China Pharma Industry

Overview - Opportunities for Growth

China is the world's largest producer of pharma ingredients and the world’s second largest pharma market. It is projected to reach staggering $158 billion worldwide in 2016 and grow at a CAGR 7.7% between 2014 and 2019.

China’s population growth and increasing medical needs make it the world’s biggest producer and exporter of pharmaceutical ingredients.  Covering 40% of global APIs production, the Chinese pharma market has huge opportunities for growth.  With government’s increasing investment in healthcare and R&D, China presents great opportunities for innovative products and technologies, and collaboration between international and domestic pharmaceutical companies.

Low prices with good quality and bulk production are main advantages for China being a global leader on APIs production.  Now, majority of Chinese manufacturers are looking into deepening ties with European and Indian markets by investing in APIs, generics, biologics, biosimilards, finished Formulation and packaging.

The Chinese API Industry

In 2014, the global API market reached 130 billion dollars, with CAGR of 7%, and will rise to 180 billion dollars in 2020.

According to the China Chamber of Commerce for Imiport & Export of Medicines and Health Products (CCCMHPIE), Some MNCs adopt a vertically integrated strategy from APIs to formulations for their main products, while others prefer purchasing APIs from outside.

In the foreseeable future, the Chinese API industry will develop more rapidly and continue its transformation. The late-comer advantages are gradually forming new competitiveness, characterized by:

  • Soft environment factors are outweighing production cost and policy benefits, and the industry is more geared to mid-to-high end market instead of mid-to-end speed growth;
  • Innovation low-lying land and an Open Innovation System are gradually taking shape;
  • CRO and CMOs are increasingly gathered to form the Magnetic Effect
  • Health-related policy reform driven by both industry needs and external pressure
  • Changes in disease spectrum, public medical needs, and the new round of health reform
  • Internet plus and reshaping of the value chain
  • Implementation of the “Belt and Road Initiative”

Healthcare and Pharmaceutical Business Environment

Healthcare expenditure’s share of GDP rose to 5.6% in 2013 and government is committed to increasing healthcare expenditures to 6.5 – 7% of GDP by 2020.

China is pushing forward of the reform of pharmaceutical regulatory review and approval system and will make great efforts to eliminate the drug application backlog within 2-3 years. The new revision of drug administration law and Chinese pharmacopoeia will improve the competitive ability of Chinese pharmaceutical companies and upgrade the products quality and help Chinese companies get access into international market.

Pricing pressures in the tender system are increasing, with several provinces introducing new tendering systems to lower drug prices, hitting multinationals, in particular forcing the out of some markets. Reforms proposed in 2015 should aim to improve the efficiency of this process. The CFDA (Chinese Food and Drug Administration) plans to also permit online sales of prescription drugs in the near future.

The narrowing quality gap between multinational brands and premium local products will increase competition in the off-patent sector.  Despite short-term uncertainties, the potential of the Chinese pharmaceutical market will continue to attract inwards investment as foreign companies step up their R&D and production/packaging activities in China. Collaborations between local players and foreign companies are fostered by the drive to develop local innovative industry and by multinational efforts to expand product portfolios and geographical footprint.

Research & Development in China

China is pursuing its goal of becoming a research hub for international pharmaceutical product development with biopharmaceutical industry as one of seven strategic industries within 12th Five-Year plan for 2011 – 2015 support.