lower number of births
2. Increasing life expectancy

Demographic aging puts pressure on a nation’s ability to support its elderly citizens. A commonly used indicator of this pressure is the elderly support ratio, calculated as the number of working-age people ages 15 to 64 divided by the number of persons 65 or older. This ratio serves as a rough indicator of the number of potential providers of support (including healthcare costs) per potential elderly dependent. In 1950, there were 12 working age people for every elderly person in the world. By 2010, this ratio declined to 9, with the largest decline occurring in more developed countries. However, China and other BRIC economies are expected to feature elderly support ratios in 2050 near or below those of developed countries such as France and the United States, where stable fertility rates and immigration will stabilize ratios that otherwise declined in past decades.

Elderly Dependency Ratio - Workers to Elderly Citizens 
Ratio in 2010 vs. 2050
Brazil 10 vs. 3
Canada 5 vs. 2
China 9 vs. 2
United States 5 vs. 3
World 9 vs. 4

Disease Demographics in China

Greater elderly populations in China and other developing countries emphasize the need for extremely efficient tests and systems for chronic diseases of the aging, even at a time when emerging viruses and infectious diseases are still an ongoing concern. The World Health Organization (WHO) estimates that about 60% of all deaths worldwide are attributable to chronic diseases, and 80% of such deaths occur in low- and middle-income countries.

Globally, diabetes is emerging as one of the chief public health challenges of the 21st century as it is a major risk factor for many serious complications including kidney and heart disease. Unlike type 1 diabetes, which is present at birth, type 2 diabetes is acquired during a person’s lifetime and impairs the body's ability to properly use the blood sugar-regulating hormone insulin. Both forms of the disease involve abnormally high blood sugar levels that can damage blood vessels, the heart and other organs. Diabetes and its sequelae are already a major source of low life expectancy in many developing countries where once infectious diseases were thought to be the leading disease burdens.
Rates of the disease have soared in many countries around the world mainly because of lifestyle changes including increased calorie intake and reduction in physical activity that come with economic progress. According to the International Diabetes Federation (IDF), there were about 425 million diabetic patients in 2017 worldwide and IDF projects that more than 629 million people will have diabetes by 2045. The regions with the highest comparative prevalence rates are North America, where 11% of the adult population has diabetes, followed by the Middle East and North Africa with 10.8%. The regions with the highest number of people living with diabetes are Western Pacific, where some 159 million people have diabetes and South East Asia with 82 million diabetics. China has the most people with diabetes, with a current figure of more than 114 million, followed by India with about 73 million, the United States (30 million); Brazil (12.5 million); Mexico (12.0 million); Indonesia (10.3 million); the Russian Federation (8.5 million); Egypt (8.2 million); Germany (7.5 million); and Pakistan (7.5 million) rounding out the top 10.

The financial burden borne by people with diabetes and their families as a result of their disease depends on their economic status and the social insurance policies of their countries.
In the poorest countries, people with diabetes and their families bear almost the entire cost of medical care, with family finances putting an effective limit on treatment.
Slowly, governments are stepping up to the plate but not quickly enough. Hospitals have traditionally been the major consumers of blood glucose strips and meters. However, as more middle-class people develop diabetes, the market for glucose self-testing products has grown considerably. So much so that the blood glucose market in developing countries is growing by at least 15% per year. As discussed above, China represents the single largest population of diabetes patients in the world by a large margin. It is estimated that in 2017, the market for blood glucose testing, both professional and self-testing, is valued at more than $600 million in China.

China faces cancer as a mounting health challenge, as cancer is believed to be the leading cause of death in China. The burden of several forms of cancer – lung, stomach, liver, colorectal and esophageal – proportional to population are significantly above global averages. Among urban Chinese, cancer is the leading killer with lung cancer as the most dominant contributor.
This reflects a rising public health threat from cancer throughout both developed and developing nations. According to the American Cancer Society, 1 in 8 deaths worldwide are due to cancer, and globally, cancer causes more deaths than HIV/AIDS, tuberculosis, and malaria combined. It is the leading cause of death in economically developed countries and the second leading cause of death in developing countries; and imposes a substantial burden on the world economy.

Tobacco is one of the main culprits for much of the increase in cancer in developing countries, especially in the Asia-Pacific, where one third of the world’s smokers live. China alone is home to 370 million smokers. According to a report from the International Agency for Research on Cancer (IARC), about 15% of cancers in low- and middle-income countries are linked to tobacco use, and that figure is expected to climb sharply. People in developing countries are also picking up other Western habits, such as eating too much and exercising too little. Meanwhile, they have less access to resources for prevention and treatment. In China, the country with the world’s highest population of smokers, annual lung cancer mortality rates have risen by 500% over the past 25 years, representing about 600,000 lung cancer deaths annually.

Cervical cancer is a disease that has just about disappeared in many developed countries but remains a major killer in the developing world. Despite being a preventable cancer with a known primary cause and established diagnostic procedures, cervical cancer claims roughly 270,000 lives every year, with 85% of these deaths occurring in developing countries. Cervical cancer is the second most common cancer in women living in less developed region.

India has more cervical cancer cases than any other country in the world, followed by China. The World Health Organization (WHO) estimated in 2012 that more than 123,000 Indian women were diagnosed with cervical cancer and approximately 62,000 were diagnosed in China. The WHO estimates that only about 5% of women in the developing world have been screened for cervical disease in the previous five years, compared to 40% - 50% in the developed world.

The heart of cervical cancer control is regular Pap testing as performed in developed countries. In developing countries, the test is available to women who can afford it in urban areas but is largely unavailable to those living in the rural areas of even higher income developing countries. There is a huge need for company-supported initiatives in this area.
In China, more than 12 million Pap tests are performed every year, mostly through private labs. The immediate available market is the 300 million women aged 30 to 50 who have at a minimum basic health coverage under government insurance programs. Recent screening rates were boosted by the central government-led free screening program for 10 million rural Chinese women as part of healthcare reform. Free and subsidized screening for cancer is a likely feature of Chinese reform and government insurance expansion programs through 2020.

Cardiovascular Disease
The prevalence of lifestyle diseases – non-communicable chronic diseases associated with risk factors such as inactivity, smoking, diet and urban air quality – has risen across the Chinese population in the past several decades due to modernization and income mobility. The scourge of diabetes has already been noted in this chapter. Cardiovascular disease has also seen significant movement in the past decade or has remained elevated in the Chinese population relative to global averages.
The morbidity rate of hypertension in the Chinese urban population nearly doubled between 2003 and 2008 from 54.7 to 100.8 per 1000 persons. In 2013, the president of the World Hypertension League stated that one out of every three adults in China (more than 330 million individuals) has hypertension. In 2012, WHO reported 248,200 deaths due to hypertensive heart disease; roughly 2.8% of all deaths in the country.
In China, cerebrovascular disease or stroke increased in its morbidity rate by nearly 50% in the early to mid-2000s. Furthermore, in 2012 the leading cause of death, excluding combined neoplasm deaths, was reported by WHO for stroke, which accounted for 23.7% of deaths in the country or 2.3 million.
Cardiovascular diseases are largely established health threats in China. Government healthcare resources are being marshaled largely for preventative healthcare and screening, though the majority of cardiovascular disease sufferers remain undiagnosed. Triage or emergency rapid tests also represent a significant market in the country.

Infectious Disease Threats

The globalization of emerging infectious diseases poses another healthcare challenge and opportunity for clinical diagnostics. Emerging or emergent infectious diseases are characterized by new pathogenicity in the human population or significant growth in the incidence of the pathogen’s associated disease in a region or across regions. Emerging viruses are often zoonotic, sometimes newly so through a novel viral strain, with initial transmission into the human population through animal vectors. Significant demands are placed on national, regional and global healthcare and public health systems with the emergence of a new disease threat that often necessitates the development of new diagnostic, vaccination and treatment products.

In addition to the intensifying globalization of trade and travel, emerging diseases are seeing more widespread and higher incidence due to increased antimicrobial (drug) resistance (sometimes resulting from improper or overuse of antibiotics) and climatic changes that are increasing the viable range of pathogens, often through the expansion of mosquitoes’’ habitats.
Significant emerging diseases that have spurred development of new rapid and point-of-care (POC) diagnostic tests are reviewed below. Diseases endemic to China are included in this report, though also other significant emerging infectious diseases in the developing world that may be addressed by the Chinese IVD industry.

5 Conclusions about the Chinese IVD Market

The following are among the main conclusions of our report IVD in China

1. China represents the most attractive IVD market in the developing world and among BRIC nations. Additionally, the Chinese IVD market has been and is projected to be the fastest growing among the top-ten national IVD markets.

2 Urban healthcare markets in China – defined by better-equipped and better-funded city hospitals and patients seeking medical care at such institutions – are significantly more lucrative opportunities for international IVD companies than rural healthcare markets. The relative strength of urban healthcare markets is due to the superior financial resources and spending power of middle-class and affluent patients, greater reimbursement and coverage features under government insurance programs for urban residents, and greater existing representation by international companies in major cities and China’s directly-controlled municipalities.

3. Major international IVD companies already have a significant presence in the Chinese market and represent potential competitive barriers to prospective market entrants. Major companies enjoy significantly greater financial resources to afford costs associated with product certification, clinical trials, and agent representation. Certification or registration of products under different provinces in the fragmented Chinese market also favors larger companies able to build distribution more rapidly. Additionally, larger companies are more able to make the acquisitions necessary to establish direct distribution and local manufacturing operations.

4.  A large number of domestic Chinese IVD companies are also active in this market, and benefit from established relationships within the health care infrastructure as well as relatively low operating costs.

5. Product opportunities for international IVD companies in the Chinese market are diverse; they include rugged, easy-to-use rapid tests with built-in high specificity and sensitivity for applications in rural healthcare; instrumentation in advanced diagnostics, including sequencers and molecular test analyzers; microarrays and other multi-analyte molecular assays; and multi-tool analyzers capable of running hematology and immunodiagnostic assays. Rural health care largely represents an inaccessible market to new entrants and companies without substantial domestic manufacturing or distribution operations.