China’s Pharmaceutical Actuality and Future

 China’s Pharmaceutical Actuality and Future

Only two decades ago, China was a poor agricultural country; now it becomes the third-largest economy in the world, with a GDP of more than $2, 108 billion in 2006. Experts forecast that by 2020, China will be the world’s largest economy.

1, China’s pharmaceutical  e-cigarette supplier market

The Chinese pharmaceutical market has shown impressive growth in recent years, in tandem with the country’s rapid economic expansion. Pharmaceutical sales in China (excluding Hong Kong) were estimated at US$27.7 billion in 2005, an increase of around 8.5% over the 2004 year. The figure is distorted, however, by the presence of traditional Chinese medicines (TCMs). The TCM market is estimated at around US$6.9 billion. The size of the market for western-style pharmaceuticals, therefore, can be reckoned at around US$20.8 billion, equal to around US$16 per capita. This makes China one of the largest markets in the world, and second only to Japan in Asia. China is expected to become the fifth largest drug market in the world by 2010. Growth will be driven by factors such as an increasingly aging population, large market size (urban and rural), government support in restructuring the highly fragmented industry, IPR policies, as well as increasing life expectancy.

2, China’s pharmaceutical industry

China has a large domestic pharmaceutical industry, providing 80% of China’s pharmaceutical consumption. In 1995, approximately 3,000 domestic state pharmaceutical enterprises produced a total output of $12 billion, of which more than $3 billion was exported, according to the State Pharmaceutical Administration of China (SPAC). The Chinese pharmaceutical industry has increased in value with an annual average growth rate of 16.72% over the last few decades.

However, the industry is still small-scale, with a scattered geographical layout, duplicated production processes, and outdated manufacturing technology and management structure. The Chinese pharmaceutical industry also has a lower market concentration and weak international trading competitiveness, coupled with a lack of patented pharmaceuticals developed in-house. As China joins the World Trade Organization (WTO), it needs to integrate more completely into the global economy. The international competition will place an intense pressure on the Chinese pharmaceutical industry and further open the door to a lucrative market for non-Chinese companies, especially for pharmaceutical producers and manufacturers. Accession to the WTO binds China by fundamental WTO principles, such as improved transparency and the strengthening of commercial legal procedures. China’s WTO commitments include the tightening of rules on intellectual property, tariff concessions, and market access of non-Chinese service suppliers engaging in the distribution of pharmaceuticals. All such moves create additional business opportunities for non-Chinese pharmaceutical companies in China, and in turn, place an intense pressure on the Chinese pharmaceutical industry.

So, over the past few years, Chinese pharmaceutical firms have been merging to improve economies of scale, concentrate resources, and increase competitiveness through vertical integration. Many large, state-owned pharmaceutical companies are also transforming their ownership structures into joint ventures or public companies to become more efficient. According to the SPAC, China aims to become the world’s leading producer of pharmaceuticals and medical devices and instruments in the first half of this century.

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