Snapshot survey of COVID-19 impact on China pharma industry

With the breakout of COVID-19, Deloitte China Life Sciences & Health Care Industry team initiated a survey to understand the virus impact on China pharmaceutical industry and measure the longer-term impact this could eventually have on their business model and operating processes. We hope this report supports your business decisions during this special period.

Framework

• Survey conducted between February 13 to 17, 2020
• Engaged China based Pharma & Healthcare sector operators and investors: 104 responses

How did your Company respond to the crisis

Insights

• Flexible work arrangement policies were top of mind in order to provide a safe working environment, like working from home, as well as allowing operations to continue to the best possible
• Implement government required tracking systems were a priority thus putting HR and IT teams in the forefront. 23% participant’s tracking systems included third parties (eg. dedicated sales team, logistics, IT vendor etc.)
• Least concern was around adjusting 2020 targets: yet it may depend on the progression of the crisis

Within your business priorities, what are the most difficult challenges to overcome during this crisis? 

Insights

• Market & sales activities were the ones most affected – as HCP facing engagements, medical & drug presentations events as well as simply Hospital physical access are currently impossible; and at current stage, HCP’s less interested in non-crisis-related e-detailings
• Adjusting business operations to ‘new market demand’ were 2nd top in mind to the executives

On what aspects does this crisis impact your enterprise most?

Insights

• Supply chain management issues with logistic issues (inter-provincial transports, availability of transport services and their employees…) as well as access to raw materials (inventory management – minimum inventory levels constraints) are the obvious crisis impacts to most respondents
• Cash flow and financing concerns are of importance to > 50%
• Business channels ie. the relative limited use of ‘online’ access models in the sector were sighted by half of the respondents as a area of concern (and likely to topic for change going forward)

How will your company do in short term to mitigate the impact to your business?

Insights

• All topics really apply…
• Strengthening local government relationship and hospitals is the highest short term priority
• The ‘new technologies’ focus: engage clients and distribute & access patients & clients through online channels is a clear focus

Which of the following do you expect the new 5Y plan (14th) will have a significant emphasis on after the crisis?

Insights

• There seems to be consensus that the ‘Healthcare’ sector will be a key area of emphasis in the upcoming 14th 5 Year plan: Healthcare services, Hospitals and but also the approach to ‘prevention’ and ‘education’ of the population as a whole.
• Expectation are also, that there will be resources allocated to R&D, enabling Pharma’s to engage and deploy the necessary program covering China’s key health & disease areas

With the crisis, do you perceive that local drug companies will be advantaged going forward to allow a fast re-directing of R&D resources specifically catering for China's needs?

Insights

• As expected, there is great difference in the anticipation of future support and resources provided to different market players, WOFEs are enjoying current regulations on new drug approval speed-up and are confident to make agile response for China needs;
• SOEs are also confident that they’ll benefit from their profound understanding of local market

How do you foresee the crisis will impact on your business revenue in 2020?

Insights

• Very balanced
  • ~20% of the respondents believe that sales will catch up in 2020 and actually allow to meet currently set targets and budgets
  • ~20% of the respondents believe that sales will drop somewhere up to 20%
  • While a big portion of participants are uncertain about the whole year outlook, it may depend on the crisis progress

In Summary: Insights and Outlook

• New ways of working were the immediate responses, covering immediate health safety concerns for employees but also to continue the business ongoing

• Sales and marketing activities have been the most disrupted and are top of mind of all c-suite members. Also nearly 60% of the larger companies are already reviewing the possibilities to roll-out / upgrade and implement new technologies to engage HCP’s, Hospitals, patients and customers.

• New market distribution models are considered by many respondents of the survey, and further focus on online channel models will be accelerating going forward.

• Prevention and education of the broader population is the likely focus of the forthcoming government support programs looking at China’s healthcare. The latest updates on ‘Healthy China 2030’ had already a number of such KPI’s, also the currently in preparation of the next 14th 5 Year-plan is more than likely to emphasis these objectives.
• R&D specific to China’s disease and pathologies is expected to be supported at a higher degree going forward, and that domestic industry players (SOE & Private) are expected to be better positioned to capture such resources and support.
• Healthcare professionals and service providers will be in the center of many reforms for the “better healthier life” going forward in China. The value chains of the industry as whole will be reviewed and re-distributions will take place.