China’s Pharmaceutical Industry
China is the world’s 3rd largest pharmaceutical market after United States and Japan with its sales reaching USD 68.44 billion in 2011. Though the market is not yet mature, the 1.3 billion market size has always greatly contributed to its current status. The president of PIM, Tom Ward, is positive that the Chinese market is expected to become more sophisticated and grow further within the next decade with the combined forces of economic and demographic development, government support, enhanced health awareness of the public, and improving research and development capability.
In March 2009, China's government revealed plans to make an USD 850 billion investment on reforming its healthcare system between 2009 and 2011. The first stage of this plan was to extend the Basic Medical Insurance coverage from approximately 65% of the total population to 90% by 2011. In the second period, the government's health reform is aimed at reducing the disparities in health care that exist between more affluent urban and poorer rural citizens. The government wished to establish a universal system that all citizens will be able to access affordable drug and medical services by 2019. PIM’s market research division believes that China’s 12th Five-Year Plan also suggests an enormous and growing market for pharmaceuticals.
As can be seen in Figure 1, the pharmaceutical sales in China grew at a compound annual rate of 25.9 percent from 2007 to 2011. Factors contributing to this growth include China’s rapid economic development over the past decades, its acceptance into the World Trade Organization, a large and aging population and urbanization process. According to Intercontinental Marketing Services (IMS) Health, China’s pharmaceutical market could grow 22% a year, achieving approximately $115 billion in 2015.
Figure 1 Pharmaceutical Sales in China, 2007-2011 (Unit: USD Billion)
Source: China Pharmaceutical Industry Association
By 2016, Economist Intelligence Unit (EIU) projects that the population of China will reach 1.36 billion, the largest in the world. In 2011, the senior population (over 65 years old) was 8.4% and will continue to grow in the coming years. PIM has noted that the aging population is expected to generate higher demand for health care services.
With a population of 1.3 billion people, China has the potential to surpass the American market as well as Japan and become the world largest pharmaceutical market. However, pharmaceutical demand is dependent on the amount of people who have access to and can afford prescription medication. Currently, though China started its healthcare reform in 2009, PIM’s finding reveals that there is still a large portion of Chinese that do not have proper access to treatment or cannot afford prescription medication because of low household income and poor insurance coverage.
Therefore, based on 12th Five-Year Plan, PIM’s research concludes that rising income projections will increase overall healthcare delivery, as well as the associated demand for higher quality healthcare services. Urbanization and the upgrading of rural infrastructure, including healthcare facilities, will also give rise to new pockets of demand for pharmaceuticals.
During the research, PIM’s research discovers that several of the largest pharmaceutical companies have had an early stake in the China market, such as Eli Lilly, Bayer, Aventis, and ICI, the predecessor of AstraZeneca, all having been active in China since the late 1800s. Recently, Eli Lilly and Novartis, among others, have opened R&D facilities in China, primarily in Shanghai.
According to a February 2012 report by Bloomberg, two of China's largest medical research testing companies, which are WuXi Pharmacy Tech (Cayman) Inc. and Shang Pharmacy (SHP) Corp., may be takeover targets by large pharmaceutical firms hoping to stake a claim in China.
Following is the list of Top 20 Most Competitive Listed Pharmaceutical Companies in 2011:
Yunnan Baiyao, Shanghai Pharmaceuticals, United Laboratories, Dong-e E-jiao, Kangmei Pharmaceutical, Hengrui Medicine, Zhongheng Group, Tasly, Renhe Pharmaceuticals, Sinopharm, Salubris, Shineway, Weigao Group, Luoxin Pharma, Yuyue Medical Equipment, Pien Tze Huang, Conba, Hisun Pharm, Jiangzhong Pharmaceutical and Lepu Medical.
China Pharmaceutical Industry Association
State Food and Drug Administration
General Administration of Customs of the People’s Republic of China
China Pharmaceutical Enterprises Association