According to IMS, with projected drug sales increasing over 25% in 2011 to close to $50 billion, China is expected to be the
world's third largest pharmaceutical market in 2011, after the US and Japan. The Chinese pharmaceutical industry primarily
comprises an increasing number of manufacturers of low-cost generic products. The increase in research and development capacity
is directly offset by the government's failure to implement and enforce fully internationally compliant patent laws. Presently,
local producers lack any real capacity to innovate, although joint ventures and partnerships with foreign players are likely
to reverse this trend. Realizing the economic and social benefits of pharmaceuticals, China is embraced by drugmakers from
abroad and encourages local manufacturing and R&D by foreign firms.
The Brazilian pharmaceutical market has continued to grow at a rapid rate in recent years, fueled by a strong overall economy.
Brazil's pharmaceutical market was valued at $25.8 billion in 2011, and there are more than 300 pharmaceutical companies in
operation—of which an estimated one-fifth are multinationals. However, given their larger size and capabilities, multinational
companies are estimated to account for 75% of the entire market. In recent years, the government has moved to align the drug
regulatory environment with international standards, including significant IP reforms. The local biotechnology industry is
also developing rapidly, presenting a number of opportunities for international players.
Although the number of manufacturing facilities has more than doubled over the past five years, the country is plagued by
a weak labor market and has a strong dependence on imports of active pharmaceutical ingredients. Unless periphery industries
step up investment in skilled labor and local production of raw materials, Brazil's drug industry will be unable to meet domestic
needs, let alone meet export demand and become self-sustaining. The shortage derives from a lack of technical schools catering
to the pharmaceutical market, with just one such school—the Institute of Science, Technology, and Industrial Quality—currently
in existence. However, Brazil launched a major 10-year biotechnology initiative in 2007 that provides incentives for private
sector R&D and production. Clinical trials opportunities also abound, as a number of contract research organizations (CROs)
expand their capacity for Latin American trials.
The Russian pharmaceutical market is projected to expand 12.1%, to about $20.1 billion in 2011. A small number of strong domestic
players are emerging, amid signs of consolidation in the manufacturing sector, with growing domestic and cross-border mergers
and acquisitions activity. New legislation imposes a domestic clinical trials requirement, potentially imposing significant
new costs for drug registration. The government's drug pricing, reimbursement, and purchasing policies are complex and opaque—including
a history of sudden changes in policy without consultation with manufacturers. Domestic patent law also remains well below
international standards, and enforcement is especially weak with little recent progress on the ground.
India is home to a reasonably advanced native pharmaceutical sector, albeit one specializing in generic drugs. The Indian
pharmaceutical industry accounts for about 10% of the world's total pharmaceutical output. India's market is expected to reach
$67.1 billion in 2011, and comprises domestic pharmaceutical manufacturers (primarily research-based companies with international
links) organized under the Organization of Pharmaceutical Producers of India (OPPI), and foreign players operating from abroad.
Local producers supply more than 70% of the market for bulk drugs, intermediates, formulations, capsules, and injectables.
A large and cheap labor force, low production and R&D costs, and a strong balance of trade guarantee high output. Internal
resources and international connections also make India one of the regional leaders in biotechnology.
Drug manufacturing is one of the relatively few industries in India open to 100% foreign ownership. They will continue to
encourage international interest in the local market, which is increasing with the growing population and economic improvements.
However, foreign interest will be a challenge to local players, especially in the face of rising scrutiny of IP and manufacturing
quality standards. Western pharmaceutical companies have also been establishing their own manufacturing facilities in India,
as the cost of setting up and operating such facilities is a fraction of that in the west.
The decline of the Mexican pharmaceutical market can be attributed to competition from low-cost Asian producers, high investment
costs, weak product development, and a lack of intermediate materials. The manufacturing sector is highly dependent on imported
raw materials and active pharmaceutical ingredients—approximately 30% of exports are in a semi-finished form. A growing number
of manufacturing firms are currently opting to pursue bioequivalent generic drugs. Even manufacturers who have opposed tougher
bioequivalence requirements now see legitimate generic drugs as the only way to secure market position domestically in the
long term. Despite recent reforms, the enforcement of domestic patent law remains problematic and continued failure to enforce
these laws may limit both investment and product launches by multinationals.
South Korea boasts approximately 250 pharmaceutical manufacturers, including 47 multinationals, which operate either independently
or under a joint venture. However, the rise of China and India as more financially viable regional manufacturing bases has
led to the closure of a number of internationally operated production facilities. Foreign companies are instead shifting their
focus to R&D in the face of difficulties experienced in Japan. Failure by the government to align domestic patent law with
international standards, with particular concern surrounding illegal copying and the enforcement of existing legislation,
is proving detrimental to investment. However, South Korea recently signed a free trade agreement with the US to improve
the intellectual property environment and trade regimes between the two countries. In effort to lure foreign investment and
potentially boost the biotech sector, an international stem-cell research agency was recently established in Seoul.