Roche diagnoses China market prospects as healthy

Despite the drastic economic downturn enveloping the globe, Roche Diagnostics senior executives seemed relatively upbeat at their recent parley with the press in Beijing.

And they had every reason to appear optimistic, as the firm, which is the world's No 1 in-vitro diagnostic company, reported a year-on-year increase of 10 percent in its global business.

The in-vitro diagnostics operator develops and manufactures products and solutions used to test blood and other body fluids and tissue to obtain the information required by healthcare professionals to make treatment decisions.

Set up in 2000 and headquartered in Shanghai, Roche Diagnostics China has experienced more than 30 percent growth over the past eight years, according to the executives, who said they expected this trend to continue this year.

Roche Diagnostics China is the top diagnostic device provider in the country, with a 12 percent share of the 4.9-billion yuan market in 2007.

"China was the No 10 market of Roche Diagnostics globally last year and is expected to be No 5 within five years," said Roland Diggelmann, managing director of Roche Diagnostics Asia-Pacific.

He told China Business Weekly that China sales accounted for 3 percent of the Switzerland-headquartered company's global total and 40 percent in the Asia-Pacific region last year.

"We are very pleased with the growth here, and we are optimistic about our future in this emerging market," said Diggelmann, who took up his current post last year.

Greater China General Manager Wong Fatt-heng said that swift business growth in the nation was due to good fundamentals - growing healthcare demand, a huge population base, and a graying population.

Stimulus package

China issued an 850-billion yuan stimulus package for healthcare system reform last year. Li Shanshan, a healthcare analyst at Ping'an Securities, said that around half of the money would be used to upgrade public hospitals' infrastructure and facilities, providing opportunities for device and service providers.

Diggelmann stressed that the company is looking at ways it can contribute to the reform, as improved diagnosis results in savings for both healthcare providers and patients.

"If you have a good diagnosis early on, that will allow you to take the right actions to understand the disease before it progresses. If you make an early decision and an early investment, you have saved money and improved the patient's health, that's the real strength of diagnosis," he said.

Increasing the use of diagnostic testing provides opportunities to save money, however diagnostic testing is currently under-utilized throughout the world, including in China.

Global healthcare expenditure currently stands at $2,500 billion, but only 1 percent is spent on diagnostic services, despite the fact that diagnostic tests provide the basis for roughly two-thirds of all medical decisions, according to the World Health Organization.

The China Health Census 2008 showed that healthcare spending increased 10 times in urban areas between 1993 and 2006, while it rose five-fold in rural parts of the country over the same period.

"With China's healthcare expenditure expected to grow by 11 percent annually over the next five years, the savings provided by the broad adoption of diagnostic tests could be significant," said Wong.

So far, the products sold by the company in China are mainly imported from Germany and the United States, and are for high-end consumers or high-level hospitals.

The testing device and solution provider noted that the nation's top public hospitals stood to benefit from increased automation, which would ease pressure resulting from their massive workload.

"Automation not only increases testing efficiency but also reduces possible errors in the identification of samples," said Wong.

In China's high-end market, the company's competitors are international players such as Beckman and Abbott Diagnostics of the United States and Japan's Sysmex.

The company is also considering entering the lower-end market. "We are slowly launching small systems. As a result, we hope to be able to address the needs of the lower segment, where price sensitivity is more pronounced," said Wong.

But Li from Ping'an Securities warned that entering the rural market would not be easy for Roche as price is a crucial factor at the county-level sector, with domestic firms such as Jiangsu Yuyue, Shandong Shinva and Beijing Wandong, having a clear advantage.

In addition, the local players mainly originated from State-owned enterprises, who have established strong networks in rural regions, where foreigners' access is limited.

Both Diggelmann and Wong said that the company has good prospects in China, where it will open new offices in Nanjing and Hangzhou, as well as adding to its workforce. It has also proposed the establishment of a research and development campus.

(China Daily 06/01/2009 page6)