The Growing China OTC Market

China’s over-the-counter (OTC) market is growing fast and is expected to be the largest OTC market in the world within the next decade. In 2000, revenues from OTC sales in China reached RMB 12 billion (US$1.5 billion) and by 2005 this figure is expected to reach RMB 60 billion (US$7.3 billion). Experts project an annual expansion of the OTC market in China by 30% per year over the next five years.

Vice Chairman of the China OTC Association, Hu Shengyu, believes that the Chinese government’s policies with regards to OTC drug sales have contributed greatly to the growth of the country’s OTC market. The State Drug Administration (SDA) created a classification system in 1999 to differentiate between prescription and OTC drugs.

Vice Chairman Hu also states that the OTC market will continue to grow due to the following factors: 1) China’s immense population as well as growing aging population requiring more OTC drugs, 2) increased disposable income leading to more people able to afford OTC medication, and 3) changes in the healthcare system encouraging patients to buy more OTC drugs rather then utilizing hospital services (patients are now responsible for a percentage of healthcare costs, previously, employers shouldered the full burden of medical costs).

According to China’s WTO entry agreements, starting from January 1, 2003, foreign investment in wholesaling and retailing of drugs will be allowed. Until that time, foreign companies that do not manufacture in China must form joint ventures with local companies in order to distribute into these markets.