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China still important for Big Pharma despite M&A slowdown

By Gareth Macdonald , 16-Apr-2009

 

Although the downturn has slowed Big Pharma’s investment in China, the country’s wide ranging healthcare reforms and changing economic landscape still provide considerable opportunities says PricewaterhouseCoopers (PwC).

 

 

A new PwC report suggest that while the $2.1bn (€1.6bn) worth of M&A deals between multinationals and Chinese drugmakers in 2007 is not likely to be bettered in the present economic gloom, the country will continue to develop as a key market.

 

 

 

Michael Keech, director pf PwC’s life science industry group, said that: “Impending healthcare reform, the commitment to innovation by the Chinese government, and numerous tax incentives among other things are making China a much bigger player in the global pharmaceutical industry.”

 

 

 

The report claims that R&D spending by the Chinese drug industry was the third highest worldwide in 2006 and suggests that President Hu Jintao’s pledge to “build an innovation-oriented country by 2010,” will further increase investment.

 

 

 

China’s contract manufacturing and research sectors are highlighted as success stories. The report speculates that the rapid adoption of international standards and the Big Pharma vogue for outsourcing will drive expansion of the two sectors.

 

 

 

While China’s key status as a supplier and production hub has been underlined in recent years by the creation of US Food and Drug Administration (FDA) field offices and the establishment of IPEC China, recognition of its importance is relatively new.

 

 

 

Although traditional medicine is cited as a factor in delaying development of China’s drug market, the country’s track record on counterfeiting and complicated IP rules have had more of an impact on Big Pharma investment decisions.

 

 

 

With this in mind the PwC also suggests that December’s reform to Chinese patent law, which increased the fines IP fraud, coupled with government efforts to combat counterfeiting and corruption will catch the eye of the multinational drug industry.

 

 

 

China industry changes will go on

 

 

 

While they maintain that China represents a real opportunity for Big Pharma, the authors caution that the rate of evolution of the country’s drug market is likely to accelerate, particularly given the recent government reforms.

 

 

 

Over the last three years, the pharmaceutical landscape has changed rapidly in China, and…is going to be altered again in the coming years given the direction of the healthcare reform plan announced by the Chinese government in October 2008.”

 

 

 

Although the plan gives only high level trends, the changes are expected to be significant and should have a major impact on multiple aspects of China's pharmaceutical industry in the coming years.”

 

 

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