Q & A with Ken Pittman, MHA ’86

Ken Pittman

Meet Ken Pittman, MHA ’86 and a member of the Health Care Alumni Advisory Board. Realizing that moving the MHA program to Fuqua was the right move, he is now trying to bring MHA alumni into the Fuqua family.

Describe your role in student health services at UNC-Chapel Hill.

I am Chief Operating Officer of UNC Campus Health Services which is an 80,000 visit, JCAHO-accredited multi-specialty group practice serving 30,000 students and post-doctoral fellows. I lead the operations and financial management of the organization which includes Primary Care, Urgent Care, Women’s Health (inclusive of Obstetrics), Sports Medicine (inclusive of Physical Therapy and Athletic Training), Counseling and Psychological, Student Wellness, Orthopedic, 50,000 Prescription Pharmacy, Radiology and Laboratory Services. Our Center has approximately 50 providers and around 200 full-time and part-time staff members. I also manage three University-provided health insurance plans for students, post-doctoral fellows and research/teaching assistants.

Share how your career has progressed from Duke until now.

Since I didn’t have any relevant work experience before graduate school, I decided to do a one-year residency in Charlotte for SunHealth, which was a shared services organization and consultancy for a network of 250 hospitals located in 15 Southern states. I then stayed on following my initial obligation and served as a hospital management consultant for another 4 years.

In 1991, I moved to Kinston, in the eastern part of North Carolina, to serve as VP, Administrative and Ambulatory Services and later as Senior VP/Chief Operating Officer for 300-bed, Lenoir Memorial Hospital. I expected to be in Kinston for 3-5 years, get some direct hospital management experience and move on. But I fell in love with both the people of Kinston and Lenoir County and really saw the impact a community hospital and its physicians have on the health and welfare of the local area. We kept specialty care closer to home, improved mortality rates through better emergency and trauma services, and served as an economic engine for Lenoir County. I worked in this role for 13 years and am very proud of what our leadership team was able to accomplish.

In keeping with my belief that community hospitals are vital to an area’s quality of life, in 2004, I joined a fellow Duke MHA at her Atlanta-based hospital turnaround company and for the next seven years served as the CEO for financially and operationally distressed small hospitals in Texas, Georgia and Alabama. I was challenged to determine the best scope of service and mission for each hospital while making them financially viable and able to meet the needs of the local residents. We turned around and successfully positioned 2 of the 3 hospitals I led which is a high batting average in the small hospital market.

Unfortunately, I had a very hectic travel schedule without much work/life balance. I was on a plane every Sunday night and back at RDU on Friday so I could spend time spend time with my family. In 2011, I decided to work where I lived—a novel idea—and have the luxury of sleeping in my own bed most nights. So I got into the large physician group practice sector and the UNC Campus Health Services organization seemed to be a good match for my experience and accomplishments to date. Besides always seeing the lighter side of blue, I’ve increased provider recruitment and retention, helped manage the financial management of payer contracts, and created value so students choose our practice over others.

How did Duke prepare you to work in the health care sector?

When I was looking at graduate school, Duke’s MHA program was the oldest and finest health administration program in the country. The alumni network was certainly one of the largest, including many movers and shakers in the industry, particularly in the provider sector. And since I was most interested in the provider sector, it was the best fit for me.

My Duke education gave me with the skills, knowledge and contacts to be successful. I was able to build up my leadership skills and more easily navigate group dynamics—I learned when to take control and how to leverage individual and group strengths for a quality product. Besides a rigorous curriculum, we were challenged through internships and residencies to apply what we learned in a real-world setting.

What is your focus as you sit on the Health Care Alumni Advisory Board – can you share your goals in reconnecting the MHA community?

Well first of all, I love all things Duke and so my service on the HCAAB is simply an extension of this love. I am a member of the Duke Chapel Congregation, an Iron Duke and Blue Devils supporter, and a member of the James B Duke Society with a desire to do what I can to share my financial resources.

Duke has always been ahead of the curve and, early on, recognized the industry challenges were more aligned with the business school. Therefore, moving to Fuqua was the right move to keep the school on an upward trajectory. Unfortunately, it created, I think, a natural disconnect for many MHA alums. So to alleviate this, over the past few years, we’ve provided opportunities for MHAs to reconnect with Duke and Fuqua by helping them learn more about the HSM program—its students and faculty—and reconnect with their MHA class during Reunion Weekend, serve as a mentors to current HSM students, create an internship or serve as a guest lecturer if appropriate.

Many MHAs have reached a point in their careers where they are looking to give back to the next generation and we want to provide a full range of opportunities to do just that. In addition, I want to make sure that current HSM students, who are interested in the provider sector, have access to the MHA community since many alumni are now accomplished senior leaders in this sector.

Who/what was the most influential prof/class at Duke?

We had several great professors̶ and classes—especially in Health Law and Financial Management given the realities of healthcare reimbursement in the 1980s. But really, the best part of my Duke MHA experience was our group of 40 individuals who came together in class—daily. We forged relationships which have lasted to this day and many of us get together a couple of times a year and have remained important parts of each other’s professional and personal lives. The ability to call upon these friends has been, by far, the best part of my Duke experience.

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Fuqua Client Consulting Practicum in South Africa: Extension and Application of Healthcare Markets Class to Real Life

Lee, SoominPrevious to Fuqua, I interned at a biotechnology firm to create a supply chain strategy for a pipeline product. My work was limited to developed pharmaceutical markets, so I always wondered what those implications would be in the third world. At Fuqua, I joined a team of 4 to work with the National Department of Health in South Africa to understand the cost and benefit of a new drug distribution network. This network, aimed to deliver medication more directly to patients without involving the middle man, was to help alleviate the increasing number of HIV/AIDS patients in the country and to help address increasing number of cancer patients.

This Fuqua Client Consulting Practicum helped me apply my previous experience and classroom concepts from Healthcare Markets and Global Financial Management to create a framework to determine the financial implications of the new drug distribution network. Each player in the supply chain was now faced with an incentive system that differed from the previous system. Each change needed balance to ultimately improve speed of product delivery. By interviewing suppliers during the 2 week spring break trip to Johannesburg and evaluating datasets from the central information exchange system, my team drew insights to identify benefits and challenges for the system moving forward.

Immersing myself in another country to understand their healthcare market challenges was a truly enriching experience where I learned many problems mimicked those of the complex US system. This deep-dive broadened my understanding of the industry as well as establishing incentives that drive change in behavior.

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Interview with Health Care Club co-presidents, 2014-2015

Heather and Andrea for HCC interview

Health Care Club co-presidents, Heather Langerman and Andrea Readhimer, both Daytime MBA ’15, shared their views on the club’s most important event, the Annual Health Care Conference and how leading the Health Care Club strengthened their MBA experience.

1. How did you determine the theme for this year’s Health Care Conference?

Heather Langerman: We consulted with faculty, HSM staff and corporate sponsors for relevant subjects along with polling students on where their interests lie. We also looked at what other schools have done and tried to do something different. Through this process, we tried to strike a balance of global vs. U.S. trends because a significant portion of Fuqua students are international.

Andrea Readhimer: With healthcare being so broad, our team identified a theme that was focused enough to provide a cohesive structure to the conference but broad enough to be relevant to multiple sectors within the industry.

2. What aspect of the Health Care Conference resonated most with you?

AR: How payers and providers are improving quality of care by using data and analytics to help physicians make better decisions.

3. What is up next for Fuqua’s HCC?

HL: We are getting the first year students ready for their summer internships. As for events, we are coordinating town hall meetings, where David Ridley and a speaker will hold a Q&A in a more intimate setting hoping to initiate a productive dialogue.

AR: Fine-tuning key roles for the newly instituted HSM Fellowship. Right now there is an overlap and coordination between the HCC and HSM Fellowship, but it will be an iterative process to figure out the different roles, long-term. Right now the HSM Fellowship is viewed as the strategy arm of the HSM student voice while the HCC is more involved with the tactical execution of that strategy.

4. What is the most fulfilling part of being co-presidents of the HCC?

HL: For me it’s watching our goals come to fruition.
• Getting to know first year students and making their experience fulfilling.
• Looking to build connections around the Duke/Durham community and continuing to strengthen them.

AR: On a macro level, I’m thrilled that I could attend the HSM program with no previous health care experience plus co-lead the HCC. On a micro level, I’m learning how to strike that balance between being a leader, while managing my peers and developing a collaborative team.

5. What role did HSM play in your decision to attend Fuqua?

HL: I initially looked at public health programs but felt that an MBA would have the greatest impact in the health care space. Fuqua was my first choice because of their strong sense of community and the opportunities within Duke Hospital.

AR: The robust HSM program was definitely my deciding factor.

6. What do you see as the greatest opportunity and challenge in health care?

HL: I’m interested in health care more from a public health perspective, and tend to look at the whole person and how health care delivery can impact one’s entire life. Health care doesn’t just happen at the doctor’s office, but at work and home.

7. What are your plans post Fuqua?

HL: I’m moving to Columbus, Ohio to work for Cardinal Health in their corporate strategy department. I interned there and am looking forward to going back to the Midwest.

AR: I’m going to be part of the Commercial Leadership Development Program for Janssen Pharmaceuticals, a division of Johnson & Johnson.

8. What’s the most important thing you learned from HSM while at Fuqua?

HL: The experiential learning opportunities helped me apply what I learned in real life. I did a Client Consulting Practicum with a hospital in rural Georgia and worked with Duke Home Care and Hospice where I shadowed clinicians and made home visits.

AR: As someone with little previous industry experience, the HSM program has helped me come away with a much stronger grasp of the industry’s complexities, a deeper understanding of the drivers of the widely publicized “healthcare crisis,” and an excitement for the vast career opportunities.

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WIDC: Supreme Court holds the key to the future of the ACA

Sesh SarathyOne of the highlights of the Fuqua Week in DC (WIDC) course was hearing from Mr. Lyle Denniston, who has been covering the Supreme Court for 57 years and writes for scotusblog.com, about how the Supreme Court has handled the ACA. He gave our group a comprehensive history of court’s decisions regarding the ACA, including insights on the NFIB (National Federation of Independent Business) vs. Sebelius case from 2012. Interestingly, he was the first to correctly report the verdict of the NFIB case; channels such as CNN and Fox, in a rush to break the news, incorrectly reported that the Supreme Court had ruled that the ACA was unconstitutional.

Denniston spoke to our group at length about the upcoming battle in the Supreme Court – King v. Burwell – on whether the federal government can extend its program of subsidies to buyers of health insurance in federally operated exchanges in 34 states. According to him, if the court decides to limit subsidies only to the state-run exchanges, it would result in the complete unraveling of the ACA.

At the heart of the King v. Burwell case are four words in the ACA: “established by the State,” and the future of the ACA will depend on how the nine justices interpret those words. When the subsidies were setup, Congress wrote that it would apply to exchanges “established by the State.” But if a state did not setup an exchange, can it still receive federal subsidies? The plaintiffs in King argue that the ACA authorizes federal subsidies only for individuals who purchase insurance on state-established exchanges and not for those who do so on exchanges established by the federal government.

While to the casual observer, it may seem preposterous that the healthcare of several million people could be held hostage by “four words” in the ACA, Denniston explained the history and nuance behind how justices view the constitution and interpret law. Some judges believe in textualism – that a law’s ordinary meaning should govern its interpretation, as opposed to looking at the legislative intention behind passing that law. Other judges take a more holistic view, known as the purposive approach, and look at legislative intent as well consider relevant materials such as speeches given in Congress, committee memos and reports, white papers, etc.

Denniston gave our group some extremely interesting tips on what to look for ahead of the Supreme Court ruling on King v. Burwell. Chief Justice Roberts and Justice Kennedy are considered to be the “swing votes,” and the other justices are expected to vote along ideological lines. But Denniston admitted that very few, if any, were able to correctly predict the outcome of the NFIB case. Oral arguments in the King case will be heard on March 4th 2015 and the final decision will be made on the last week of June 2015.

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Duke University Hospital Experiential Learning Practicum: New Perspectives on Primary Care

Jessica DennisBefore coming to Fuqua, I worked as a strategy and operations consultant and advised pharma and payer companies. My interactions with healthcare industry clients inspired me to pursue the Health Sector Management (HSM) Certificate at Fuqua, but after just a few days at HSM Bootcamp, I realized how little I knew about the drivers of the industry.

The Duke Hospital Experiential Learning Practicum (DUH ELP) gave me the opportunity to learn more about the care delivery side of healthcare. Throughout the semester I worked on a project for Duke Primary Care (DPC), a network of roughly 40 offices encompassing primary care, urgent care, and pediatrics. The DPC Chief Operating Officer oversaw my project and included me in DPC’s Performance Improvement group meetings.

In the past few years, the introduction of new technology as well as the need for more streamlined and coordinated care has helped DPC become more efficient but also challenged employees at each practice to take on new responsibilities. The lines between clinical, clerical, and administrative tasks have become increasingly blurred as employees are required to interact with both the patient and the patient’s electronic medical record. My project for the semester was to support DPC in its effort to clarify roles and responsibilities for key managerial positions at the primary care practices.

Each practice relies on a team of health care administrators, practice medical directors, and nurse managers to manage patient flow and clinical operations. I surveyed and interviewed each of these groups to understand the current state of their leadership responsibilities as well as their perspectives on an ideal future state. The final product was a matrix view of roles and responsibilities that each practice could use as a reference for decision-making and delegation.

In addition to working with DPC, I also had the privilege of shadowing three different leaders within Duke University Hospital. I shadowed the Vice President of Emergency Services and learned about hospital’s training and preparation for potential Ebola patients. I spent a half day with the Chief Operating Officer of the Patient Revenue Management Organization understanding the impacts of the Affordable Care Act on Duke and other large hospitals throughout the state. Finally, I met several members of Duke’s Center for Community Health, a unique group that works to improve access and affordability of healthcare services in several North Carolina counties.

The most important lesson I learned from this experience goes far beyond the trends, frameworks, and statistics of the provider setting; instead, I learned to appreciate the complexities of a large healthcare system. Within the sector, within each system and even within departments of the same system, leaders constantly face competing demands, conflicting interests, and gray areas, but all are seeking the same objective: delivering the best possible care to patients. Advances in technology, policy, and innovation support that objective, but they also introduce new challenges to the system. Addressing those challenges will be complex, but the DUH ELP is one of many HSM experiences that prepares my classmates and me to continue onward with our main objective: pushing the limits of our abilities to positively impact the healthcare industry.

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WIDC: This Class is the Jewel of Fuqua’s HSM Program

Gay WehrliThank you for a fantastic week in DC. When I began the WEMBA program I predicted my two top experiences would be the Term 6 Coach K Basketball experience and the Health Policy Class in DC. My prediction was 110% correct. Through this class and week in DC, I learned a tremendous amount about the ACA and its challenges, health insurance exchanges, the challenges of healthcare policies, and the roles in healthcare for Government, Government organizations and Non-government organizations.

This truly was a phenomenal week and one that every HSM student should attend. I am still reveling in my new found knowledge, in meeting the phenomenal speakers, and in entering buildings, old and new, that house our Nation’s healthcare leaders. The DC experience and memories will remain with me for years to come. This class is the jewel of Fuqua’s HSM program.

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Why Business Students Should Care About Policy

Hunter SinclairIf you’re a business student and you want to work in healthcare, you’re going to need to understand at least a little bit about healthcare policy. While Americans take pride in their “free-market” healthcare system, government sources pay 55 cents out of every healthcare dollar spent in the United States…and there are a lot of healthcare dollars spent in the United States (far more than any other country in the world).

During Duke’s Week in DC trip, speakers from across the healthcare industry talked about a number of different ways that healthcare policy changes could have a dramatic impact in 2015. For example, a number of our speakers talked about the upcoming King v. Burwell Supreme Court case and the potential $36-65B annual impact that this decision could have on the industry. We also heard about the potential repeal of the medical device tax (a $4B annual impact on the medical device industry). We even heard a few speakers talk about the potential of non-profit hospitals to lose their long treasured tax-exempt status as the number of uninsured patients falls drastically in some states (Not-for-profit hospitals are exempted from paying $20B in sales, property and income taxes each year).

While all the issues I mentioned previously are important, I feel that the most emblematic topic we discussed this week was the Sustainable Growth Rate (SGR) or “Doc Fix”. I’ll spare you the gory details, but Congress passed a law in 1997 that was designed to rein in healthcare costs. This sounds great in theory, but Congress has prevented its own rule from being enforced 17 times. The latest delay in enforcement expires on March 31, 2015 and many in Washington are optimistic that Congress won’t “waste a good crisis” and will issue a permanent Doc Fix. The proposed fix attempts to transition physician payment away from fee-for-service towards a payment system that rewards higher quality and better outcomes.

The reason I feel that the SGR debate is so emblematic of the week is because it highlights the best and worst parts of healthcare policy. The worst part of healthcare policy is that it is constantly changing, heightens uncertainty and often doesn’t factor in unintended consequences for those in the industry. The best part of healthcare policy is that it can be used to redesign the largest healthcare system in the world towards a system that rewards better care (instead of more care) and offers opportunities for entrepreneurs like Privia Health and Evolent Health to do well (make money) while doing good (saving lives).

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HSM Bootcamp: An Enriching Experience

Elena BraunHaving spent the first part of my career at a generic pharmaceutical company, I had a reasonable understanding of what it takes to get a product to market and really enjoyed the challenge pharmaceuticals presented. I knew that post MBA, I wanted to go back into the industry so I came to Fuqua primarily for the HSM program. My goal was to round out my expertise in the US healthcare market, but what I didn’t realize was how much was left to learn and just how quickly that education would begin.

On the first day of bootcamp, our professor, a medical doctor by trade, asked the class to always consider the question “who is going to pay”?  This was totally new to me. In generics, the answer to that question was simple and consistent- everyone would be willing to pay because we were the most affordable option. But the story on the branded side was much different. In order for providers to pay, or doctors to recommend new products, innovators must present a case for incremental benefit.

This was just the first of my “ah-ha” moments during bootcamp. Between lectures and casual conversations with my classmates, I learned how big the market was not just in the United States, but globally. I was tested and challenged to go beyond my experience, asked to leverage my own interactions with the health system, and pushed to think critically about how health, social and societal factors, as well as cost, play into decisions. We examined healthcare around the world to see what worked, what didn’t, and perhaps most importantly, why there is no “one size fits all” model.

Once the week wrapped up, I spent some time reflecting on the conversations and discussions I participated in during boot camp. I compared the takeaways to my professional experience and reexamined my interactions with the healthcare system. Amazingly, the question of “who is going to pay” was central to everything I had experienced, I just didn’t have the right framing to realize it. Personally, I had been making tradeoff decisions about visiting the doctor when the cost was my personal time. Professionally, I realized that our customers had been choosing between the long trusted brand name and a lower cost generic.

With even more distance between bootcamp and now, I can cite two significant changes in my world view.  First, on a more tactical level, I approach healthcare situations by trying to first understand the flow of money through the system. Secondly, on a more macro level, I have tried to step back from problems and consider different framing of the question. Overall, the bootcamp was extremely enriching and I am thrilled I attended.

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HSM Student Travels to South Africa on a Fuqua Gate Trip

Liz MeinertAs a first year student, I had the opportunity to complete a Global Academic Travel Experience (GATE) course on South Africa that culminated in a two-week trip to South Africa over spring break. Over the course of two weeks, we spent time in Cape Town, Durban, the Entabeni game reserve, and Johannesburg. The trip was a once in a lifetime opportunity to venture to the other side of the world and experience an emerging, but strong economy with an incredibly rich, but complicated, social and political history. I was also interested in learning more about South Africa’s healthcare system, given widespread HIV and tuberculosis (TB) prevalence that further complicates care delivery. The trip definitely did not disappoint!

Our main class assignment required us to develop a business plan for a particular industry prior to our trip, and then write a follow-up assessment to evaluate its actual potential based on our company visits, cultural tours, and the trip overall. Given my impending summer internship at athenahealth, I chose to focus my paper on electronic medical record adoption and implementation in South Africa.  Several factors complicate the South African healthcare landscape:

  • The system varies in both its breadth and depth across the private and public sectors.  While the state provides primary care and accounts for 40% of all healthcare expenditures, the private sector currently provides care for 80% of the total population[i].  This divide between the private and public sectors has led to widespread disparities in access to healthcare services–an underfunded, understaffed public health sector provides care to lower income individuals, and a private health sector employs 80% of all providers and targets middle to higher income individuals[ii].
  • Secondly, the burden of infectious disease, particularly HIV and tuberculosis, adds additional complications to this dichotomous system.  Currently, the South African life expectancy hovers around 53 years of age as a result of these two infections and their complications; 60% of South African TB patients are also HIV+[iii]. This translates to approximately 1,000 deaths per day due to AIDS.[iv] Mother-to-child transmission is also a significant area of concern, as 30% of pregnant women were found to be HIV+ as of 2011[v].  By comparison, tuberculosis affects approximately 1% or 500,000 South Africans,[vi] translating to the second highest rate of new tuberculosis cases in the World and the highest rate of drug-resistant tuberculosis in Africa.[vii] The drug resistance adds another complicating factor that also significantly increases medical costs; further, it is almost certainly driven by varying levels of adherence to medication regimens due to sporadic and inadequate access to care.

Post-Trip Assessment:  While on the trip, I had the opportunity to see a few medical facilities, and visit the traditional Zulu Muthi market in Durban. However, the most interesting “reality check” for my business plan was a front page, Johannesburg newspaper article titled “Is there a doctor in the house?” , centered entirely on the shortage of doctors and nurses in South Africa. By the numbers, South Africa only graduates half of the physicians it needs on an annual basis: 1,200. This, for a country of approximately 52 million individuals. Additionally, the average age of a specialist is 55 years [2].

Numerous factors were discussed as part of the rationale, including a lack of interest in the medical profession, mass exodus of South African physicians to other countries, and insufficient capacity at medical schools that prevents taking on larger class sizes.[viii] Additionally, private hospitals are not allowed to train medical students, so training is restricted to public hospitals, further decreasing the national recruitment pipeline. There has been movement to lobby for government approval of training in private hospitals, but thus far has not been successful despite significant support from the private hospitals.

Given this dramatic shortage of physicians, my final assessment was that it may be early for South Africa to consider full-scale EMR adoption. EMR adoption would require governmental support, via potential subsidization and regulation, and it seems that their efforts would be better focused on insuring sufficient clinicians to care for South Africa’s citizens. However, I do think adoption of a point-of-care app could be a great resource for training medical students in general. Access to the latest technology could change the perception of the profession and also incentivize the younger generation to consider treatment options and resources that may be “outside the box”.

Overall, the opportunity to vet my business plan was an important lesson in applying the business skills I learned throughout my first year at Fuqua. But most importantly, the trip was an amazing experience!


[ii] Ataguba, John Ele-Ojo. “Health Care Financing in South Africa: moving toward universal coverage.” Continuing Medical Education. February 2010 Vol. 28, Number 2

[iii] Ibid





[viii] Ibid.

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HSM Student Travels to China on a Fuqua Gate Trip

Maria McLemoreI spent the first two weeks in May on the China GATE trip, along with 95 other Fuqua students.  GATE is an opportunity to learn about global business by visiting enterprises operating abroad – on the China trip, we visited both American and international companies operating in industries across the spectrum.  While in China, some students, including more than twenty HSM folks, had the opportunity to visit the Shanghai offices of British pharmaceutical company GlaxoSmithKline (GSK).  At GSK, we learned not only about the company’s business model in China (including some discussion over its recent bribery scandal), but more importantly, how the pharmaceutical industry operates in China.

Pharma in China is flourishing.  As a component of its socialist market economy, the State Council of China publishes five-year plans to outline significant economic initiatives.  The 12th five-year plan, published in March 2011, establishes the “biomedical” sector as one of its seven key industries to grow China GDP.  The plan broadly defines the biomedical sector as anything from small-molecule pharmaceuticals to more complex biological products, vaccines, medical devices, and diagnostics.  Historically, government backing has significantly accelerated the growth of designated strategic initiatives, and the biomedical industry is not expected to be an exception. The central government has pledged to spend 20 billion yuan ($3 billion)[1] specifically on innovative medicine, the cultivation of new varieties of genetically modified organisms, and on the prevention and control of infectious diseases. Since the State Council published the plan, various ministries—including the Ministry of Health, the Ministry of Science and Technology, and the Ministry of Industry and Information Technology—have contributed their own 12th five-year plans to develop the biomedical industry.  The biomedical prioritization is expected to generate 1 million jobs in these five years alone.

However, like any industry, the pharmaceutical industry in China is not without its challenges.  The GSK visit enlightened us to a variety issues borne out of the biotech expansion that present both challenges and opportunities for foreign drugmakers operating in China.  For example, quick growth has overburdened regulators, slowing the approval process for drugs.  The Chinese regulatory agency, the SFDA, is understaffed and underfunded, resulting in a backlog of new drug applications that can take up to five years to be approved.  Current regulatory processes require that all marketed drugs in China be approved by the SFDA (i.e. there is no reciprocity based off approval from the FDA or the EMA, for example).

A second issue is that, in order to be successful, foreign drugmakers must partner with Chinese companies via joint venture.  China’s 12th five-year plan encourages the biomedical industry to look outside China to gain best practices from industry leaders, begetting partnering and consolidation and creating opportunity for multinationals looking to enter or expand presence in China.  China incentivizes multinationals to seek joint ventures simply by the promise of an easier operating environment – it is widely suspected that the Chinese government looks more favorably, in terms of drug approval and reimbursement, upon multinationals operating jointly with local companies. Currently, all the top 20 pharmaceutical companies in the world have set up joint ventures or wholly owned facilities in China, suggesting that market conditions have never been more attractive or competitive.  However, in pursuing JVs, multinational cede autonomy to the partner organization, a challenge for many big pharmaceutical companies that are accustomed to dominating smaller partners.

A third issue is reimbursement for drugs, which continues to be a major problem in China, not only for GSK but for other major pharma companies.  China’s public health insurance programs covers 90% of the population, but coverage is not extensive.  The formularies are particularly selective, and those drugs that do get coverage are often not covered in full.  Over 30% of healthcare costs in China are borne by the patient as out-of-pocket expenses, and prices for drugs on government programs’ formularies are under immense pressure.  This causes prices for drugs that are not covered to skyrocket, and become out of reach for even wealthy Chinese.

Ultimately, the success of the 12th five-year plan for the biomedical industry will depend how well China aligns the viewpoint and needs of its many different stakeholders to foster policies that better support innovation and quality.  Progress could be slow due to the existing infrastructure and the hub-and-spoke nature of Chinese government, however, the eagerness of foreign multinationals to enter China is promising.  The road will not be easy for them, either: they will want to increase their investments across the value chain, step up their core capabilities, and explore creative ways of reaching new customer segments through partnerships.   Despite the challenges, the future is bright and promising growth suggests that the biomedical industry will continue to be a focus, even beyond these five years.

[1] GaBI http://www.gabionline.net/Biosimilars/News/China-s-5-year-biotech-investment-fires-clear-warning-to-US

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