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China’s booming pharma sector welcomes western investors

By Michael Stones , 04-Apr-2011

Double-digit growth in the Chinese pharmaceutical sector will increasingly make the nation a lucrative place for Western companies to do business, delegates heard at the InterPhex trade event in New York.

The Chinese government’s investment in health care services will underpin significant growth of the nation’s pharmaceutical sector and bring a wealth of opportunities for western companies, said Yu Xiong, vice president of China State Institute of Pharmaceutical Industry.

Health care

Over the next year, the government plans to invest a further $125bn in health care reform following the $850bn invested over the past two years, said Xiong.

China is already the third-largest pharmaceutical market in the world. This year total revenue is expected to increase by 23 per cent to reach $154bn.”

At present, health care spending accounts for only 4.6 per cent of China’s Gross Domestic Product (GDP) compared with top spender, the United States which invests 15.3 per cent and Denmark which spends 10.8 per cent on health care. But, China’s investment is set to rise significantly under China’s latest five-year plan covering the years 2011 to 2015.

Xiong highlighted China’s aging population as offering a particularly lucrative market for Western pharmaceutical companies. Within four years, 140m Chinese will be aged 50 or over compared with about 6m people who are aged 65 or over today.

Migration of people from the country to urban and semi-urban areas would also help to drive the sale of pharmaceutical products, he said.

John Choate, CEO Advanced Pharmaceuticals, told the seminar that the largest drug categories in order of priority were: Antibiotics, cardiovascular, diabetes, neurological conditions, including depression, GI diseases and finally cancer drugs.

Western pharmaceutical companies such as Roche, Pfizer and Lilly were already well-established in China. Roche currently has the top sale revenue of $1.38bn while the second-largest western revenue earner Pfizer employs about 9,000 people in China at nearly 200 locations.

In total, 1,475 international firms operate in the Chinese pharmaceutical sector, either alone or in partnerships with local companies, compared with about 6000 domestic players. Non Chinese companies currently account for just over 30 per cent of the sector’s total revenue.

Choate said that western companies, particularly US firms, were well placed to significantly grow their presence in the US market. “There are huge opportunities for US manufacturers to provide products and services to these people,” he said.

Win approval

The Chinese population has a strong bias in favour of FDA (Food and Drug Administration) approved products.” This helps US products win approval from SFDA, the Chinese regulatory system, and offers a compelling selling point compared with output of low-tech, inefficient domestic pharmaceutical companies, he said.

SFDA is introducing a tough new approval procedure for new pharmaceutical products based on the FDA system.

Since many domestic firms will be unable to comply with the strict regulatory requirements, they will be forced to seek help form western outsourcing companies or face closure, said Choate.

He predicted that the country will become the world’s number one pharmaceutical market by 2020.

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