Industry Insights | Uneven Supply and Demand of Traditional Chinese Medicine Services Drive Rapid Market Growth

The 'Opinions' clearly state that efforts should be made to vigorously promote the study of traditional Chinese medicine by Western medicine practitioners. Comprehensive hospitals, specialized hospitals, infectious disease hospitals, maternal and child health care institutions, etc., should support Western medicine doctors in receiving professional training in traditional Chinese medicine, gradually achieving the goal of 'being able to practice both Western and traditional Chinese medicine'. A special program for Western medicine practitioners to study traditional Chinese medicine will be implemented, aiming to cultivate a group of high-level talents integrating Western and traditional Chinese medicine within 5 to 10 years.

However,From the perspective of hospitals at the supply end,At the current stage, the distribution of traditional Chinese medicine (TCM) medical resources in China is uneven and insufficient, resulting in a serious imbalance between TCM diagnosis and treatment demand and TCM medical service supply. Currently, TCM medical resources in China are concentrated in large traditional Chinese medicine hospitals, which account for only 1% of the total number of TCM medical institutions nationwide. In 2020, the number of visits to TCM hospitals in China accounted for 37% of the total number of TCM medical visits nationwide, and these visits were mainly concentrated in some developed cities or provinces, leading to a serious inversion of medical resources and diagnostic demand.

From the demand side,The domestic population is showing a deep aging trend. Coupled with the deterioration of living habits and ecological environment, it is expected that the demand for traditional Chinese medicine (TCM) services from patients will further increase in the future, putting high-quality medical resources under even greater strain.

Lu Guohui, Director of the Personnel and Education Department of the National Administration of Traditional Chinese Medicine, pointed out that by 2030, significant progress will be made in reforming the talent development system and mechanism. The talent echelon will be more reasonable, and the scale of high-level talents will increase significantly. By 2035, the talent system that conforms to the characteristics of traditional Chinese medicine will be more complete. Strategic scientists, leading talents, and innovative teams in the field of traditional Chinese medicine will continue to emerge. The leading and supporting role of talents in the revitalization and development of traditional Chinese medicine will become more prominent, and their contribution to the construction of Healthy China will be significantly enhanced.

According to the statistics of the National Health Commission, as of 2020, there were 682,770 practicing (assistant) traditional Chinese medicine (TCM) physicians in China, a 41.8% increase compared to 2016, with 4.8 TCM physicians per 10,000 people. At the same time, the proportion of TCM practicing physicians with senior professional titles also increased from 15.1% in 2016 to 16.6% in 2020.

Source: National Health Commission, Frost & Sullivan

The current development of traditional Chinese medicine (TCM) has encountered a historic opportunity. The Party and the government attach great importance to TCM work. The report of the 19th National Congress of the Communist Party of China clearly states that 'we should adhere to equal emphasis on traditional Chinese and Western medicine, inherit and develop the cause of TCM,' and has incorporated the development of TCM into the 'Healthy China' strategy.

In February 2021, the General Office of the State Council issued the 'Notice on Several Policy Measures to Accelerate the Characteristic Development of Traditional Chinese Medicine', proposing twenty-eight policy measures in seven areas including strengthening the foundation of traditional Chinese medicine talents, enhancing the vitality of the traditional Chinese medicine industry, boosting the development momentum of traditional Chinese medicine, and improving the system of integrated traditional Chinese and Western medicine. This undoubtedly provides a policy basis for accelerating the resolution of prominent issues faced in the practice of traditional Chinese medicine development and for better realizing the inheritance and innovation of traditional Chinese medicine.

In recent years, the state has introduced a number of policies and laws and regulations to support the healthy and orderly development of traditional Chinese medicine (TCM) medical institutions run by society.

In October 2019, the 'Opinions on Promoting the Inheritance, Innovation and Development of Traditional Chinese Medicine' issued by the Central Committee of the Communist Party of China and the State Council pointed out the direction for inheriting, innovating and developing traditional Chinese medicine in the new era;

The Law of the People's Republic of China on Basic Medical and Health Care and Health Promotion, which came into effect on June 1, 2020, encourages medical and health institutions run by social forces to carry out cooperation within medical consortia: participating in the medical service cooperation mechanism, supporting and regulating the cooperation between medical and health institutions run by social forces and those run by the government in various types of medical services, discipline construction, talent cultivation, etc.;

The 'Notice on Issuing the Administrative Measures for Medical Consortia (Trial)' (implemented on August 1, 2020) by the National Health Commission and the Administration of Traditional Chinese Medicine clearly encourages social forces to run medical and health institutions to participate in medical consortia on a voluntary basis;

In February 2021, the General Office of the State Council issued the 'Several Policy Measures on Accelerating the Characteristic Development of Traditional Chinese Medicine' and in March 2022, the General Office of the State Council issued the '14th Five-Year Plan for the Development of Traditional Chinese Medicine', proposing a number of detailed policy measures to promote the development of traditional Chinese medicine. It is clear that efforts will be made to strengthen the construction of traditional Chinese medicine medical service systems and create 'flagship' grassroots healthcare institutions; implement the Famous Doctor Hall project, encourage and support experienced social forces to establish chain-operated famous doctor halls, and plan and layout a number of famous doctor halls at different levels according to the requirements of branding, quality, standardization, and normalization, creating a demonstrative model of famous doctor hall operations that is promotable, replicable, and sustainable;

The Outline of the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Objectives Through the Year 2035 (released on March 11, 2021), requires 'implementing regional registration of physicians and promoting multi-institutional practice of physicians';

The 'Physicians Law of the People's Republic of China', which came into effect on March 1, 2022, encourages physicians to regularly provide medical and health services at designated healthcare institutions below the county level. The main practice institution should support and facilitate this. Physicians practicing in healthcare institutions within a medical consortium do not need to go through relevant change registration procedures;

Meanwhile, with the modernization of traditional Chinese medicine (TCM) rising to a national strategy, the internationalization of TCM has been continuously included in relevant national plans.In the 'Outline of the Development Strategy Plan for Traditional Chinese Medicine (2016-2030)', it is clearly proposed to strengthen international exchanges and cooperation in traditional Chinese medicine and expand international trade in traditional Chinese medicine. Additionally, the 'Healthy China '2030' Plan Outline also requires innovation in cooperation models based on bilateral cooperation mechanisms to promote health cooperation between China and countries along the 'Belt and Road'. It is expected that with policy support, the prospects for the traditional Chinese medicine industry in overseas markets will become increasingly promising.

With the rapid development of the national economy and the continuous improvement of people's income levels, the pursuit of a high-quality healthy life has become a necessity. Traditional Chinese medicine, as a treasure of the Chinese nation, will play a greater role in the prevention and treatment of common diseases, frequently occurring diseases, chronic diseases, difficult and complicated cases, and major infectious diseases.

Under the current new development pattern that takes the domestic large cycle as the main body and promotes mutual reinforcement between domestic and international dual circulations, in the new situation where people's health concepts have changed after entering the post-pandemic era, fertility policies have been further liberalized, an aging society has arrived, and traditional Chinese medicine has performed excellently throughout the process of fighting the epidemic, the public's recognition of traditional Chinese medicine services has been continuously increasing and their demand has been growing day by day.

According to Frost & Sullivan data, the market scale of traditional Chinese medicine (TCM) healthcare services in China increased from 460.2 billion yuan in 2016 to 702.9 billion yuan in 2020, with an annual compound growth rate of 11.2% during this period. It is expected to reach around 2 trillion yuan by 2030.

Source: Frost & Sullivan

In recent years, China has vigorously promoted the construction of grassroots traditional Chinese medicine clinics and improved the network of traditional Chinese medicine services covering the grassroots level.Previously, the National Health Commission and the National Administration of Traditional Chinese Medicine jointly issued a notice clarifying the strengthening of the construction of traditional Chinese medicine departments in township health centers and community health service centers. The goal is to achieve full coverage of traditional Chinese medicine clinics by 2022. The aforementioned national policies and laws have also explicitly encouraged private medical institutions to promote the orderly flow of high-quality medical resources to the grassroots through market mechanisms, such as participating in medical consortium cooperation, multi-site practice by doctors, and creating model famous doctor halls.

According to data released by the National Administration of Traditional Chinese Medicine, by the end of 2020, there were 36,300 primary-level traditional Chinese medicine clinics nationwide, with 85.4% of community health service centers and 80.1% of township health centers having set up traditional Chinese medicine clinics. The accessibility of primary-level traditional Chinese medicine services has further improved, with 99% of community health service centers, 98% of township health centers, 90.6% of community health service stations, and 74.5% of village clinics being able to provide traditional Chinese medicine services.

Given the forecast that the traditional Chinese medicine (TCM) medical service market will continue to maintain a high growth rate in the future, and currently there is an insufficient supply of high-quality medical resources, the demand for TCM medical services from the general public is constantly rising. The future development trend of the TCM medical service market is as follows:

1) Developing OMO (Online-Merge-Offline) business:In line with the national policy encouraging the integration of Internet+ traditional Chinese medicine services, the Internet diagnosis and treatment system has been improved and connected to medical insurance. Patients can now enjoy traditional Chinese medicine services at any time and place.

2) Strengthen the strategy of renowned traditional Chinese medicine (TCM) inheritor studios, implementing the 'master-apprentice' model of TCM:Inherit the excellent experience and academic achievements of renowned traditional Chinese medicine practitioners, while also cultivating our own doctors to further increase the proportion of our own doctors' income.

3) Strengthening cooperation within medical consortia:Further increase the number of public hospitals and traditional Chinese medicine universities collaborating with each other, tap into the potential for medical consortium cooperation, and enable renowned doctors to systematically descend to the grassroots level.

4) Increase R&D investment:Implementing the common prescription system - in-hospital preparations - and the construction of a drug system, with traditional Chinese medicine (TCM) characteristics at its core, adhering to the principles of TCM treatment, and providing the public with easy-to-use and efficacious TCM-specific medical services.

5) Explore membership service content and models:Develop family doctor services, and actively provide traditional Chinese medicine (TCM) family doctor services in conjunction with the national policy encouraging the provision of TCM services.

6) According to business development needs:Implement a strategy for high-quality and high-growth expansion, actively expanding into existing cities and new markets.

7) Further strengthen digital capabilities:Improve operational efficiency through digitalization and standardization capabilities, developed in-houseHIS systemPrevent clinical medical risks and strictly comply with compliance requirements.

8) Adopt a business model that combines online healthcare platforms with offline medical institutions:Make full use of the development of Internet technology to address pain points such as limited customer access to traditional Chinese medicine diagnosis and treatment methods, unbalanced physician resources between different regions, and inconvenience in customer follow-ups and long-term health management.