Diagnosing APAC Healthcare Boom

In recent years, the APAC healthcare and pharmaceutical industry has grown exponentially, China being the major healthcare player.
The healthcare industry in APAC

By Karen Reddington, President, FedEx Express Asia-Pacific

The healthcare industry in Asia Pacific (APAC) is experiencing a boom. While the healthcare industry was previously centered on the US and Europe, it is rapidly shifting to Asia Pacific. In recent years, Asia’s healthcare and pharmaceutical industry has grown exponentially, with total healthcare spending in the region tipped to reach US$2.2 trillion by 2018 (Frost & Sullivan, 2014)

China is today a major healthcare player. Its pharmaceutical market grew at an average annual rate of almost 26% between 2007 and 2010 – and total spending on pharmaceuticals is projected to top US$107 billion in 2015 – roughly four times the 2007 figure (Deloitte, 2014). Singapore’s biomedical market is expected to reach US$1.6 billion by 2022, up from US$770mn in 2012; and Japan’s biotech sector is the second largest in the world, with a value of US$302 billion in 2013, compared to only US$21 billion in 2005 (JETRO, 2013).

Why the sudden boom? There are many reasons why APAC is on the cusp of a healthcare growth spurt. Below are five trends that will define its growth in the coming years.

  1. Asians are spending more on health

 Prosperity and a growing middle class mean that Asia is now able to spend more on health .The region is predicted to be home to 66% of the global middle-class population (OECD, 2012). This has led to a steep rise in healthcare expenditure in the region. According to Frost & Sullivan, Asian healthcare spending is predicted to grow at an average of 12.8% a year in the six years to 2018, with the largest share coming from China, Japan and India (Frost & Sullivan, 2013). In fact, according to a report jointly published by the OECD and WHO, the average annual per capita healthcare spend in the region grew at an average rate of 5.6% per year between 2000 and 2012, outstripping the average GDP growth rate over the same period (OECD & WHO 2014). Factor in significant population growth and higher standards of living, especially in China and India, and the scope for further growth is easy to see.

  1. The ageing dilemma

The APAC region is ageing faster in mature economies like Hong Kong, Japan and Singapore as well as developing ones such as China. With more than 2.3 billion people aged 65 or older in 2013, comprising 9.8 percent of the region’s population, Frost & Sullivan estimates this elderly population segment will grow to 11 percent by 2018. In response, many countries have transformed their retirement structures into state-controlled provident funds to ease social pressures. As mortality and birth rates drop across the region, spending on programs for the elderly will rise. For example in China, the number of older people requiring healthcare is growing rapidly – on some estimates, those aged 65 and over will account for a quarter of China’s population – some 335 million people – by 2050 (University of Wisconsin-Madison, 2014).

  1. Remote clinical trials

Clinical trials, the key foundation on which the success of a drug and its investment depends, are going to more remote locations including places in Asia Pacific. Reason: People are less affected to the exposure of drugs and medication from the Western world. This has necessitated the supply chain to reach further to ensure these trials are conducted in a compliant manner. 

  1. Changing perceptions on healthcare

Rising affluence has changed the way people are perceiving healthcare. In the past, healthcare was akin to treating diseases like asthma, heart disease, diabetes, and arthritis. Governments were focused on reducing mortality rates and raising awareness about cancer and cholesterol levels. These still matter. What has changed is that Asians now look at healthcare as part of their overall well-being. They see it as part of improving their quality of life. This has led to more healthcare providers pushing for more programs focused on one’s well-being. New consumer medical applications and mobile apps have raised awareness a few more notches over the past few years. The result is a strong demand on health products as part of a healthy lifestyle. Food supplements, dietary products, regular medical checkups and medical insurances are no more seen as money down the drain.

  1. Medical tourism boom

APAC countries are looking to reap dividends from medical tourism, as the cost of healthcare rises across the world. And increasing wealth across the region has also meant that more patients are from the region itself. More than 10,000 medical tourists flew into Australia in 2013 for procedures, resulting in a boost of more than $26 million to its economy (Tourism Research Australia, 2014). According to economists at Deloitte, the growing wealth in places like China and Indonesia is driving people to seek high-quality care, especially for specialized procedures like robotic surgery and IVF, in developed countries like Australia. Frost & Sullivan sees medical tourism as one of the top growth sectors in the region in the short and medium terms, along with outpatient surgery, specialty hospitals, private medical insurance and healthcare IT.

  1. Effect of big pharma and R&D investments

Lastly, the healthcare boom is partly led by the increased investment by pharmaceutical and medical research companies in the region. Some commentators predict that emerging markets will contribute around 20 percent of top-line sales of pharmaceuticals – up from less than 10 percent in 2000. By 2030, emerging markets are expected to account for 25 percent of global drug exports, a 10 percent increase from 2011 (Kellie Maske, FedEx Economist).

Connecting APAC’s healthcare

The full transformative potential of the region’s healthcare boom won’t be realized without an ability to supply medicine, connect with the right facilities and transparently track the various products. The solution lies in making the healthcare supply chain more intelligent and cost-efficient. Logistics providers have already begun investing in real-time medical inventory management systems, adopting global standards, and building cold chain logistics. It’s estimated that today, 25% of all healthcare products are temperature sensitive. By 2016, more than half of the top 50 best-selling drugs are likely to require temperature sensitive transport (Logistics Portal). Asia Pacific is leading the charge, with the region expected to account for 30% (iMarc Group) of the global healthcare cold chain logistics market in coming years. As the healthcare industry grows and evolves in APAC and consumer demands increase, building out smart, connected healthcare supply chains is quite literally a matter of life or death.