2021 China LSHC Industry Survey Results: ‘State of Industry’

How did 2020 turn out…

How did your company perform (top line) in 2020?

Insights

• Over 60% of respondents are still able to maintain the annual financial performance to be in line or better than the annual plan
• Only 26% of wholly foreign owned companies state that 2020 was worse than plans
• Nearly a majority of SOE’s (47%)  state their annual financial performance was better than planned

During the recovery, which were the key actions to manage the impacts of the Covid crisis?

Insights

• The top two key actions included a strict OPEX spending process maintaining flexible work arrangements
• As expected flexible work arrangements were implemented by all throughout the year (in line with snapshot survey in 2/2020)
• Larger Companies focused on OPEX spending controls to protect their bottom line profits
• Collaboration initiatives around new technologies were top in mind, and more so for CEO/C-suite from WOFE who ranked this 2nd with 67%
  
• Global system deployment efficacy was not top in mind during Covid-times
• Investment in commercial & marketing digital technologies varied significantly across the respondents

Your 2020 business performance was mainly impacted by? (ranking of importance)

Insights

• The VBP policies & implementation is the top impacting factor to all respondents
• Regulatory related (VBP), hospital visits (main promotion channel) and keeping new product launches on track were top three factors on commercial impact
• Online channels and reviewing supply chain structures were considered as a much lesser importance
• Product launch was viewed by the larger co’s and foreign pharma’s as key to their business performance in 2020

Within your organizational & business model which are the key changes implemented in 2020?

Insights

• As expected and anticipated, marketing & sales teams remained a focus as VBP changed the engagement needs
• R&D capabilities and GA’s teams have been even more important than before
• While the industry is embracing its ‘digital revolution’, only 35% of respondents have cited this a focus in 2020

Considering China's very specific data and security environment, have you done any of below implementations?

Insights

• Around half of all, except POE’s, have allocated more than expected resources in IT & data compliance framework
• A majority of large co’s and WOFE’s will allocate more resources in 2021 in the IT & data security and compliance development in response to the rapid growth in digital healthcare in China
• For POE’s and SOE’s, resource allocation in IT security development seem of a lesser business priority (2020 and 2021)

Online/internet business channel plays critical role during the crisis period, does your company consider to increase investment on these new channels?

Insights

• 75% of respondents are investing or willing to increase the investment in the online channel development
• Willingness in increasing the investment into online/internet channels among POE’s and SOE’s is significantly lower
• All types of respondents that are more willing to invest through both self-development and collaboration, especially large co’s
• In comparison, domestic players have a stronger intention in build the online channel with their own capability, while WOFE’s are more into the co-development mode

How might 2021 turn out…

How do you foresee the Covid pandemic on your China business outlook?

Insights

• A large majority (62%) see a rather bright outlook and forecast a ≥ 10% growth in 2021 (only 19% see no growth or decline in 2021)
• POE’s have the most ambitious outlook, while a total of 85% of WOFE’s expect growth 

Has your overall business and portfolio strategy changed for China in the next 3-5 years?

Insights

• A majority (57%) has a better outlook in China market and may further elevate the China focus
• SOE’s are having the most optimistic attitude and aggressive in elevate the China focus and followed by POE’s, expecting further local preferential policies to be published in 2021 and onwards
• Only a very small group (2% = 3 respondents) considers the China market to be less attractive going forward

What do you think are the most relevant considerations from your perspectives when introducing new products into China?

Insights

• Overall, the competition in China market is the top consideration to all respondents, along with local demand & market acceptance
• SOE’s highlight a particular need for supply chain arrangements and eventual global dependency

Have government administrations increased their engagement to…

Insights

• Very consistent views on government administration support across all respondents
• WOFE’s perceive a specific push to further review localization and engage in ‘new activities’
• The import & export tariffs application guidance from the government seem to take relatively less attention from all

With China's dual circulation strategy, do you expect that…

Insights

• With the government’s purpose in bring up more innovation and first-in-class products in China, the new drug registration and market access timeline are expected to be further shorten and accelerated under the dual circulation strategy
• The dual circulation strategy is also expected to bring a more frequent and boarder coverage of VBP implication and NRDL updates which will further eliminate products that are unable to offer a lower price
• All industry respondents are sharing the similar expectations, POE’s are slightly more expecting in the preferential treatment
• WOFE’s are also having a higher expectation in further regulatory & government measures to impact the industry

From 2020 to 2021…

Government involvement will continue to increase speeding up domestic innovation and competition, to the benefit of Chinese patients

• Potentially a more frequent and boarder practice of VBP and NRDL coverage, the market will become highly centralized, also pricing strategies and cost controlling will become even more important in the future.
• Outward looking scenarios planning with high agility will be a key for success for all players.
   

New business models and digital technologies will make Chinese patients to become highly engaged well-being focused consumers

• With the covid-19 outbreak, business models are changing  and the adoption of digital channels has accelerated, thus blurring the lines between ‘consumers’ and ‘patients’.
• Collaborations between LSHC companies and third parties, such as technology companies, are popping up, thus requiring adjusting skills & mind sets of existing teams.
• IT innovation and data security will become a higher priority ever than before.
   

China’s market will continue to grow faster than most mature markets and will be impossible to be ignored

• The government is aiming to promote local first-in-class products over me-too/me-better, and we are seeing more relevant policies and initiatives in supporting the domestic players.
• Many domestic players are enhancing their R&D and product portfolio through partnering, and seeking for more preferential policies to be announced in 2021.
  
• Looking towards a long term sizable market too large to be ignored, foreign players have started to further develop a China-centric market access and pricing strategy, meanwhile proactively in looking for local support from the government affairs and relation enrichment.
  

Note: [1] Large co’s companies with revenue above 5BRMB; [2] SOE: State-owned Enterprise; [3] POE: Private-owned Enterprise; [4] WOFE: Wholly foreign-owned enterprise