Ames Gross, Pacific Bridge Medical
Ameing for Asia

Update on Radiology Market in China

By Ames Gross
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Ames Gross, Pacific Bridge Medical

Economic development in China has created a burgeoning middle class that demands higher standards of living.

High-quality healthcare is chief among the demands of Chinese consumers, but many Chinese hospitals are unable to meet international standards of care. Some Chinese hospitals outside of first-tier cities still lack essential medical equipment such as radiology systems. However, with the Chinese government investing heavily in healthcare reform throughout China, both the radiotherapy market and the diagnostic radiology market is set to rapidly expand.

Radiotherapy

The market for radiotherapy is flourishing in China, driven by demand for high-tech therapy such as proton beam therapy. Proton beam therapy, a highly precise but expensive form of radiation to treat cancer, is booming in China. Currently, there are only two operational proton therapy centers, one in Shanghai with technology from Siemens (Munich, Germany), and one in Shandong with technology from Ion Beam Applications S.A. (Brussels, Belgium). However, at least 43 more proton projects are in various stages of development. Proton beam therapy is lauded for being better than conventional radiation treatment based on X-rays because protons release most of their energy on the tumor and then stop, causing less damage to nearby healthy tissue. Proton centers continue to be built around the country, and Ion Beam Applications S.A. recently won a €70 million contract to provide its ProteusPLUS four-room proton therapy solution to Beijing Proton Medical Center. Furthermore, Varian Medical Systems (Palo Alto, CA) was recently selected to equip its ProBeam proton therapy system at China’s first government-owned proton center. Proton beam therapy is expensive, with average treatment at the proton center in Shanghai going for about $30,000. Patients pay out of pocket as no insurance policy covers proton beam therapy in China today.

Proton beam systems are currently only made by foreign manufacturers, and cost between $30-$50 million per system. However, Chinese companies are investing in foreign manufacturers. In 2015, proton therapy developer Mevion Medical Systems (Littleton, MA) raised $200 million in equity funding led by Chinese investment firms HOPU investments and YuanMing Capital. Mevion and the two leading Chinese investors will form a joint venture to produce and sell proton therapy systems for the Chinese market. Furthermore, Concord Medical (Beijing, China), a Chinese radiotherapy and diagnostic imaging operator, acquired a 19.93% stake in the University of Texas’s proton therapy center in 2013.

Foreign companies such as Elekta (Stockholm, Sweden) have also made inroads into the conventional radiotherapy market. Elekta currently operates a radiotherapy training center in Beijing to educate oncologists on their products’ use. In recent years, Elekta has received large orders for its linear accelerators and its Leksell Gamma Knife products in deals valued at more than $25 million each.

Diagnostic Imaging

The Chinese diagnostic imaging market is set to reach $2.5 billion by the end of 2019. Historically, large foreign vendors have monopolized the top end of the diagnostic imaging market. Siemens (Munich, Germany), GE Healthcare (Boston, MA), and Philips Healthcare (Amsterdam, Netherlands) have all captured a large share of the total market. Currently, foreign vendors’ combined business infrastructure in China is vast and include local R&D and manufacturing facilities. However, this will change in the future as more domestic Chinese imaging manufacturers make high-quality products. Domestic diagnostic imaging manufacturers currently dominate the low end of the market. The mid-range market is competitive with both domestic and foreign manufacturers fighting for market share.

Foreign manufacturers have begun to enter the rural, traditionally underserved, market. GE Healthcare has launched a series of competitively priced, entry-level radiology equipment designed for rural healthcare facilities. Furthermore, GE Healthcare has founded a financing and loan division to ease purchasing for rural hospitals that lack money to purchase medical devices. GE Healthcare is committed to the Chinese market and moved the global headquarters of its X-ray business to Beijing from Wisconsin, and opened four R&D centers in China. Philips has also invested in Chinese facilities that design products for the rural market and train physicians from rural healthcare institutions.

In 2016, Carestream Health (Rochester, NY) began a joint venture with Alibaba to create a cloud platform that allows for clinical images such as X-rays to be shared with faraway specialists. This allows for patients in rural areas to receive diagnostic and treatment decisions from specialists in urban areas, eliminating the need for travel.

IBM-Watson for Oncology (Armonk, NY) has also aggressively entered China and is currently in use at eight Chinese hospitals. IBM-Watson for Oncology looks at patient records including radiology images and lab test results, and provides oncologists with a second opinion.

Conclusion

Foreign manufacturers currently hold a large market share in high-end diagnostic imaging systems and a monopoly in high-end radiotherapy systems. In the diagnostic area, foreign manufacturers are now making products with less bells and whistles for Chinese second- and third-tier cities. Unfortunately for foreign companies, the Chinese government is providing money for the development of domestic radiology manufacturers and is beginning to tighten its purchasing policy at public hospitals. Despite these challenges, the Chinese radiology market remains attractive.

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