Posted by
acrylic-china on Tuesday, April 20, 2010 2:00:11 AM
Currently China has about 3,500 drug companies, falling from more than
5,000 in 2004, according to government figures. The number is expected
to drop further. The domestic companies compete in the $10 billion
market without a dominant leader. As of 2007, China is the world’s
ninth drug market, and in 2008 it will become the eighth largest market.
China’s thousands of domestic companies account for 70 percent of the
market, and the top 10 companies about 20 percent, according to
Pharmaceutical Industries
Business China. In contrast, the top 10 companies in most developed
countries control about half the market. Since June 30, 2004, the State
Food and Drug Administration (SFDA) has been closing down manufacturers
that do not meet the new GMP standards. Foreign players account for 10%
to 20% of overall sales, depending on the types of medicines and
ventures included in the count. But sales at the top-tier Chinese
companies are growing faster than at Western ones, according to IMS
Health Inc.
Even the top selling companies just barely exceed sales of $100 million
(hospital market). Most of the Chinese drug-makers fall below the 20th
ranking, but 30 of the top 50 companies are local.
In addition, China’s over-the-counter market is growing fast and has
become the fourth largest OTC market in the world. Foreign enterprises
have been closely monitoring the expanding OTC market. Merck announced
the launch of OTC program in China in September 2003. Roche listed
China as one of its 10 core OTC markets, with the aim of growing its
OTC drug sales by 50% in the next five years and reaching 1.3 billion
in 2008. Novartis is expanding its OTC market share in China, and Wyeth
has also entered OTC market.
The
Pharmaceutical generics
market in China is dominated by its non-branded generic industry that
operates with basic technology and simple production methods. Domestic
pharmaceuticals are not as technologically advanced as western
products, but nonetheless occupy approximately 70% of the market in
China. Domestic companies are mainly government owned and fraught with
overproduction and losses. The Chinese government has begun
consolidating and upgrading the industry in an effort to compete with
foreign corporations.
It is estimated that most hospitals derive 25-60% of their revenue from
prescription sales, hospitals remain the main outlets for distributing
pharmaceuticals in China. This will change with the separation of
hospital pharmacies from healthcare services and with the growing
numbers of retail pharmacy outlets. Retail pharmacy outlets are
expected to grow in number once the government finally introduces its
system to classify drugs as OTC. The government is now encouraging
development of chain drug stores, but the full effect might not be seen
for several years.
The price of pharmaceutical products will continue to decrease
steadily. In June 2004, the price of 400 antibiotics in 24 categories,
including penicillin, was reduced by, on average, 35%. The total value
affected by this reduction was US$42 million. The central government
has been playing a significant role in pharmaceutical price
readjustment. Future price reductions will originate from hospital
pharmaceutical retail shops.
The rural
Pharmaceutical Industries
will shift significantly. 80% of counterfeit products are consumed in
rural areas. This provides a huge opportunity for pharmaceutical
companies to develop the market in rural areas. In 2005, Huanan
Pharmaceutical Group, Guangzhou Ruobei Huale, Baiyunshan Pharmaceutical
Group, and others, have stepped up efforts in targeting the rural
market.
Bayer of Germany, the inventor of aspirin, began trade with China in as
early as 1882. Hoechst AG, known as Aventis, sold its products through
128 distribution agents across China in 1887, becoming China's no. 1
Western medicine and dyeing provider. Eli Lilly and Company opened its
first overseas representative office in Shanghai in 1918. ICI, the
predecessor of the world's no. 3 pharmaceutical enterprise AstraZeneca,
began trade with China in 1898.In the 9 months from January to
September 2004, the total output of the country’s pharmaceutical
industry reached $40 billion, 15.8% higher than the same period of
2003. In the same period, 23 major state-owned pharmaceutical companies
had sales of $10 billion. A survey of 16 typical city hospitals, the
usage of drugs increased by 32.23% in the first half of 2004 as
compared with that of 2003.
Around 36% of all
China Pharmaceutical Industries
are state-owned. Another 35% are privately owned domestic enterprises
and the remaining 29%, foreign-funded. Synthetic drug manufacturing
remains the pharmaceutical industry’s largest business in China,
constituting 65% of industry sales. Another 21% of industry sales come
from traditional Chinese medicine. Biotech-related medical products and
medical equipment make up the rest.With their low budget for research
and development, China’s pharmaceutical makers are in a different
league from the multinationals, but they do enjoy certain advantages.
Many Chinese companies not only produce the dosage forms (such as
tablets) but also own the pharmacies where they are dispensed, as well
as the distribution networks that deliver them to the hospitals, where
nearly 80% of drugs are sold. In addition, Chinese companies can
produce generic versions of branded drugs for a fraction of their price.
Of the 3,000 pharmaceuticals - not including traditional medicines -
manufactured in China since the 1950s, 99 percent are copies of foreign
products, as are almost 90 percent of China's biotech products. Most
Chinese companies - even joint ventures - compete with each other for
the same generics. Many are struggling for survival; more than 32
percent recorded losses in 1999, according to the Pharmaceutical
Department of National Development and Reform Commission.
Moreover, compared with international pharma giants, Chinese companies
are not only small, but are weak in technology and often lack capital.
The total R&D expenditures for Chinese-owned pharma businesses
amounted to less than that spent by a single major Western pharma
company.
There are presently more than 5,000 research and development (R&D)
institutions in China, but only a handful of them are able to compete
internationally in certain areas.
The R&D system consists of specialized research institutes, major
universities, biotechnology companies, and R&D divisions of large
Capsule filling machine
pharmaceutical enterprises. In recent years, mid- and small-size
biotechnology companies are developing at a rapid pace. There are more
than 1,000 such entities nationwide at present, and more than 30% of
them are privately owned. Special governmental funds are available to
promote this type of entrepreneurship.
During the past several years, some Chinese pharmaceutical companies
began to establish R&D infrastructures largely due to internal
growth needs, but their primary focus is directed toward improving
existing technologies or developing generic version of new drugs.