Weekend Look at China and Advertising in the Healthcare Industry
China Media Group StockGuru Profile CHMD.OB
China Media Group has a contract with the Central Government of China to deliver healthcare messages across the entire country of China. I think it is important to understand the nature of the companies that are interested in purchasing a position in sponsoring these healthcare messages — which is how CHMD will profit from this agreement.
Healthcare is an expensive proposition in China just like it is in the United States. But the structure of the Healthcare system in China is vastly different and I think it’s important to understand these differences when making investment decisions in this industry.
Healthcare has become the third biggest expenditure for the Chinese. In China doctors are paid very little. The real revenue comes from charging a marked up price for pharmaceuticals and for the use of medical equipment such as CAT Scans and MRI’s or any medical equipment. These manufacturers have an interest in purchasing this advertising.
The population of China does not have a deep understanding or a strong familiarity with healthcare that we in the west take for granted. According to a recent survey, 48.9% of the respondents said they would choose not to see a doctor even if they should, while 29.6% said they would prefer not to be hospitalized even if they should be.
As the great urbanization of China occurs, so does the understanding of the place for healthcare in the life of this population. At the end of 2004, there were more than 5,000 pharmaceutical manufacturers, about 12,000 wholesalers and more than 120,000 retailers in China.
All of these companies are potential targets for the kind of advertising CHMD is doing for the Central Government of China, which is delivering fundamental healthcare messages in the most pervasive means possible.
Pharmaceutical companies are vitally interested in advertising in China. The Chinese government allows hospitals to buy medicines at wholesale prices, sell them to patients at retail prices and pocket the difference as profits. This practice has become the main revenue source for most hospitals. The more expensive the drugs are, the more profitable the hospitals become and pharmaceutical companies want the population to demand their drugs and perceive them as being better than the competition.
Statistics show that today, 85% of the medicines in China are sold through hospitals. China’s hospitals have always been allowed to have their own drug outlets. Patients usually buy their medicines there once they get their prescriptions. There is competition among manufacturers, but there is minimal competition when it comes to selling drugs to patients.
Doctors in China are low paid. Healthcare has always been viewed as a kind of public service, so it’s very difficult to charge high prices for medical treatment. In China medical revenue is made through prescriptions and through charging the patient for the use of the medical equipment.
Because doctors are not fairly compensated based on their services, the shortfall is then transferred to the costs of medicine and equipment.
Statistics released by the Health Ministry show that from 1980 to 2004, the healthcare expenditure in China jumped from 3.17% of GDP to 5.55% of GDP, while government expenditure declined from 36.2% to 17.1%. China’s population is aging rapidly and as the citizens enter the pivotal age of sixty-five, healthcare will increase dramatically. One half of all healthcare expenses are incurred after a person turns sixty-five. Pharmaceutical companies will be competing to reach this targeted group.
Statistics released in 2004 showed that there were more than 300,000 healthcare organizations in China, with 90% of them public hospitals. CHMD has the authority to place advertising in these hospitals on a nationwide basis.
CHMD’s agreement with the Chinese Government pursuant to the United Nations’ Millennium Development Goals Program named this project The Great Wall of China Project, which provides them the potential to grow exponentially and build and retain strong media interests when this contract expires in 2015.
Source: China Media Group
China Media Group Corporation
9901 I.H. 10 West, Suite 800
San Antonio, TX, 78230
Hong Kong Office
1803 Chinachem Tower
34-37 Connaught Road, Central
Hong Kong, China
Phone: +852 3171 1209 ext 222
General Information: info@chinamediagroup.net
Investor Relations: ir@chinamediagroup.net
Website: http://www.chinamediagroup.net
Forward Looking Statement: This release contains forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements contain words such as “expects,” “believes,” “anticipates” and “intends.” Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, economic conditions affecting the B2B environment; continued ability to obtain hardware, software and peripherals at competitive costs; the company’s ability to finance its planned expansion efforts; the company’s ability to manage its planned growth; and changes in regulations affecting the company’s business and such other risks disclosed from time to time in the company’s reports filed with the Securities and Exchange Commission. The company does not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in management’s expectations, except as required by law.
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