Pharmaceutical Industry and Growth
China’s pharmaceutical market has become a bright spot in both the Asia Pacific region and the world markets, with an impressive average annual growth of 19.4% between 2000 and 2005. As a top-ten world market, it is second only to Japan in the Asian region. This status is primarily attributed to the following factors:
• Expanding market demand based on large population, with an emerging middle class (now estimated at 70 million)
• Thriving economy with 9% annual growth rate
• Biotech and pharmaceutical sector highly prioritized by the government
• Increasingly high-quality pharmaceutical production capacity after nationwide GMP modification
• Increasing exports, especially in chemical crude drugs
• Enhancing intellectual property protection status
• Improving innovation ability
The Chinese currency, Renminbi (RMB), is most likely to remain undervalued, and any appreciation of RMB will play a role in China’s revenue growth. According to IMS Health, China’s pharmaceutical market size was $11.7 billion in 2005 and is anticipated to reach $15–16 billion in 2007.
Between 1978 and 2005 China’s pharmaceutical industry achieved an average growth rate of 16.1% in production value. In 2005, China’s pharmaceutical industry revenues grew by 25.78% to 437.28 billion RMB ($55.8 billion). Chemical synthetic medicines, traditional Chinese herbal medicines, biological products, and medical devices constitute 93% of the Chinese pharmaceutical market (Figure 1).
The industry achieved a total of RMB36.71 billion ($46.89 billion) profits in the same year (Figure 2), an 18.63% increase over 2004. Chemical synthetic drugs generated RMB17.57 ($2.24) billion profits, accounting for 47.86% of the total profits. However, 23% of Chinese companies experienced a total of RMB3.59 billion ($0.46 billion) loss in 2005, a 0.19 billion RMB ($24 million) increase over the previous year.
Notably, in 2005 China’s medical device market leaped into third place, following U.S. and Japan, with a 54.8 billion RMB (7.0 billion) domestic market. However, domestic products accounted for only 30% of the Chinese market, while imported medical devices dominated with 70%.
China’s pharmaceutical industry continued to expand in 2006. Recent Chinese government statistics showed the industry grew by 18.9% between January and August 2006. However, the profit growth of the industry during this period moderated to 7.9%, as an immediate result of significant drug price reductions.
China’s pricing authorities have been taking ongoing steps to reduce drug prices to the benefit of Chinese citizens. The National Development and Reform Commission has launched 19 drug price reduction campaigns over the past decade. In August 2006, the retail prices of 99 types of antimicrobial drugs associated with 2,000 manufacturers in China were lowered by 30%. The result of this may be a savings of RMB 4.3 billion ($550 million) to Chinese consumers.