the ethical challenges of doing business in china's healthcare economy
TRANSCRIPT
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The Ethical Challenges of Doing Business in China’s
Healthcare Economy
February 3, 2014www.HealthIntelAsia.comwww.RubiconStrategyGroup.com
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Where the Problem Begins …Would it surprise you to know that in many ways, China’s healthcare was actually better under Mao than once the country began to open to the West?
+Better During Mao?
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Christina Ho, Fellow and Project Director of the China Health Law Initiative at Georgetownand Yanzhong Huang of the Council on Foreign Relations have written extensively of lateon how China’s modernization has actually dramatically harmed the access to healthcareand successful outcomes to medical interventions of nearly every sort. Mao’s “Barefoot
Doctor Brigades” were not sophisticated, but they created better outcomes for the averageChinese than what they have today.
+What Happened?
China’s economic reforms required dismantling large parts of the state’s involvement in the economy.
State Owned Enterprises (SOEs) were shut down, privatized, or modernized.
These good and necessary steps had a bad and unintentional effect: the “broken rice bowl” was not replaced by similar investments from the private sector.
China’s central government was so focused on modernization and its many down-stream implications that it overlooked healthcare.
+What Happened? (cont.)
Government spending on healthcare decreased from 1.1% of GDP in 1980 to 0.8% in 2002.
WHO estimates that 50% of China’s rural poor find themselves in “entrenched poverty” due to healthcare costs.
In 2000, the WHO ranked China 188 of 1919 countries globally regarding “fairness of healthcare finance.”
56% of rural Chinese do not bother to follow up on doctor recommendations because of expense.
2012 Pew Global Attitudes Project found that between 2008 and 2012 anxieties over China’s healthcare system had more than doubled.
+A Broken Funding Mechanism
China’s Ministry of Health sets healthcare policy.
China’s Ministry of Finance pays for healthcare policy.
The two are not necessarily always on the same page.
Historically, hospitals have been chronically under-funded.
Hospitals have been starved of government reimbursement, so they have created ways of generating revenue.
Doctors are poorly paid, and they too have found ways to increase their compensation through un-necessary prescription of drugs and diagnostic procedures.
This is where China’s healthcare corruption problem begins and ends.
This is where “red envelopes” come from, and why both consumers and companies get extorted in China.
+What Happened This Summer …One of the world’s largest pharmaceutical companies found itself in the limelight for all the wrong reasons.
+A Business’ Ethical Lapse, Or the Painful Realities of Being in China? GSK is alleged to have
routed $489 million to bribe hospital officials and doctors.
Use of 700 travel agencies to wash the money.
Sinopharm, the largest pharmaceutical distributor in China, just charged w/ same thing.
But what are these companies really guilty of?
+For Life Science Companies, What Are Their Options?
Maintain western standards of compliance (FCPA, UK Bribery Act, etc.). What are the implications of this? Is this even realistic?
Hold to the status-quo. Was this primarily a political move by Beijing? If so, is this short-
term pain and will “rules” go back to where they were before?
Change sales strategy. If we can’t bribe our way to success, can we market our way?
Exit China. Don’t laugh. Actavis, the world’s 2nd largest generic
manufacturer, just did.
+Contact Information
Benjamin Shobert
Founder, Managing Director
Rubicon Strategy Group, LLC
Two Union Square
601 Union Street, Suite 4200
Seattle, WA 98101
Phone: 206-652-3572
Fax: 206-652-3205
Mobile: 317-777-2926
Email: [email protected]
URL: www.HealthIntelAsia.com