The Chinese pharmaceutical market experienced approximately 12% growth in 2000 and has achieved similarly strong growth this year as well. However, despite this growth, price reductions have plagued the sector, cutting into profits. Driving this price reduction is a marked increase in tender offers for high volume orders, increasing the generic drug business considerably. Price reductions have hit hardest in high volume market segments such as antibiotics. Also contributing to lower prices in the pharmaceutical sector is a government crackdown on corruption in pharmaceutical pricing.
One way to fight the trend in price reductions in China is to move your manufacturing facilities to China. Those companies that manufacture in China are less affected by falling prices, as their costs of production are significantly lower. Companies that currently import pharmaceuticals into China may well be advised to consider the cost advantages of manufacturing locally, although of course other factors, such as intellectual property protection, are important as well.
Other developments loom ahead in the Chinese pharmaceutical market. As a result of China’s upcoming November 2001 WTO accession, almost all Chinese markets will be more open to foreign competition. In line with the accession agreement, pharmaceutical distribution will be opened to foreign investment in January 2003. In addition, there is some talk that regulations on imported products, including possible relaxation of regulations that require analysis of every imported batch, may be eliminated by the end of the year.