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China Pharmaceuticals and Healthcare Report Q1 2010
Business Monitor International, Dec 2009, Pages: 98
China Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's pharmaceuticals and healthcare industry.
In our Q110 update, China has maintained its fourth place in the Pharmaceutical Business Environment Ratings matrix for the 15 key markets in the Asia Pacific region. Globally, the country places 18th out of the 71 countries surveyed worldwide, indicating its vast potential. Key attractions are its sheer size and the improvement of its economic and healthcare systems, although it is let down by – among other factors – rampant pharmaceutical piracy, substandard quality, bureaucracy and a poor legal framework. Nevertheless, regulatory improvements have occurred, including the recently implemented ‘Green Channel’ approval for drugs that fulfil certain criteria which is intended to improve access to innovative medicines.
In fact, the commercial value of China’s pharmaceutical market is expected to exceed that of a number of major European markets, including France and Germany, in the coming years. Having been barely affected by the 2008/09 global economic downturn, the authors expect the Chinese drug market to post a compound annual growth rate (CAGR) of 12.5% in local currency terms over the 2009-2014 period, to reach a staggering US$92.2bn. Key drivers of growth are the recently unveiled and ambitious CNY850bn (US$124.5bn) healthcare reform programme, the rising prevalence of civilisation diseases, booming population numbers, economic growth, the reform of regulations on foreign direct investment (FDI) and the strengthening of local tender, which will continue to attract foreign interest.
However, the attempt to improve healthcare coverage will come at a cost to pharmaceutical companies. In mid-October 2009, China’s National Development and Reform Commission (NDRC) slashed the prices of 45% of the drugs included on the National Essential Drugs List (NEDL), which is covered by the maximum retail prices set by the central government. An average reduction of 12% applies only to ‘grassroot’ outlets that currently stock the NEDL, with 49% of the drugs on the list unaffected, while the remaining 6% have received a modest price increase to boost production. An ancillary adjustment to the rules means that government-run basic medical and healthcare units can no longer sell drugs at a 15% mark-up.
The August 2009 publication of China’s NEDL, which lists 307 products in total, has a number of glaring omissions. For example, despite facing a significant infectious disease burden, the state has not included any vaccines, atypical antipsychotics, biologicals or antiseptics in the list. Nevertheless, the government is aiming to make medicines more affordable by targeting their prices through a public bidding system at provincial government level. As a result, prices of generics are expected to fall by between 20 and 25%, and – although select generic suppliers will clearly benefit from economies of scale – smaller companies are likely to be pushed out of the market. The NEDL will be updated again in three year’s time, in line with economic development trends, disease profile and the progression of science, with the government expecting a universal uptake by state facilities in 2020.
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