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GHA & BDI- Draft - Do not share - not yet approved - as at: 19.12.2019

Sino-German Cooperation

in Health – Opportunities and

Barriers

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Key Recommendations

Introduction

I. The Chinese healthcare sector

1. China’s healthcare sector and its healthcare economy

2. How China is responding to the megatrends of an ageing society, a rising middle class and digitalization

Made in China 2025 and Healthy China 2030

Policies for an ageing society: Dealing with NCDs and cancer Digitalization and artificial intelligence

II. Recommendations for action:

1. Setting the agenda in Berlin and Brussels - we need health in all policies!

2. Promoting innovation and improving knowledge transfer

3.Advancing Global Health

4. Advancing digital healthcare in Europe and Germany

5. Intensify Dialogue on IPR in healthcare

6. Cooperation in Regulatory Policies

7. Cooperation in Reimbursement & health technology assessments (HTA)

8. Open the markets for Procurement in Healthcare

9. Cooperation in Commercial medical insurance

10. Cooperation in Digitalization in Health

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Key Recommendations

Germany´s and Europe’s highly innovative healthcare industries are crucial contributors to European health, innovation capacity, and prosperity. They enable high-quality healthcare for patients and society in Germany, Europe, and in China. With Europe and China facing the same megatrends of an aging society, rising numbers of non-communicable diseases (NCDs) such as cardio-vascular diseases and cancer, as well as stretched healthcare sys-tems, Germany´s and Europe´s innovative health care industry therefore offers important solutions to current and future challenges Germany, Europe and in China.

Digitalization is thereby a major game changer in at least three respects: Firstly, data and data analysis render all healthcare sectors more interconnected. A silo view on healthcare sectors such as med-tech, pharmaceuticals, biotech, digital, and services such as diagnos-tics, hospital management, and insurances is therefore no longer appropriate, rather more cross-sectorial approaches are needed. Secondly, data and data analysis are key for innova-tion, innovative diagnostics, and they are a meaningful enabler for better prevention, treat-ment and monitoring, rehabilitation, hospitals management, as well as insurance services. The promotion of digitalization in health is a must and a more integrated approach with health in all industry policies is needed. Thirdly, digitalization allows for re-thinking and reor-ganization of healthcare in rural and very remote areas - another challenge that Germany, European regions, and China share. Governments now can have tools at hand that contrib-ute to better and more equal standards in rural and urban healthcare services, which is an important aspect of social cohesion in all regions. Policy and decision makers in Berlin and Brussels are therefore called upon to promote digitalization in healthcare and take proactive measures to ensure that the European healthcare industry remains competitive in future.

The first chapter in this paper illuminates and analyzes current developments, megatrends, and policies on the dynamic Chinese healthcare market. In the second chapter, it then identi-fies challenges and opportunities for the German and European healthcare industry and ar-ticulates actionable recommendations for domestic regulation and bilateral cooperation with China. Overall, the German healthcare industry calls on policy makers in Berlin and Brussels to adopt an integrated approach to health policy across all economic and social policies.:

1. Setting the agenda in Berlin and Brussels - we need health in all policies!

2. Promoting innovation and improving knowledge transfer

3. Advancing Global Health

4. Advancing digital healthcare in Europe and Germany

5. Intensify Dialogue on IPR in healthcare

6. Cooperation in Regulatory Policies

7. Cooperation in Reimbursement & health technology assessments (HTA)

8. Open the markets for Procurement in Healthcare

9. Cooperation in Commercial medical insurance

10. Cooperation in Digitalization in Health

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Introduction China’s large population of 1.4 billion people, its growing healthcare market, and Chinese government activities make China one of the primary and most dynamic markets for healthcare. By 2030, the Chinese healthcare market is projected to be worth US$ 2.4 trillion, with double digit growth rates expected.1 The Chinese government is supporting this growth through its strategic industry and social policies, specifically “Made in China 2025” and “Healthy China 2030”. The aim of these reforms is to support economic growth by encouraging the continued development of high-tech industries. A further goal is to improve the social security system. To the Chinese government, both are crucial for guaranteeing economic and social cohesion.

With European Union (EU) strategies and policies currently undergoing review by the incoming European Commission (EC), and similar reviews at a national level, the dynamics of the Chinese healthcare market need to be considered in determining the EU’s internal and external policies. The European healthcare industry contributes to this trade in innovative, knowledge-based cross-industry sectors such as medical devices, pharmaceuticals, biotechnology solutions, digital technologies, diagnostics, insurance, and educational services. New strategies will have a significant impact on the health and wealth of EU citizens and will also shape our relationship with China. Finally, promoting health in all policies and enhancing relations with China are crucial also for global sustainability, since Chinese patients´ access is increasingly important for achieving high global healthcare standards, such as also those enshrined in the United Nations Sustainable Development Goals (SDGs).

In a large and growing Chinese market, German and European healthcare companies today provide various products and services aimed at meeting demand in the Chinese healthcare system. To ensure that the European healthcare industry remains in a strong position in future, the Federation of German Industries (BDI) and the German Healthcare Alliance (GHA) call on decision makers in Berlin and Brussels to take a proactive approach to health policy, both domestically and in bilateral cooperation with China.

China: Ambitious policies for challenging megatrends

Chinese government policies such as “Healthy China 2030” and “Made in China 2025” aim to tackle three megatrends which are currently creating challenges and opportunities in China’s healthcare system: China’s ageing population, the rapid acceleration of digitalization, and China’s rising middle class. All three have a significant impact on various areas of healthcare:

1. An ageing population: China’s ageing population is resulting in an increase in the prevalence of non-communicable diseases (NCDs) such as cancer, and increased demand for prevention, better diagnostics and treatment, and care services for the elderly.

2. Digitalization: Digitalization has started to and will continue to penetrate and shape all levels of healthcare. The use of artificial intelligence (AI) and other approaches to processing health data has the potential to improve various stages of the patient journey. These include early detection, diagnosis, care, monitoring, and emergency care.

3. The rising middle class: The increasing disposable income available to China’s rising middle class will mean an increase in chronic diseases and is likely to lead to increased demand for healthcare services and financial coverage for these services.

Germany and the EU: Valuable partners for global health

1 1. China Daily, according to the Chinese National Health and Family Planning Commission, “China’s health service industry to reach 16 trillion yuan by 2030,” Aug 15, 2017

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The German healthcare industry makes an important contribution in Germany, Europe, and China. This highly innovative industry enables high quality healthcare for patients and society. On average, the German healthcare industry invests 7 percent of turnover in research and development. With Europe and China both facing megatrends of an ageing society, rising numbers of NCDs and stretched healthcare systems, the German and European healthcare industry offers important solutions to current and future challenges.

The healthcare industry is also an important economic driver. The German healthcare industry contributes 12 percent of Germany’s economic growth and provides highly-qualified jobs and generates growth and tax contributions in Europe. Healthcare is high tech. In Germany, one in six jobs are in the healthcare industry and every eighth euro is generated in the health industry. At the same time, the German and European health industry is very active in China, where it develops, manufactures, and trades products and services across the country. Chinese patients benefit from innovative German and European therapeutic and diagnostic medical devices and medicines, hospital management services, and research collaborations. These activities and investment provide China with high quality employment opportunities, healthcare innovation, and tax revenues. To retain and expand this relationship, policymakers in Germany and the EU must work towards the right framework.

I. The Chinese healthcare sector and China’s response to the three megatrends of an ageing society, a rising middle class and digitalization

1. China’s healthcare sector and its healthcare economyMarket overview

China’s enormous healthcare market continues to expand, driven by an ageing population, changing consumer habits, increasing urbanization, and economic growth. 15.5 percent of China’s population is currently aged 60 or older and is expected to reach 37 percent by 20502. By 2030, already over one fifth of the people will be aged 60 years or over in rural areas3 and by 2050, one-quarter of the overall population is expected to be aged 65 or over and half 45 or older4. The healthcare system is not yet prepared for the additional burden this will bring, particularly with regard to non-communicable (NCDs) and chronic diseases such as cancer and cardiovascular disease. In 2014, about 87 percent of all premature deaths were caused by NCDs5- in 2016, percentages already rose to 89 percent6. According to the Worldbank Report from 2011, the number of NCD cases among Chinese people over 40 would double or even triple over the next two decades until 20307.

Over the past two decades, China has undergone reforms aimed at improving access to healthcare through infrastructure investment, insurance reform, and expansion of the private hospitals and health facilities market.

Key market figures

China is the second largest healthcare market in the world with total healthcare

2 Ulrike Reisach, Das Gesundheitswesen in China, Berlin 2017, Seite 8.3 https://apps.who.int/iris/bitstream/handle/10665/194271/9789241509312_eng.pdf;jsessionid=8E97646DE84734833CB7C7140E07328B?sequence=14 https://www.ey.com/Publication/vwLUAssets/EY-the-rise-of-private-health-insurance-in-china/$FILE/EY-the-rise-of-private-health-insurance-in-china.pdf5 https://www.who.int/nmh/countries/2014/chn_en.pdf?ua=16 https://www.who.int/nmh/countries/chn_en.pdf?ua=17 https://www.worldbank.org/content/dam/Worldbank/document/NCD_report_en.pdf

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spending healthcare spending of $559 billion 20168. Long-term, China’s growing prosperity and aging population are expected to lead to

a 10-15 percent increase in the rate of healthcare growth.9

China is the second largest pharmaceutical market in the world, forecasted to grow from $108 billion in 2015 to $167 billion by 202010.

The Chinese MedTech market is the third largest in the world after the USA and Japan. It is forecast to be the second largest by 2020, with continuous growth in excess of 10 percent over the next few years11.

Healthcare expenditure data

Since 2003, healthcare expenditure has grown to 20 percent annually in China12. 35% of all healthcare spending is in the form of out-of-pocket expenses13.

In 2016, healthcare expenditure as a share of GDP was 4.9 percent. Per capita healthcare spending was only $393 in 2016, compared to an average of over $5,200 in the world's eighth largest healthcare markets14 or compared to Germany´s health care spending that accounts for about 11,4 percent of GDP. 15

Analysts estimate that expenditure in China could reach $1 trillion as early as 2020, as China converges with developed market healthcare spending patterns16 which would represent between expected 6,5 and 7 percent of GDP17.According to further analysts, health care spending will amount up to 2,3 trillion in 203018.

The Chinese healthcare system

The Chinese central government is responsible for national health legislation, health policy and health administration. Every citizen is entitled to receive basic healthcare services, with local government—provinces, prefectures, cities, counties, and towns—responsible for pro-viding them. Health authorities include the National Health and Family Planning Commission (NHFPC) and local Health and Family Planning Commissions, responsible for organizing and delivering healthcare, and for supervising providers.

Health Insurance

Over 95 percent of the Chinese population benefits from basic healthcare coverage19, but with public health funds stretched, financial coverage is on average low. On average, pa-tients pay 35 percent of healthcare costs themselves, with inpatient and outpatient care sub-ject to different deductibles, co-payments and reimbursement ceilings. Most out-of-pocket spending is for prescription drugs. Supplementary private health insurance is therefore used to cover deductibles, co-payments, other cost sharing and gaps in care. Health insurance is also provided by employers. Many Chinese companies offer group health insurance to attract and retain their employees´ challenges. The Chinese government has continuously in-creased financial coverage in recent years, but still faces ever-growing demand for better

8 https://apps.who.int/nha/database/ViewData/Indicators/en9 https://www.globalxetfs.com/china-sector-analysis-health-care/ Bloomberg, “China’s 300 Million Senior Citizens Need Healthcare,” Jul 28, 2018.10 https://www.trade.gov/topmarkets/pdf/Pharmaceuticals_China.pdf11 Page 2 of https://www.tforg.com/wp-content/uploads/2017/02/TforG-wp-china-medtech-market.pdf12 https://www.cfr.org/report/chinas-healthcare-sector-and-us-china-health-cooperation13 https://data.worldbank.org/indicator/SH.XPD.OOPC.CH.ZS?locations=CN14 http://kraneshares.com/resources/presentation/2018_06_30_kure_presentation.pdf / World Health Organiza-tion, 2015. Retrieved on 6/30/201815 https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS (retrieved on 2/12/2019)16 https://www.globalxetfs.com/china-sector-analysis-health-care/17 https://www.china-briefing.com/news/healthcare-reforms-underscore-market-growth-china/18 https://www.bloomberg.com/graphics/2019-china-healthcare/19 Ulrike Reibach, Das Gesundheitswesen in China, page 20.

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healthcare from the rising middle class. The government therefore expects private insurers to complement public insurance systems.

China’s public social healthcare system has three levels of funding:

So far, the public healthcare system provided for a differentiated health care coverage de-pending on the place of residence (rural/urban) and the status as employee or non-em-ployee. Concretely, and alongside government funded medical assistant programs this in-cludes 1) the Urban Employee Basic Medical Insurance (UEBMI)- funded by both the em-ployer and the employee (the latter with yearly contributions of 90-220 Euro), 2) the Urban Resident Basic Medical Insurance (URBMI) funded by both the state and the resident (the latter with yearly contributions of 19-90 Euro), and 3) the new Rural Cooperative Medical Scheme (NRCMS) funded by the state and the rural resident (the latter with yearly contribu-tions of 19 to 50 Euro but depending on the richness of the different regions). Additionally, there is the supplemental level – with the critical illness insurances (CII) aimed at reducing citizens´ catastrophic health care expenditure funded by the respective provinces or munici-palities and the commercial health insurance funded by individuals and/or organizations20. Starting in 2018, the Chinese government however announced to install a unified health in-surance scheme for all Chinese citizens with equal payments which shall be installed by 2019/202021. Additionally, the Chinese government is also incentivizing foreign private com-panies to enter the health insurance market.

20 Ibid, page 21.21 http://www.chinadaily.com.cn/a/201807/25/WS5b58716ba31031a351e90204.html

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2. How China is responds to the three megatrends: Health in all policies

China is trying to meet the needs of its ageing society and its rising middle class, and to fully leverage the opportunities offered by digitalization. It has done this through a number of wide-ranging industry and social reforms and has a quiet successful track record: Over the past two decades, China has increased health insurance coverage to over 95 percent of the population22 and over the last three decades has succeeded in lifting 600 million people out of poverty23. Over the last ten years, it has steadily increased total health expenditure. In 2017, China’s total health expenditure was increased to 6.2 percent of GDP. This compares to only around 4 percent of GDP in 200624. But China’s government is determined to take it even further. Recognizing its effect on social and economic development, President Xi Jinping has placed health at the heart of policy-making. To this end, the government has set up industry and social policies under “Made in China 2025” (MIC 2025)25 and “Healthy China 2030” (HC 2030)26 which today guide all healthcare related decision-making in China. Within these policies, China has also set out con-crete measures to tackle the increasing cancer burden caused by an ageing demographic. China has set up action programs in areas such as digitalization and AI. These set out concrete ideas on how to advance health services and how to meet the needs of an ageing society and a grow-ing middle class.

1) Key strategic policies: Made in China 2025 and Healthy China 2030

MIC 2025 is in part a Chinese government response to China’s slowing economic growth. The initiative is aimed at ensuring growth by (further) expanding China’s high technology industries and by decreasing the dependency on foreign technologies. Specifically, MIC 2025 identifies key industries, such as information technology, the pharmaceutical sector, robotics, medicines and medical devices, in which by 2025 China should have achieved world leadership or be at the forefront of innovation. Consequently, the Chinese government has a strong motivation to estab-lish an innovation-friendly environment in the healthcare sector and related legislation in areas such as IP. The MIC guidelines therefore aim to ensure an innovation-driven basis, quality first, green development, structural reorganization, and talent-orientation. However, it remains to be seen, to what degree foreign companies will be able to benefit from MIC 2025. The initiative’s goals of fostering indigenous innovation and decreasing the dependency on foreign technologies stand in contrast to promotion of open and equal market conditions.

HC 2030 sets out how industry and social reforms should be integrated in all healthcare sector relevant legislation. It defines how health services and financial coverage should improve nation-wide, particularly in rural areas. It has triggered a wholesale institutional reshuffle, capacity build-ing and numerous legislative proposals. HC 2030 outlines five specific strategies: Controlling major risk factors, increasing the capacity of health services, enlarging the healthcare indus-try, and continuously improving the healthcare system. These strategies are based on four core principles: Health as a priority, reform and innovation, scientific development, and jus-tice and equity (e.g. closing the gap in healthcare infrastructure and coverage between the cities and the countryside). Specific action plans containing detailed goals and actions have been released. These include the Healthy China Action Plan 2019-2030, and programs for upgrading equipment and improving treatment at regional hospitals, supporting e-health and

22 Zhang, Yan et al. “National Health Insurance Development in China from 2004 to 2011: Coverage versus Bene-fits.” Ed. Yue Wang. PLoS ONE 10.5 (2015): e0124995. PMC. Web. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4447421/; Last accessed June 201823 The World Bank; Healthy China: Deepening Health Reform in China;  http://www.worldbank.org/en/country/china/publication/healthy-china-deepening-health-reform-in-china Last accessed June 201824 EY 2018, White Paper on China´s Healthcare Insurance: https://www.ey.com/Publication/vwLUAssets/ey-white-paper-on-china-commercial-health-insurance/$File/ey-white-paper-on-china-commercial-health-insurance.pdf25 http://china.lexiscn.com/law/law-english-1-2588408-T.html?access=content_detail&lang=cn&eng=0&keyword=TWFkZSBpbiBDaGluYSAyMDI1&t_kw=TWFkZSBpbiBDa-GluYSAyMDI1&act=detail&prid=e068fb69-2975-ed76-4656-ef1c397e9065&crid=b64957a2-4271-40b9-890e-04e82272043926 http://china.lexiscn.com/law/law-english-1-2961294-T.html

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care for the elderly, and prevention. By 2020, public insurance should cover three quarters of essential medical care.

2) Policies for an ageing society: Dealing with NCDs and cancer under Healthy China 2030

Just as in Europe, the increasing incidence of NCDs such as cancer and cardiovascular dis-ease is a huge risk factor. These are one consequence of China’s ageing demographic. They are already contributing to rising healthcare costs and will do so increasingly in the future. The World Bank’s joint report with the Chinese government found that, in the absence of re-form, health spending would increase to USD 2.5 trillion in 2035, up from USD 543.5 billion in 201427. HC 2030 therefore includes specific oncology strategies which include promoting cancer research and development, reducing customs duties for oncology drugs and better reimbursement28. The Healthy China Action Plan defines additional action points29. These include promoting early screening and treatment, developing diagnosis and treatment criteria for common cancers, implementing healthcare practitioner training and education, establish-ing a comprehensive clinical evaluation system for cancer medicines, and incorporating eligi-ble medicines into the national reimbursement drug list. Additionally, HC 2030 aims at re-ducing the imbalance[4] between rural and urban healthcare coverage, and the Action Plan´s goal is to strengthening diagnostic and medical assistant for cancer patients in rural areas.

3) Digitalization and Artificial Intelligence in HealthCare

MIC 2025 aims to promote digitalization of the industry. It has been followed by specific ac-tion plans on the internet and big data published in 2015, a development plan for the robotics industry in 2016, and a 3-year action plan for the internet and AI in May 2016. Additionally, in April 2019, the Chinese government announced plans for a Digital Silk Road and is thus en-gaging in strategic technological development and competition. More specifically on health-care, in July 2017 the Chinese State Council published a national strategy on Artificial Intelli-gence entitled the “New Generation Artificial Intelligence Development Plan”30. These guide-lines flesh out the government’s efforts to achieve high technology leadership as part of MIC 2025 and are aimed at making China a global leader in AI by 2030. It shall enable a high-end and efficient economy but also construct a safe and convenient society, particularly in educa-tion and healthcare31.

More specifically, AI will help to create intelligent medical care through innovations such as smart hospital construction and development of man-machine coordination in surgical robots. It will promote research and development of flexible, wearable, biologically-compatible moni-toring systems, and human-computer collaboration in intelligent clinical diagnosis and treat-ment programs to achieve image recognition, pathology classification and intelligent multi-consultation. AI will enable large-scale genome recognition, proteomics, metabolomics, and research and development of new drugs. Epidemic intelligence monitoring, prevention, and control should also be improved by AI. Finally, AI will also enhance intelligent health man-agement and care, including in institutions and home care equipment.

Funding strategies to promote AI in all industries and in health

At the heart of China’s AI strategy for all key industries are funding and incentives from both the government and multi-channel private investments32. Financial support is to be increased, and leading enterprises will be encouraged to contribute to AI development funds. One im-portant funding program is “1+N”. This includes project funding on R&D, investment in start-27 The World Bank Ibid; Currency converted from Chinese Yuan to US Dollars: June 21st 201828 http://pharma.bayer.com/china-strategy-to-tackle-cancer/29 http://www.gov.cn/xinwen/2019-07/15/content_5409694.htm (as of 20th August 2019)30 https://flia.org/notice-state-council-issuing-new-generation-artificial-intelligence-development-plan/31 Page 19 of the New Generation Artificial Intelligence Development Plan https://flia.org/wp-content/uploads/2017/07/A-New-Generation-of-Artificial-Intelligence-Development-Plan-1.pdf32 Page 24 pp. https://flia.org/wp-content/uploads/2017/07/A-New-Generation-of-Artificial-Intelligence-Development-Plan-1.pdf

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ups, and development of AI technologies and talent. The project is jointly set up with the five national AI champions Baidu, Alibaba, Tencent, iFLYTEK, and SenseTime. There is also a clear external dimension – leading Chinese AI companies are being encouraged to explore options abroad. Services will be established that carry our overseas mergers and acquisi-tions, equity investment, venture capital, and the establishment of overseas R&D centers. Conversely, foreign AI companies and research institutions will be encouraged to set up R&D centers in China and collaboration will be encouraged.

The national key R&D program also involves funding and promoting AI-based diagnostic medical imaging. The promotion of smart robotics, big data analysis and innovation platforms in collaboration with digital companies appears to be highly significant for the healthcare sec-tor. Investment strategies by government guided funds and private sector actors, such as private equity and venture capital firms, are of interest. These may further accelerate growth in the already fast-growing start-up sector. In addition to the national program, “1+N” is also replicated at the local level such as on provincial level, direct municipalities, for example in Beijing, Jiangsu, Guangdong, Sichuan, and Shanghai.

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II. Recommendations for Action

1. Setting the agenda in Berlin and Brussels: We need health in all poli-cies!

China’s approach to health and the healthcare sector is largely holistic and more integrated. It is motivated by the view that this is beneficial for the country’s health, wealth, and social stability. European countries, by contrast, do not generally take a comparably integrated and holistic approach to leveraging the full potential of their healthcare sectors, even though health and wealth have characterized Europe’s image for decades: Europe has been excellent at providing a solid social security system, including excellent health services. It has led the way in advancing innovation and high technology. The healthcare industry therefore urges Berlin and Brussels to strive to uphold those values, and to proactively examine whether all possible measures are being taken to advance health in all policies and to create the most innovation-friendly environment possible. The EU needs to respond appropriately to the challenges of an ageing society, digitalization and the need to ensure growth, by investing in innovation and high technology. Europe and Germany should use its high data protection standards as a competitive advantage, rather than viewing it as a disadvantage compared to China and the USA. As healthcare becomes more digitalized, protecting private healthcare data becomes ever more crucial. Citizens rely on policy makers to protect their data while allowing digital innovation to flourish.

The Health industry now expects Europe to integrate health in all policies and to combine providing better health services for patients with incentivizing further economic growth; Safeguard jobs, sustainable growth, and the wellbeing of the people with an internal and external dimension of health policy!

2. Enhance competitiveness of Healthcare Industries in Europe and Ger-many

Revising internal industry and innovation strategies, such as “Industrie 2030”, “AI-Strategie der Bundesregierung”, the “Dekade gegen Krebs” as well as Europe's AI, industry and innovationstrategies, including Europe´s Cancer Plan. The European Parliament has also published a study on EU Public Health Policies33. The health Industry welcomes the areas of focus outlined by the President of the European Commission such as the initiative on “Europe fit for a digital age” to ensure technology leadership, the works on Horizon Europe, the European Health Data Space and Europe´s beating Cancer plan as well as the push for digitalization, big data, and AI strategies under the German EU presidency, covering areas such as sharing of health data, genome sequencing, and cancer.

Enhance dialogue and cooperation with China and Chinese stakeholders in the healthcare sector on innovation topics and frame the EU´s external trade strategy and all China strategies accordingly. “InnoHealth China” is an excellent example of promoting closer Sino-German companies´ collaboration, particularly SMEs and startups. Also, the EU should enhance EU-Chinese bilateral cooperation in R&D and innovation and enhance healthcare products´ export and trade promotion.

33 European Parliament- EU Public Health Policies- State of play, current and future challenges https://www.euro-parl.europa.eu/RegData/etudes/STUD/2019/638426/IPOL_STU(2019)638426_EN.pdf

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3. Advancing Global Health

Realizing “Health in all Policies” would also contribute to global health policy as set out in the UN’s Sustainable Development Goals. To achieve SDG 3’s health goals, and better health and wellbeing of the people, the World Health Organization (WHO) coordinates a WHO Ac-tion Plan to which UN member states are asked to contribute. EU-Chinese contributions are important: Moving health in all policies up the European agenda and in China-EU relations could improve the health of more than a quarter of the world’s population. The EU-28 and China together account for about two billion people. Health industry also welcomes the fact that, in her mission letters to the Commissioners, Ursula von der Leyen explicitly states that every Commissioner should contribute to the overarching goal of achieving and contributing to the UN's SDGs.

4. Promote Innovation and Improve Knowledge Transfer in HealthWe need a reliable framework for promoting and protecting innovation in Germany and Europe. Before investing in development of new active substances and products, the health industry needs an adequate level of certainty with regard to the regulatory environment.

Against a backdrop of increasing international competition, the EU should create a coherent legal framework to remove structural barriers to innovation. This is essential for ensuring that scientific excellence is rapidly translated into economic benefits and industrial competitiveness. The mission letter to the new EU health commissioner highlights the need for the European health industry to remain an innovator and world leader.

Europe therefore needs to develop a coordinated strategy for creating structures that produce a supportive business environment for developing sustainable innovation and digital change and facilitate the creation of start-ups and the growth of existing businesses. This necessitates close cooperation between EU Member States. Only by working together can Europe remain globally competitive in the future.

Germany also needs to boost its innovation strategies. It has already taken major steps to strengthen innovation partnerships with other countries. “InnoHealth China” is an example of a campaign that aims to connect the Chinese and German healthcare research sectors, and to involve small and medium-sized enterprises (SME) and start-ups. “InnoHealth China” is part of the fourth phase of the Federal Ministry of Education and Research’s International Research Marketing initiative. For the period 2019-20, it is being led by the Fraunhofer-Gesellschaft.Recommendations for action in Europe and Germany: We need a coordinated strategy and coherent legislation in Germany and Europe for

creating structures that create a supportive business environment for developing sus-tainable innovation and digital change in the health industry.

We recommend that the EU Commission's revised impact assessment procedure should include regular assessment of the impact on innovation capacity.

To enable breakthrough innovations in the health industry, we need to strengthen the European Research Area and EU Framework Programs, and boost knowledge transfer between the academic and industrial health research sectors.

The EU’s "Horizon Europe" (2021-2027) research funding program needs to have at least €120 billion available to make the European ecosystem globally competitive for research and innovation.

Following the example of the “Innovation Medicines Initiative” (IMI), a public private partnership (PPP), health undertakings within Horizon Europe should involve partners

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from the entire industrial healthcare sector and the pharmaceutical industry.

To achieve risk-based, technology-adjusted measures, rather than uniform solutions in the health industry, we recommend strong industry participation in the planned "Digital Europe Program". Protection of intellectual property is an important factor in promoting investment in research and development both in Germany and at the European level, especially in the highly innovative field of health technology. The health industry should therefore continue to be closely involved in developing this system.

5. Advance Digital Healthcare in Europe and Germany Digital technologies are transforming the healthcare sector. The benefits of digital healthcare solutions are multiple. New technologies enable better and more efficient medical care, as well as broader access to medical expertise, especially in rural and remote areas. Digital technologies also help us better deal with an ageing society.

E-health is an integral part of the European Commission's Digital Single Market strategy. Within Europe, Germany urgently needs to catch up in implementing digital technologies in the healthcare system. A 2018 comparative study carried out by the Bertelsmann Founda-tion, ranked Germany 16th out of 17 countries in a digital health care index.34 German health-care system stakeholders do seem to have heard the wake-up call, however. In May 2019 the German Federal Ministry of Health (BMG) put forward its Digitale-Versorgung-Gesetz (DVG), which aims – among other things – to provide access to and reimbursement for spe-cific digital healthcare products, and to address technical infrastructure challenges. The BMG has also initiated a participatory process called “Digital Health 2025” to work on the future of digital health and come up with actionable solutions.

For both Europe and Germany, improving healthcare requires a system of cross-border ex-changes of health data which takes into account data privacy and data protection require-ments. Appropriate, resilient data networks are essential for fully developing the innovative power of digital healthcare solutions. For this reason, there is an urgent need for a coherent, innovation-oriented legal framework across Europe and within Germany.

While first steps have been taken by the European Commission and the German federal gov-ernment, the industry urges all stakeholders to keep up the pace and even step up their ef-forts in the area of digitalization of healthcare.

Recommendations for action in Europe and Germany: We recommend a strategy for a Digital Single Market for Health (DSM-H) to remove

regulatory barriers between national healthcare markets in EU Member States. The European Commission's e-Health strategy should include a clear implementation framework with specific targets and deadlines to accelerate the exchange of health data. For the benefit of patients, the secure use of data for academic and industrial research should be facilitated both in Germany and at the European level. This re-quires the establishment of a European Health Data Space.

In order to promote the exchange of data, e.g. in the context of healthcare research, the European Commission and political stakeholders in Germany should advocate a legally certain demarcation between anonymization and pseudonymization of per-sonal data. To ensure efficient research and development of innovative therapies, the European Commission should promote the development of a legal framework for the use of existing data (e.g. for big data analysis) between, but also within, EU

34 Bertelsmann Stiftung, #SmartHealthSystems – Digitalisierungsstrategien im internationalen Vergleich (November 2018), https://www.bertelsmann-stiftung.de/fileadmin/files/Projekte/Der_digitale_Patient/VV_SHS-Gesamtstudie_dt.pdf

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Member States. Interoperability of digital healthcare solutions must be strengthened both within Germany and at the European level. This requires EU-wide agreement on mandatory use of international standards, and specifications for their implementa-tion.

The German healthcare industry is committed to flexible project groups of interested EU Member States for the implementation of innovative services within the frame-work of the digital eHealth service infrastructure (eHDSI). A uniform solution for trust centers throughout Europe will help to facilitate the cross-border exchange of health data over the long term.

Secure digitalization of Germany and Europe's industrial healthcare sector requires uniform implementation of the EU-GDPR and more investment in digital expertise.

Cybersecurity is a particular concern for medical technology. Within the framework of the EU Cybersecurity Act, due weight should be given to this circumstance by ensuring that the health industry is actively involved in implementation of the EU Medical Devices Regulation.

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6. Intensify Dialogue on IPR in HealthcareEnsure intellectual property protection and proper implementation

Intellectual property protection is key when building an innovation-driven economy and, for a large proportion of healthcare companies, intellectual property rights (IPR) are central to their business model. They ensure that developers and manufactures have an incentive to con-tinue to invest significant resources in developing innovative products. IP protection is espe-cially important for sectors with long innovation cycles and large, very risky investments. In some sectors, such as the pharmaceutical sector, these cycles can be as long as 10-15 years.35 To ensure incentives for such risky investments, it requires certain exclusive market-ing protection in return until innovations are at a later stage also available for generic produc-tion or legal copies. Patents offer additional benefits. When registering a patent, the company registering it is obliged to publish and make publicly available certain research findings and information. This mechanism, which benefits patients, society, and the economy, needs to be reflected in clear legislation, which in turn needs to be enforced.

Core challenges:

Enforcement: There needs to be stricter enforcement of existing intellectual property rights. While IP protection in China comes in for a lot of criticism, some progress has been made on IP legislation in the health sector. Enforcement still needs to be tightened, however and some legal mechanisms still need to be strengthened. To prevent illegal acts and IP violations, these include faster injunction procedures and higher punitive damages that have a genuine deterrent effect. Currently, the state of IP protection varies across different sectors:o Examples from the pharmaceutical sector: The Chinese government is strengthening

the incentive system for the pharmaceutical sector and has proposed positive reforms to IPR36, that now need to be implemented and enforced. Patent term extension (PTE) pilots, regulatory data protection (RDP) and the publishing of an Orange book in particular are generally positive proposals. In addition, discussion of a patent link-age system is a step in the right direction. There is, however, still no clear timetable for introducing implementation rules for PTE and RDP, and protection standards need refinement.

o Examples from the MedTech sector: In other sectors, such as medical devices, major challenges remain, with inadequate investigation of potential IPR violations and a lack of proper enforcement of existing intellectual property rights. Counterfeit medical de-vices still violate the IPR of many medical device manufacturers, stifle innovation and prevent the provision of high-quality healthcare.37

Implementation and consultation: To ensure the practicability of new measures, pro-posed IPR should be implemented swiftly and in consultation with industry partners.

Future-proof IPR: Intellectual property rights in China should be updated to reflect the requirements of new technologies such as AI, big data, and biometrics.

35 Schuhmacher, A., Gassmann, O., & Hinder, M. (2016). Changing R&D models in research-based pharmaceut-ical companies. Journal of translational medicine, 14(1), 105. doi:10.1186/s12967-016-0838-436 Among those were in May 2017, the former CFDA´s draft document Encourage Innovation of Drugs and Med-ical Devices, Rights of Innovators (Document No. 55). In October 2017, the Central Committee of the CPC and the State Council jointly published the document Opinions on Deepening the Reform of Evaluation and Approval to Encourage Innovation of Drugs and Medical Devices (Opinions). On 13th April 2018, the State Council called for extending patent protections by a maximum of five years if a manufacturer applies for parallel registration for its innovative drugs in China and abroad. On 25th April 2018, the NMPA published the draft Regulations on Protec-tion of Drug Study Data for public consultation. On 4th January 2019, the NPC released draft amendments to the Patent Law—which includes PTE for invention patents of innovative drugs—for public comment.37 Ellison, S (2018) Keeping up with Counterfeiters: The Battle Against Counterfeit Medical Devices, MedTech Intelligence, accessed 07.11.2019

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Forced Technology transfer: De facto forced technology transfer often happens through joint-venture requirements, licensing or approval processes. With increasing digitization China’s restrictive cyber security regulations are of particular concern in this respect. China’s new foreign investment law (2019) specifically bans forced technology transfer (Article 22). However, the provisions in the law are not specific. The Chinese government should come up with detailed regulations in order to prevent forced technology transfers.

EvaluationThe Healthcare industry is encouraged by recent policies that incentivize innovation and strengthen IPR protection. Establishing a truly innovation-friendly environment, however, requires a functioning multi-level protection mechanism that enforces existing IPR.

Recommendations: Elaborate clear IPR implementation rules, for example for PTE and RDP, and refine

standards, such as twelve years for RDP; establish an effective patent linkage system.

Enforce existing IPR more strictly and strengthen specific rule of law mechanisms such as injunction procedures.

Review policies that indirectly cause forced technology transfer and ensure that they reflect rapid technological advances.

Increase opportunities for the industry to participate in the policy making process and contribute to formulating and implementing laws and regulations on IP protection.

7. Cooperation in Regulatory PoliciesEnsure internationally harmonized, smooth approval procedures

In the highly regulated healthcare sector, national regulatory approval procedures ensure the quality of products on the market. They determine how quickly an innovative medical product able to improve diagnosis and treatment becomes available to patients. Harmonized quality and approval procedures can facilitate simultaneous product development programs world-wide and ensure quicker availability of products across markets. In addition, harmonized reg-ulatory rules, well-staffed regulatory authorities, and trained personnel help prevent delays in approving much-needed new medical products. Better regulatory approval is at the heart of the Chinese government’s reforms.

Core challenges:

Capacity building: Alongside enormous capacity building efforts, the National Medical Product Authority (NMPA) has taken a number of positive, much-needed steps towards creating a smoother regulatory process, including the Opinion on Deepening the Reform of the Review and Approval System and Encouraging the Innovation of Drugs and Medi-cal Devices38. o MedTech: The NMPA is driving forward generally positive reforms to medical device

supervision by announcing amendments to Order No. 680. Under former CFDA, the NMPA predecessor, testing institutes in 2017 nevertheless “…received insufficient funding, causing serious delays to the registration of medical devices.”39 The then amendment allowed for the use of alternative testing facilities, a measure which was warmly welcomed in helping to remedy this serious industry concern. Further clarifica-tion of the concepts set out in the amendment is, however, required, for example which “qualified” testing institutes are recognized and the criteria that qualified insti-tutes need to meet. Further, implementation of the amendment is not yet complete.

38 Opinion on Deepening the Reform of the Review and Approval System and Encouraging the Innovation of Drugs and Medical Devices, State Council 8th October 2017 www.gov.cn/gongbao/content/2017/content_523236239 European Union Chamber of Commerce in China (2018), Healthcare Equipment Working Group, pp. 240.

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o Pharma: Initial achievements include a reduction in the former CFDA’s drug applica-tion backlog by the end of 2017. The NMPA and the European Medical Authority (EMA) have also started a structural exchange that should help train further person-nel, accelerating approval procedures. The new Drug Administration Law ensures that regulatory reform will be implemented by 1st December 201940.

o Digital: Big data promises to improve patient care, but digital health technology regu-lations are yet to be fully elaborated. This jeopardizes smooth application procedures and a clear vision for the use of patient data. Accelerate implementation of initiated policies to allow alternative testing methods for medical products.

Circular economy: o It is still illegal to sell imported refurbished medical devices in China41, though reman-

ufacturing is possible within certain parameters. Refurbished products, however, are crucial for a sustainable society. A better regulatory framework is therefore required.42

Clinical trials: There has been significant improvement for some areas of the healthcare industry. Other areas still face difficulties and additional costs.o Pharma: China improved clinical trial approval timelines and more easily accepts

global trial. The reforms introduced, for example, a new drug application (NDA) proce-dure that better accepts foreign clinical trial data, and faster approval for drugs with urgent unmet medical need and for orphan diseases.

o MedTech: Chinese Good Clinical Practice (GCP) and requirements for clinical evalua-tion reports (CER) are not sufficiently harmonized with international regulations, de-laying market access in China and making international multi-center studies impossi-ble. They do not, for example, differentiate between clinical studies for registration and post-market studies.

Harmonization: The Chinese government has accorded high priority to membership and harmonization endeavors in some international organizations. There are, however, impor-tant differences between sectors: o MedTech: Within the framework of the International Medical Device Regulators Fo-

rum (IMDRF) – the highest international regulatory body – the CNDA has started a series of international initiatives and hosted the IMDRF in 2018. Streamlining manda-tory standards is also the aim of the Standardization Law that took effect in January 201843. Engineering and health standards are exempted, however, and product regis-tration with the CNDA still requires separate approval from the China Center for Dis-ease Control and Prevention (CDC) (for example for X-ray machines and CT scan-ners) though there are large overlaps with international standards.44 Conversely, some requirements are contradictory, as updated international standards are trans-lated into national standards too slowly. In addition, adoption of international stan-dards is still slow, and the CNDA is not yet participating in all organizations develop-ing international standards in this field.45

o Pharma: China has joined the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH), was elected to the ICH Management Committee and is striving to gain membership of the Pharmaceutical Inspection Co-operation Scheme (PIC/S)46. This is a clear indication of China’s efforts to achieve harmonization in areas such as clinical trials, regulatory approval, and standards for Good Manufacturing Practice (GMP) for medicinal products for human or veterinary use.

Quality and safety standards for generics and products:

40 https://www.chinalawinsight.com/2019/08/articles/healthcare/major-changes-in-the-newly-revised-drug-adminis-tration-law/41 Article 48 of the amendment to Order No. 680.42 Ibid, pp. 24343 Standardisation Law, NPC, 2017, www.npc.gov.cn/npc/xinwen/2017-11/content_2031446 44 European Union Chamber of Commerce in China (2018), Healthcare Equipment Working Group, pp. 243.45 Ibid.46 https://www.eurobiz.com.cn/a-new-direction-for-chinas-pharmaceutical-management-model/

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o Pharma: The CNDA has been continuously advancing and pushing the “generic drugs quality consistency evaluation” (GQCE) to improve generic quality. Equal treat-ment: approval processes which discriminate against foreign companies. In the past, product lists favoring local producers have prevented there from being a level playing field for all competitors. To allow fair competition, to the ultimate benefit of Chinese patients, examples such as these must be discontinued.

Evaluation:

The Healthcare Industry welcomes and supports the Chinese government's goal of imple-menting faster, more transparent regulatory approval processes, for example faster clinical trial assessment and approval for essential drugs and other much-needed products for dis-eases such as heart disease.47 Further reforms now need to be ensured through stringent implementation and by enhancing capacity building. To align with international standards, the Chinese government should also seek to expand the harmonization process, including in the medical devices industry.

Recommendations: Continue the process of simplifying approval procedures: Further speed up stan-

dard approval procedures and broaden the range of fast-track approval processes for high-need medical products. Eliminate drug lag. Clarify and implement the amend-ments to the supervision of medical devices. Deepen reforms for introducing innovative modes of supervision in order to regulate digital health technology.

Enable data use: Enable the secondary use of data for health and research purposes.

Further enhance capacity building in organizations such as the CNDA and NMPA, including through twinning and structural exchanges with the European Medical Au-thority (EMA).

Promote precision medicines: Biomarkers and IOs should be given the same treat-ment as orphan drugs and rare diseases, as patient populations are small and there is unmet need.

Promote globally harmonized standards and transparent, predictable, science-based rules in all healthcare sectors to improve product registration and regulatory approval, including, for example, harmonization of GCP with international standards.

Enable the transition to a circular economy: To enable efficient use of resources, the import and sale of refurbished medical devices should be allowed.

No discriminatory criteria: o Multinational medical device companies face discriminatory approval criteria com-

pared to Chinese companies, even in the case of Chinese subsidiaries. This in-cludes a requirement for approval in the manufacturer’s home country, even though most innovative medical devices no longer require market approval in their home country.48

o No Chinese drug approval prioritization for first approval in China.

47 https://www.medtechintelligence.com/column/heart-disease-a-growing-threat-in-china/ 48 European Union Chamber of Commerce in China (2018), Healthcare Equipment Working Group, pp. 242.

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8. Reimbursement & Health Technology Assessment (HTA)

Endorse a reimbursement policy that guarantees up-to-date treatment and care

The Chinese government has decided that the key to achieving health equity within the coun-try and ensuring harmony in society is to provide a broader service and increase financial coverage for treatments. Healthy China 2030 also expressly aims for providing better preven-tion, screening, diagnosis, treatment and care.49 The Chinese government is therefore deter-mined t, and has started to, review its reimbursement models. For innovative German and EU healthcare companies, this creates new opportunities. Their innovative products now have a chance to be better reimbursed and thus to benefit more patients in China.

A systematic health technology assessment (HTA) can ensure to better value innovation. An HTA ensures that the properties and effects of a drug or medical device are systematically evaluated and enables an informed decision on reimbursement and coverage by national health systems to be made. The availability of a single joint clinical assessment at the time of marketing authorization will expedite patient access to new medicines. For companies, this proposal would help make the requirements for evidence generation during development more predictable. A stringent, predictable HTA system has not been implemented in China to date50. Since 2019, the Chinese government has, however, been preparing to table a legisla-tive proposal for drug evaluation.

Core challenges:

Valuing innovation and guaranteeing differentiation: For medical products, it is important that patients have access to the latest innovations with the highest potential for improving health outcomes. Innovation must be valued in both the reimbursement and HTA system. In the past, this has not always been the case.

o Pharma: Until 2017, the average Chinese patient relied on many outdated treatments. Most innovative drugs were not reimbursed by the public healthcare system. The em-phasis in the previous update of the National Drug Reimbursement List (NDRL) in 2009 had been on me-too, biosimilar and biobetter products. Since 2017, however, there has been rapid progress on market access. Over a two year period, the NDRL has been updated three times with dozens of new active ingredients and, to support the national oncology strategy, one list with 17 oncology drugs51. 2018 guidelines on the “Reim-bursement Standard Payment Policy” introduced systemic changes to the process for listing drugs and negotiating the inclusion of drugs on the NDRL.52 Preparatory work has finally started on setting up an HTA in China for the first time ever. Chinese think tanks and government authorities are therefore looking for input and information from other HTA-experiences abroad. It is not yet clear whether this will make possible truly innovation-friendly assessments, if precision medicines in particular will be valued by the new reimbursement systems. It is also unclear, if industry input is well and early on considered in the design and consultation phases of the HTA, even though this is key to ensuring solid insights into current and future scientific development.

o MedTech: Single-patient-use implantables may be listed for reimbursement but reim-bursement differs greatly between provinces. In addition, single patient genetic tests for guiding targeted tumor therapies are not yet reimbursed by the public healthcare sys-tem. This is, however, essential for enabling patients to access modern precision medicine and determining whether specific treatments are appropriate for them. The data sets generated can also help in further developing and optimizing treatments. Fi-

49 World Health Organization (2016), Healthy China 2030 (from vision to action), https://www.who.int/healthpromo-tion/conferences/9gchp/healthy-china/en/, accessed 07.11.2019.50 https://www.idsihealth.org/wp-content/uploads/2018/05/ICL_case_study_China_PRINT2-003.pdf51 https://www.raslss.com/changing-face-regulations-market-access-china/52 In addition, 36 high-value medicines were successfully added to the NRDL via reimbursement negotiations led by the central payer for the first time in China. In Oct 2018, 17 oncology drugs were listed on the NRDL after an ad-hoc National Reimbursement Negotiation (NRN).

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nally, challenges remain as innovative specialized medical products are often not priced differently even though their different qualities should be reflected in their prices. There is, for example, no price differentiation for diagnostic reagents, even though they vary greatly in quality, making price differentiation essential. 53

Evaluation:

The Healthcare industry welcomes the Chinese government's efforts to improve access through broader reimbursement, including increasing the frequency of updates to the NRDL, and national negotiation of reimbursement for innovative drugs. It is now crucial to ensure that the system is predictable, evidence-based, and adapts quickly to scientific change by means of flexible reimbursement processes. The Healthcare industry also welcomes the Chi-nese government’s efforts to set up an HTA system for the first time, as this can systemize and improve the transparency of national reimbursement decisions. However, the extent to which it values innovative medical products depends on the design of the system.

Recommendations: Valuing innovative medical products by opting for national payers’ regular reim-

bursement to make new treatments available to patient. Additionally, rapid endorse-ment of the legislative proposal on NDRL updates to promote evidence-based criteria and improve the transparency of the reimbursement process. To ensure new treat-ments reach the market quickly, ensure that reimbursement assessments can be also triggered by industry.

Promote precision medicine: To improve the efficacy of treatment and make more efficient use of health insurance funds, use modern diagnostics and add genetic testing for guiding targeted tumor therapy to health insurance coverage.

Ensure patient-centric endpoints and patient-centric systems that value innovative medical products, including incremental advances.

Strengthen good governance: Consult patients and industry experts at early stage of the research and legislative processes to respond to patients’ unmet needs and mirror scientific development.

Install future-proof HTA policies that allow innovative medical products to be as-sessed holistically and smoothly, and create a strong link between clinical benefit and price. Additionally, medical devices different in quality should be consequently priced differently and reimbursed accordingly considering their innovative properties.

9. Open markets for Public ProcurementValue quality and do not limit treatment or diagnostic optionsPublic procurement allows purchasing processes which use transparent, predictable rules, and allows the promotion of healthy competition. It also allows shared purchasing and, for the Chinese government, provides an important tool for controlling prices over volume as well as ensuring transparency of anti-corruption efforts. Recent criticism of Chinese purchas-ing practices, however, has centered on the suggestion that procedures are too price-ori-ented and pay insufficient attention to quality criteria. Additionally, there have been allega-tions of localization and discriminatory practices.

Core challenges:

53 European Chamber of Commerce in China (EUCCC), “Healthcare Equipment Working Group”, European Busi-ness in China Position Paper 2018/2019, pp 248.

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Localization: The use of product lists and restrictions on buying imported goods may favor domestic companies in public tendering processes.

o MedTech: Despite the Working Plan 2017/2018 to abolish anti-competition policies, some provinces are issuing administrative notices that restrict the use of imported high-value medical devices54. Additionally, the process of localizing highly innovative medi-cal technologies to decrease costs and support local manufacturers is supported at the highest level of the Chinese government. The National Health Commission (NHC) uses product lists which list a selection of medical products that healthcare institutions should purchase from local manufacturers.55 Domestic market share targets for Chi-nese companies in the medical device sector, as set out in China Manufacturing 2025, are a further challenge. With a view to these problematic practices, the German health-care industry calls for a cancellation or at least very considerable decrease of localiza-tion requirements which lead to a discrimination of foreign bidders. In any case more clarification and official guidance from the Chinese government is necessary.56

Emphasis on price and volume over quality and innovation: A number of sectors face the challenge of aggressive price negotiation practices that fail to value and tend to exclude highly innovative products from the procurement process.

o Pharma: The Chinese government has overhauled municipal and provincial procure-ment regulations with rather price and volume-based pooled procurement (VBP) pilots for drug purchasing. There are now also plans to apply VBP nationwide57. Specifically, in March 2019 the government introduced the “4+7 cities” pilot program. This is a VBP that targets off patent originators and generics which have passed the Generic Quality Consistency Evaluation (GQCE) and centralizes procurement procedures previously conducted by individual hospitals. The “4+7 Cities” pilot uses a ’winner takes nearly all’ approach, where a 70 percent market share goes to the single bidder offering the low-est price for a molecule. The remaining 30 percent market share is awarded to com-petitors who set prices in a race to the bottom. Overall prices for the first wave of mole-cules selected for the pilot program dropped by 52 percent, with some dropping by as much as 96 percent. In August 2019, the Chinese government announced that the VBP would be extended to further provinces.

o MedTech & diagnostics: Innovative medical devices often require individual configura-tion and commissioning. Manufacturing, assembling, and delivering the product to the customer requires additional logistics and service processes. Tendering processes do not consider these costs, however, and tend to favor lower prices.58

o Diagnostics: Some provincial health authorities in China do not differentiate the price of diagnostics according to the quality and method. This is a barrier to the clinical use of modern diagnostic tests, and prevents patients from accessing the most appropriate, reliable diagnostic results, potentially leading to increased treatment expenses and shorter survival. This includes, for example, cancer patients who could benefit from modern precision medicine, in the form of targeted therapy or immunotherapy. Patients with non-small cell lung cancer, at least 30% of whom can be treated with modern tyro-sine kinase inhibitors or specialized immune drugs (checkpoint inhibitors), resulting in significantly longer overall survival, are a key example.

54 Urgent notice on strengthening accountability and strictly controlling unreasonable growth of medical expenses, Sishuan HFPC, see tieba.baidu.com/p/5449562416?redtag=1912952024.55 European Chamber of Commerce in China (EUCCC), “Healthcare Equipment Working Group”, European Busi-ness in China Position Paper 2018/2019, pp 248.56 Cf. also China Manufacturing 2025 Key Area Technology Roadmap, China Academy of Engineering, October 2015 www.cae.cn/cae/html/files/2015-10/29/20151029105822561730637.pdf 57 https://www.cgdev.org/sites/default/files/CGD-procurement-background-china-case.pdf58 European Chamber of Commerce in China (EUCCC), “Healthcare Equipment Working Group”, European Busi-ness in China Position Paper 2018/2019, pp 248

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o Precision medicine will change diagnostics, enable earlier diagnosis, and provide pa-tients with better, more personalized treatment. However, developing and using preci-sion medicines requires a better understanding of biomarkers or analysis of the patient or tumor genome prior to treatment. Enabling access to targeted genetic sequencing and/or immunological testing are therefore key issues. Genetic testing, genome se-quencing, and immune analysis are not currently properly reimbursed and are therefore not available to most patients.  

Evaluation:

The healthcare industry recognizes and supports the wish to broaden access to diagnostic procedures and medicines. It is to some extent understandable that a volume-based ap-proach has been chosen with the aim of reducing prices. Quality, innovative, patient-centric medical products are, however, resource-intensive to develop and produce, and therefore come at a higher price. Ultimately, however, quality should not be compromised to the extent that patients are unable to access quality or innovative solutions.

Recommendations: Value quality and innovation: Guarantee fair, open tendering procedures that place

the maximum possible emphasis on the quality, efficacy and innovative value of medi-cal products. Before issuing new calls for tenders, conduct comprehensive tender eval-uation and avoid selecting winners based purely on lowest price.

Differentiate where necessary: Separate biosimilar from generic products and do not apply generics regulation to bio products as they are more complex. Differentiate be-tween different diagnostic methods during procurement and pricing. Innovative diag-nostics should be valued if they enable earlier or better treatment of patients. Ideally, there should be a nationwide guideline which obliges provinces to/recommends that provinces adapt their procurement and pricing negotiation standards accordingly.

Do not exclude customer-fit or patient-fit solutions: Design tendering processes that consider essential configuration, services, and logistics. The same tender pro-cesses should also not hinder patient-fit treatments and not reduce too much the vari-ety of treatment options for doctors and patients. Allow hospitals to purchase products according to the needs of patients, and to adjust and allocate procurement volumes accordingly. Rescind the requirement for individual hospitals to conduct second-round price negotiations. Similarly, promote precision medicine, and genome sequencing and immune analysis should be reimbursed by public insurance. Provinces should aim for genomic testing to be available in a large number of the hospitals in their province, with analysis carried out in in specialist hospitals or central laboratories.

Guarantee equal access: Eliminate regulations that prevent access to local markets and fair and equal competition. These include product lists, and domestic market share targets for local manufacturers of medical devices, both of which currently present an obstacle to a competitive market environment.

Apply fair competition principles Instead of gradual price reductions or setting price limits to non-winning products that participate in VBP bidding.

10. Cooperation in Commercial medical insuranceThe Chinese healthcare system currently provides public healthcare coverage to over 95 percent of its people. Under its Healthy China 2030 plan, over the last two years the Chinese government has significantly increased public reimbursement, including innovative drugs and new treatment options. Gaps in coverage remain, however, and commercial health insurance is therefore currently purchased to cover deductibles, copayments, and other cost-sharing,

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as well as gaps in the coverage offered by the publicly financed health insurance system. This insurance is largely provided by for-profit commercial insurance companies and is at present purchased primarily by higher-income individuals and by employers for their workers.

Private insurance like life and health insurance often enables people to receive better quality of care and higher levels of reimbursement, since some health services are very expensive or not covered by public insurance. The main health insurance products currently available are personal critical illness insurance and medical insurance. Despite the ageing demo-graphic, insurance covering social care needs is underdeveloped. Epidemic risk insurance policies are now available for the first time, including policies offered by German insurers. There is great investor interest in China, as these policies protect clients and their balance sheets from the consequences of an epidemic. They cover items such as the delay in start-up, business interruptions and extraction of the workforce as a result of infectious diseases on or off-site.

For the Chinese government, improving service and financial health coverage for 1.4 billion people without overburdening public healthcare funding is a challenge. The Chinese govern-ment therefore recognizes that commercial insurers perform a valuable function and, under its Healthy China 2030 plan, is promoting the expansion of the private insurance sector. It has, for example, created tax incentives for employers and employees by making costs for eligible health insurance plans tax deductible. China’s new investment law also appears to be removing obstacles to investment in the insurance sector by opening it up to foreign invest-ment.59

Megatrend ageing society and rising middle class creating greater demand

An ageing demographic and the rising middle class are increasing demand for commercial health products. Forecasts suggest that by 2050 China will have 329 million people aged 65 or older, including 120 million people aged over 8060. Better prevention, diagnosis, and care, including precision medicine, will be needed to tackle the growing burden of NCDs. Addition-ally, a burgeoning middle class is demanding up-to-date treatments and is willing to make larger out-of-pocket (OOP) payments. Rather than risking unexpected one-off payments, however, many would prefer to better manage their risk by taking out commercial insurance policies. The potential demand is clear from the figures. In 2017, individual OOP health ex-penditure reached RMB 1.49 trillion, representing 28 percent of all health expenditure61. OOP expenditure is likely to increase with the growth in middle income families, forecast to grow from 37 percent of families in 2017 to up to 50 percent of families by 2025.62 From the per-spective of the Chinese government, to relax pressure on public funds and improve overall health security it would therefore be prudent to accelerate the development of commercial supplemental health insurance.

Evaluation

The Healthcare Industry welcomes the Chinese governments’ approach to combining public and commercial coverage, and recent steps to encourage commercial insurance in general. The healthcare industry also believes that facilitating the purchase of commercial health in-surance requires the right incentives and that private insurers should be enabled to respond to the demand for additional insurance products from Chinese patients. The country of origin of the insurer should not be a criterion for market access. Up to now, foreign-funded compa-nies have generally been subject to regulatory restrictions concerning their business location and have been unable to reach all potential policy holders. New Chinese investment law means that foreign insurance companies can now carry out commercial insurance activities

59 Order of the President of the People's Republic of China No. 26; Promulgation Date: 2019-03-15 http://www.f-di.gov.cn/1800000121_39_4872_0_7.html;60 “White paper on China Commercial Health Insurance”, EY CPIC Allianz Health Insurance, 2018 https://www.ey.com/Publication/vwLUAssets/ey-white-paper-on-china-commercial-health-insurance/$File/ey-white-pa-per-on-china-commercial-health-insurance.pdf 61 Statistical Bulletin on China Healthcare Industry Development Issued by the National Health Commission62 Chinese Academy of Social Sciences, Social Blue Book 2017.

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in a previously highly restricted Chinese insurance market. It is encouraging that some Ger-man insurers have now received approval to establish Chinese subsidiaries. To meet the needs of an ageing society, the healthcare industry therefore advocates further encouraging the commercial health insurance sector, particularly for products which improve preventive diagnosis, treatment, and care of NCDs.

Recommendations: Incentivize private insurers and industry: Make it easier for insurance companies to

enter the market and register irrespective of their country of origin and provide tax in-centives to both insurers and partner pharmaceutical companies. Thereby, it is particu-larly important to incentivize private NCD insurances like e.g. cardiovascular or cancer care to prudently prepare rising health cost pressure of the ageing population.

Incentivize potential insurance policy holders: Grant further tax credits or reduc-tions to insurance policy holders and to employers providing their employees with sup-plemental insurance.

Organize insurance pilots: Organize medical insurance payment and tax credit pilots for the treatment of chronic diseases such as cancer, hypertension, and diabetes in designated pharmacies. In particular, tax credits should be available for insurance packages enabling diagnosis and treatment with precision medicines.

11. Cooperation in Digitization in Health

As outlined in the 1st section of this position paper, digitization and digitalization in the health-care sector are already strongly encouraged by the Chinese government and various provin-cial and municipal entities. China’s “New Generation Artificial Intelligence Development Plan”63 states that AI should help establish intelligent medical care in areas such as smart hospital construction and development of man-machine coordination in surgical robots. In addition, China’s VR master plan 2025 nominates education and healthcare as key indus-tries, creating a firm foundation for foreign companies wishing to use VR technology to enter the healthcare e-learning market64. This enables the German health industry to seek out ar-eas where collaboration in services and combined products offers value for both sides. More encouragement is needed in areas such as e-learning and virtual reality learning.

Current challenges and opportunities:

Digitalization in patient and hospital management: Digital health and patient pathway records can significantly improve care delivery in areas such as oncology. In addition, digital health records can enable advanced care management, including better self-man-agement and organization of health services by the patient. E-learning programs can help optimize hospital and care management.

Digitalization in diagnostics: To promote patient-centered care, precision medicines rely on large, high-quality data sets and analysis of genome sequencing data. Currently, this data is often not available, and many patients do not have access as tests are not reimbursed. By improving identification and understanding of biomarkers, better data and digitalization of processes would help alleviate the burden of a number of diseases, in-cluding cancer.

63 https://flia.org/notice-state-council-issuing-new-generation-artificial-intelligence-development-plan/64 Chinese Ministry of Industry & Information Technology. (December 2018). Retrieved from https://www.pkulaw.-com/en_law/83f1361ce6b20a68bdfb.html?tiao=1

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Digitization in improving R&D productivity: By combining expertise in biologics, phar-macology, biochemistry, engineering, and data science, we now have a real opportunity to bring new medicines to patients faster and more efficiently. We are leveraging big data and advanced analytics to accelerate drug discovery and improve drug development pro-ductivity. This includes both pre and post-approval data, as well as real world evidence. Clinical trial timelines and approval procedures, for example, have yet to be optimized.

Digitalization in the education of health professionals: Combined/digitized medicine products and health-related services like e-learning and virtual reality can be highly useful in areas such as improving education and lifelong learning for doctors and nurses. Tech-nologies such as e-learning, simulations and extended reality will change the way we learn.They are smart additional education options for treatment and care. Currently, in part because of China’s ageing demographic, some parts of the country face a shortage of sufficiently skilled medical staff. On average, for example, there are just 18 doctors and 3 nurses per 1,000 people65, compared to 41 doctors and 13 nurses per 1,000 people66 in Germany. Cultivating specialization of doctors is still a challenge in some parts of the Chinese education system. In 2014, 48% of doctors and assistant doctors had a bache-lor’s degree or above, while 31% had a vocational diploma and 21% a secondary voca-tional diploma. At present, however, the Master and Doctor of Philosophy programs are the only programs for educating specialists. Similarly, a shortage of well-trained nurses is a widespread problem in China, particularly in the healthcare of the elderly sector.

Digitalization in occupational safety and health: Evaluation of statistics and E-learn-ing can be helpful for promoting occupational safety and health in medical, geriatric insti-tutions and in all companies as well as in elderly care outside institutions. Work-related accidents, injuries and diseases have an impact not only on the lives of individual em-ployees and their families but also on the productivity and profitability of the employers and ultimately on the welfare of society. Government, employers and employees in China are strengthening efforts to prevent workplace accidents and diseases resulting from non-appropriate working conditions. Improving occupational safety and health particu-larly in small and medium-sized enterprises (SMEs), which employ many young and mi-grant workers, is a major challenge67. E-learning in could be an effective educational op-tion.

Digitalization in therapy or remote service: Sending on-line data from the therapy de-vice (e.g. ventilator, [ other examples welcome….]) to remote specialists can facilitate to include expert advice in medical therapies or quickly ensure medical engineer´s support to fix failure sources in medical devices. Particularly, in a vast country like China this can be of particular importance. The rural-city divide in health infrastructure thus can be better bridged in therapy delivery and medical device´s off-times can be reduced to ensure in-frastructure readiness.

Digitalization for Population Health Management: To reduce health care costs within the health care system, it is important to promote broad health care systems analysis that are able to collect, analyze and identify cost drivers and cost cutters in the health care system. Currently, health care costs are administered by /with limited detailed data to longterm cost and health development trends within different parts of the population and their socio-economic status and with quite a high time-lag. However, real-time health data

65 WHO. (2016) retrieved from http://apps.who.int/gho/data/node.main.HWFGRP_0020?lang=en66 Statista. (November, 2019) retrieved from https://www.statista.com/statistics/283124/selected-countries-nurses-per-1-000-inhabitants/67 https://www.ilo.org/beijing/areas-of-work/safety-and-health-at-work/lang--en/index.htm

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and cost data on regional and even local (neighborhood) level is important to develop information and strategies to prevent unnecessary morbidity, reduce over-excessive cost increases and reduce the burden of disease and handicaps for the population. The Ger-man health care industry provides solutions from data-warehousing and data-analysis to developing insights and strategies and interventions regarding focused interventions within primary health care instead of more expensive secondary hospital care. When ap-plying such, Governments can better identify and set up more effective education, pre-vention and rehabilitation policies that contribute to health preservation or quick rehabili-tation. Also, other economic factors can be better considered through AI and digitization, such as economical gains through quicker return to work, less sickness induced absence from work, reductions in the need of nursing and hospital care and improving the overall health status of the population.

Recommendations: Establish and promote Sino-German collaboration on digitalization in areas of

shared interest, such as education, occupational safety, patient and hospital manage-ment, and precision medicine.

Ensure equal market access for digitalization products and services in health facilities in China.

Facilitate cooperation between Chinese and German companies of all sizes, in-cluding SMEs and start-ups and encourage better mutual understanding.

Enable and promote genetic testing and genome sequencing, particularly for cancer research and treatment, through better reimbursement and facilitating digi-tized procedures.

Impressum:

Redaktion durch Steuerungskreis: Verena Kantel, Bayer und GHA-China-Sprecher (Leitung Steuerungskreis), Ben Mayer, Siemens HealthineersAntonia Menzel, BDIPremarajani Sabanantham, GHA

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