By 2020, China is expected to have surpassed the United States as the world's largest pharmaceutical market. While reform efforts, an aging population, the prevalence of chronic diseases and the expansion of the health care system significantly increase the market attractiveness for foreign companies, new market regulations pose major challenges for foreign pharmaceutical manufacturers. With its extensive experience in and in-depth knowledge of both Chinese and European healthcare systems, SILREAL consults pharmaceutical companies to enter new markets and expand their existing operations.
Opportunities of the Chinese Pharma Market
The rise of non communicable diseases
Growing prosperity and demographic changes as well as health policy reforms suggest that the outlook for the pharmaceutical industry continues to be favorable. Non communicable diseases such as cancer and diabetes have become more prevalent among China's population and its government is consequently attaching greater importance to healthcare. Companies providing innovative cancer drugs such as Merck & Co or AstraZeneca are therefore not surprisingly experiencing particularly rapid growth in China. Similarly, the alliance between Amgen and Beigene is focused on the development of cancer drugs. With over 4 million cases, China records more than twice as many cancer cases per year as the United States. The WHO estimates that this number will rise to about 6.7 million cases in the next two decades.
Healthy China 2030
In 2016, China adopted the "Healthy China 2030" strategy. Besides prevention and health education, the government aims to provide the Chinese population with drugs at an affordable price. To achieve this, it is implementing considerable tax discounts on medication and making more drugs reimbursable by the Chinese health insurance system. According to figures from the National Health Security Administration, 128 new drugs were added to the list of reimbursable drugs only in 2019.
Import of patent-protected drugs
The majority of drugs in China are imported, a large proportion of them from Germany. According to the German Association of Research-based Pharmaceutical Companies (VFA) the value of all pharmaceutical exports from Germany to China and India currently amounts to 4 billion euros and primarily includes patent-protected drugs. Conversely, German pharmaceutical companies mainly purchase basic pharmaceutical materials and generics from China.
Backlog in the Chinese supplier industry
Alongside the pharmaceutical industry, a supplier industry has developed in China since 1970 producing basic equipment for pharmaceutical companies. According to the China Association for Pharmaceutical Equipment, the majority of suppliers achieves an annual turnover of less than 2.5 million euros. In contrast, only some of the medium-sized German pharmaceutical equipment manufacturers achieve annual sales of more than 300 million euros. There are not only differences in size, but also in terms of technology. In the past, particularly smaller, local manufacturers in China manufactured copies without investing in their own R&D capabilities. The need for high tech products consequently increased the demand for products from European equipment manufacturers. Despite their technological strength, however, Chinese pharmaceutical companies also see shortcomings in Western suppliers. Local equipment suppliers stand out with faster and more efficient services and support than Western technology leaders.
Challenges of the Chinese Pharma Market
Changing healthcare landscape
For the pharmaceutical industry, China's strategic plans also pose new challenges for an entry or extension in its growing market. First, the market structure is likely to change significantly. In the past, it was mainly the mature, often off-patent drugs that made Western pharmaceutical companies successful in China. However, the attention is now shifting towards innovation. While it used to take years to launch a new product, nowadays only a few months lie between the initial approval of a drug in western countries and its registration in China.
Reforms and stricter approval procedures
Simultaneously, the Chinese government has also tightened the approval process for new drugs and has taken a stricter line on generic manufacturers in recent years. Several campaigns are aimed at improving the overall quality of production, reducing the prices of domestic drugs and strengthening China's reputation as the number one generics manufacturer. However, the high cost of the approval procedures has also led many companies to stop production, which has resulted in market consolidation.
Made in China 2025
Assuming everything goes according to the plans of the Chinese government, pharmaceutical companies must also be prepared for growing competition from China. The sector is one of ten key industries identified by the government in its "Made in China 2025" strategy which is aimed at promoting technological innovation and developing world-leading companies. For instance companies have become involved in the development of new biotech drugs. Additionally, over 100 clinical trials are currently underway at Chinese universities and companies in the area of innovative gene and cell therapies against cancer.
... is that these challenges can be overcome with a trusted partner by your side. SILREAL has vast experience in pharma consulting. One example is a delegation trip that SILREAL organized for the German Federal Ministry of Health, where German politicians could gain insights into state of the art technologies in the Chinese pharma industry.
SILREAL is deeply embedded in the Chinese and European pharma industry, can identify and communicate with the ideal partners for your current or future business pursuits, and ensure your business succeeds in the Chinese market.
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Our Experience with Pharma Consulting
Performing a go-to-market analysis on behalf of the start up incubator arm of a leading global insurance company focusing on insurtech, health-tech and mobility .
Analysis of an OTC drug for the treatment of mouth and throat infections on behalf of a German pharmaceutical company as well as the investigation of market access requirements.