The United States isn't the only country whose government is trying to spur the adoption of health care information technology while wrangling with ambitious national health care schemes.

Halfway around the world, China is embarking on a massive, multi-trillion yuan project to ensure health care coverage of all its citizens while bringing its creaky health system into the 21st century. An internally launched study released by strategy consulting firm Scientia Advisors Feb. 16, shows how massive an undertaking it truly is, and how much HIT and diagnostics stand to benefit from the coming cash bonanza.

State of the Republic

Currently, China only spends 5 percent of its GDP, or $170 billion, on health care, about half of what G-7 countries spend. But China's catching up. According to the report, by 2015 the country will spend closer to 10 percent of its GDP on health care, only 0.2 percent shy of the G-7 average.

All told, China's health care market will triple to $600 billion in five years, engorged by massive government expenditures. By the latest reckoning, China is set to plunge 850 billion yuan (around $124 billion) into its economy under its current stimulus program.

According to Scientia, this government funding will spark a health care construction boom, as it calls for the building of almost 29,000 clinics and 2,000 county-level hospitals. It also shoots to provide basic medical insurance for 90% of the citizens by next year, and everyone by 2020.

As Harry Glorikian, the managing partner at the Cambridge, Mass. strategy consulting firm, tells DOTmed News, the aim of the bill is to encourage people to save less for health care (as is traditional in China) and spend more, thereby lubricating the economy with cash.

"How do you get out of this export economy?" he asks. "You drive internal consumption. It's the same process the U.S. went through when it was going up."

HIT Parade

While the main goal of the program is to encourage seniors to spend, China also hopes to modernize its health system by getting more hospitals online.

According to Scientia, this will be a boon for HIT. Thanks to government investments to get Chinese health care centers digital, this field should explode from $1.13 billion (as it was in 2008) to almost $4.1 billion in 2013.

Of course, this opportunity, while real, will be taken mainly by Chinese businesses. Currently, half the Chinese HIT market is dominated by 10 vendors, nine of which are Chinese (one is Siemens).

But Glorikian cautions that foreign firms aren't shut out of Chinese IT; they just have to be careful.

"McKesson has sent a lot of senior executives to understand the health system. There is opportunity. That said, if you don't understand the system, I think it would be much harder," Glorikian says.

And even with all the due diligence in the world, many local companies will still have an advantage because of their closer relationships with government officials, Glorikian says, which is why he recommends companies looking to enter China consider forming partnerships with local outfits.

"You're not in Kansas anymore," he observes. "Whenever we're there, we're always learning something."

Diagnostic Rockets

This state spending spree will also benefit numerous diagnostics sectors, including the in vitro diagnosis market, projected to grow from $1.1 billion (as of 2007) at spanking double-digit yearly rates. The report says this sector's growth is also fueled by the burgeoning middle-class willing to spend money out-of-pocket to test for diseases like hepatitis B, an infection ravaging the mainland (and whose tests have good profit margins because of lack of royalties paid).

Molecular diagnostics - tests that seek genetic clues to pathogens - also look to benefit. While the market now stands at only $100 million (as of 2007), cheaper technologies, government windfalls and population factors should spark growth. According to the report, almost 300 million women in China are at screening age for human papillomavirus, which is detected through molecular diagnostics. Point-of-care products should gain too, Scientia notes. Although a relatively modest $147 million now, this market should more than double in the next five years as a growing number of the patients will have access to the tens of thousands of new rural clinics set to be built under the Chinese stimulus plan.

Medical devices won't be left in the cold, either. According to Scientia, a startling two-thirds of conventional medical equipment in China was made in the 1980s or earlier. As Chinese get wealthier, they want access to newer, better machines.

But competition from locals in fields that aren't as advanced as CT and MR will be fierce, as domestic companies can sell products for dramatically less money. In the patient-monitoring device world, for instance, local producers like Mindray can market monitors for almost a third less than foreign OEMs, according to Scientia.

Read a report on China in the February 2010 edition of DOTmed Business News, now online.