On the hilly and tropical island of Hainan, local officials and companies are investing billions of dollars to transform a string of riverside villages into a medical tourism destination.

Their aim? To lure wealthy Chinese patients, who might otherwise venture overseas, to this province in the South China Sea known for its beach-front resorts. To do so they are making an unusual promise: The hub will bring in cutting-edge treatments for diseases like cancer that are available abroad, but don’t yet have regulatory approval in China.

There’s plenty of demand. The travel site Ctrip.com estimates about half a million Chinese traveled abroad for medical services last year. Millions are dying from cancer and heart disease, but regulatory bottlenecks have slowed approvals for the newest international therapies. Chinese hospitals are overflowing, and affluent jet-setters prefer Japan for physical check-ups or the U.S. for genetic screenings.

In 2013, the provincial government of Hainan, often known as China’s Hawaii, earmarked more than 1,600 acres of fertile farm land along a river flowing to its eastern coast for a medical tourism hub. Since then fishing villages and rice paddies are slowly being replaced by palm-tree-flanked driveways. The zone’s first hospitals are opening their doors this summer, the effective beginning of this medical experiment.

Local officials say businesses have already committed to spending 23 billion yuan ($3.3 billion) for 27 projects ranging from hospitals to plastic surgery clinics, with dozens more awaiting approval. The mission is partly to “retain domestic consumption,” the government body managing the Hainan Boao Lecheng International Medical Tourism Pilot Zone said in e-mailed comments.

New Medicines

Among the investors are Beijing-based Ciming Health Checkup Management Group and Guangzhou-based medical services firm Evergrande Health Industry Group Ltd., which is being advised by Boston’s Brigham and Women’s Hospital, a teaching hospital of Harvard Medical School.

In an early example, the zone’s Chengmei International Health Center imported 24 vials of the Merck & Co. cancer drug Keytruda for six patients under the special access channel last October, the government says.

The medicine is approved in the U.S. and elsewhere, but remains unavailable in the mainland. The special permits by the Chinese regulator only allow for a small amount of the drug to be used in the tourism hub, and it can’t be distributed elsewhere.

Merck in a statement said it’s conducting clinical trials on Keytruda in China and doesn’t sell the drug in the country. The China Food and Drug Administration and Chengmei didn’t respond to a request for comment.

Ghost Towns

By 2025, the hub’s managers want to draw more than one million tourists a year on health-related visits.

Still, China has a patchy record of managing specialized economic zones. Centers like Shenzhen, the fishing-village-turned metropolis, have thrived. But others have had a quick boom and bust, like the Caofeidian industrial zone in the northeast, which ended up as a ghost town.

The Hainan medical hub’s relatively remote location and the country’s shortage of qualified doctors make it harder to draw patients. Competition for medical resources is fierce, said Chen Bo, associate partner at consultancy McKinsey & Co.

“Building health-care capabilities there will require attracting excellent talent to work and live in the pilot zone, and good doctors are already badly needed in China’s major cities,” said Chen.

On a recent visit, the area still had the feel of an underdeveloped backwater, showing the challenges to transforming it into a flourishing tourist center. It is dotted with semi-finished hospitals that remain under construction, without medical equipment inside and prefabricated homes outside for construction workers. By the end of March, five facilities had begun operating on a trial basis, local officials say.

Evergrande has said it plans to spend 5 billion yuan on its cancer hospital there. Brigham and Women’s hospital in an e-mailed statement said it is serving as a strategic advisor as Evergrande expands its health-care network in China, helping the development of clinical programs and other aspects like training.

The hospital was slated to start operating by the end of June, according to a press release on Evergrande’s website. In late March, balloons and banners adorned the hospital’s front gate to celebrate a soft launch of the facility while a quick glance inside the bronze-colored building from a back entrance showed dark rooms with bare concrete walls, unpacked crates and cement piles.

Off the main street, behind the hospital pilot zone, was a side road yet to be paved with plywood and empty barrels of asphalt scattered around.

Evergrande didn’t respond to a request for comment on the new facility.

Li Peijuan, an analyst at Forward Industries Institute, a Chinese research firm, said the area can benefit from Hainan island’s environmental beauty, but the quality of service, the standard of medical technology as well as costs will ultimately be key to its success.

Foreign medicines have in the past taken longer to reach the Asian country partly because the regulator has been understaffed and so struggled to shepherd surging numbers of drug applications through its complex review process.

The China Food and Drug Administration is now in the midst of dramatic reforms to its approval system to reduce the so-called “drug lag” on the mainland. If that succeeds, Hainan will need to find other selling points.

“It was very appealing a few years back when approval of innovative drugs was relatively slow, but if the pilot zone can’t build full-fledged medical teams and business models in the next two to three years, its attractiveness will be greatly weakened,” said McKinsey’s Chen.

 

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Photo Credit: China is betting big on medical tourism by building a major new hospital complex on Hainan. Construction of Evergrande International Hospital. Bloomberg