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Tracking Pharmaceutical and API Growth in China
The global pharmaceutical market is in transition. Growth in established markets is slowing as growth in emerging markets, particularly China, is on the rise. State policy to increase access and affordability of medicines, a growing middle class, and increased demand for quality drugs are all factors influencing pharmaceutical demand in China. On the supply side, China’s pharmaceutical market is dominated by domestic companies although multinational drug companies are increasing their presence in the market.
Crunching the numbers
As pharmaceutical industry growth slows in developed market in the United States, Western Europe, and Japan, emerging markets, particularly China, continue to ascend. The US share of global pharmaceutical spending is projected to decline from 41% in 2005 to 31% in 2015 while the share of spending from the top five European national markets (i.e., Germany, France, Italy, Spain, and the United Kingdom) is projected to decline from 20% to 13% during the same period. Meanwhile, 17 high-growth emerging markets, led by China, will contribute 28% of total spending by 2015, up from only 12% in 2005, according to IMS (1).
In 2005, China was ranked as the ninth largest national pharmaceutical market and in 2010, it moved into third place, a position it is projected to maintain through 2015 (note: spending is based on constant US$ at 2010 exchange rates), according to IMS (1). In 2010, China’s pharmaceutical market was valued at $41.1 billion, having increased at a compound annual growth rate (CAGR) (US$ at constant exchange rates) of 23.9% between 2006–2010. A CAGR of 19–22% is projected between 2011 and 2015, according to IMS (1).
Inside China’s healthcare and pharmaceutical market
State initiatives to increase access and affordability of healthcare, particularly in rural areas, a rising middle class, growing demand for higher quality drugs, and the sheer size of its population are factors influencing the pharmaceutical market, according to the KPMG report. The state-led Healthcare Reform Plan, which went into effect in 2009, is investing approximately RMB 850 billion ($124 billion) over the initial three years of the plan to increase access to medicine. The first phase of the plan, which is scheduled to be completed by the end of 2011, seeks to increase accessibility by building basic healthcare facilities, expanding public medical insurance to cover 90% or more of the population, and reform the drug-supply system. By 2020, the Chinese government plans to bring the entire population under public medical insurance, strengthen infrastructure, and streamline research and delivery (2).
China’s pharmaceutical market varies between urban and rural areas. The mainland Chinese pharmaceutical market consists of a complex array of regional markets that are dominated by generic drugs and over-the-counter (OTC) products, according to the KPMG report (2). Based on 2009 data, OTC products accounted for 38% of China’s pharmaceutical market, prescription drugs for 33%, traditional Chinese medicines 8%, medical devices 6%, and other products 15% (2). The OTC market was valued at RMB 88 billion ($13.6 billion) in 2009 and RMB 96.4 billion ($14.9 billion) in 2010. Prescription drug sales are expected to reach RMB 442.5 billion ($68.3 billion) by the end of 2014 and have recently outperformed growth in the OTC market. In 2009, the prescription drug market in China increased 27%, compared to growth of only 7.7% for the OTC market, according to the KPMG report (2).
China has more than 5000 pharmaceutical companies, of which about 98% produce generic drugs, according to the KPMG report (2). The generic-drug market in China was valued at $29.3 billion in 2009 and is expected to increase at a CAGR of 12.9% to reach a value of $57.1 billion by 2014 (2).
Chinese pharmaceutical companies
The strength of China’s API market was on display at API China and Interphex China, which was held in Chengdu in April. API China and Interphex China, which are organized by the exhibition company Reed Sinopharm, brings together API manufacturers, fine-chemical producers, equipment vendors, and suppliers to pharmaceutical manufacturers. The exhibition is held twice a year in China. The April show in Chengdu, a city in the Sichuan province in southwestern China, was co-located with PharmChina, a trade show of pharmaceutical distributors. Collectively, the two shows attracted more than 3500 exhibitors, representing more than 80,000 categories of products, according to data from Reed Sinopharm.
In addition to the exhibition, API China and API Interphex in Chengdu included a specially orchestrated program, Sino-India Partnership Program (SIPP) to further enable business relations between China and India. SIPP included a special zone of Indian API manufacturers at API China as well as a Sino-India conference session, which was supported by the China Pharmaceutical Industry Association. The conference provided insight into the pharmaceutical manufacturing industries in China and India. China is now a provider of raw materials and fine chemicals to India and further partnerships in API trade, which would combine China’s position in APIs with the finished drug-product manufacturing base in India, was one area of further collaboration discussed at the conference.
Another exhibition of API China and Interphex China is scheduled for Nov. 9–11 in Nanjing, the capital city of Jiansung Province in Eastern China. The 2010 installment of API China and Interphex China, held in Suzhou, Jiansung Province, attracted more than 30,000 visitors and more than 1400 exhibitors, which included 800 pharmaceutical ingredient and intermediate producers, 300 pharmaceutical packaging companies, and 200 equipment vendors, according to data from Reed Sinopharm.
2. KPMG, “China’s Pharmaceutical Industry: Poised for the Giant Leap (Shanghai, May 2011).