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ChinaPosted 21/11/2014

First posted: 9 November 2012 

Concerning the future of pharmaceutical market in China, view the research article below:

Pharma’s future in China and the US

China is a mature (well-established) market* in the use of generic medicines. Generic medicines have been in use in China for more than 10 years.

China accounts for 19% of the world’s population and almost 18% of the global drug market [1, 2].

In 2009, China’s spending on health care accounted for only 4.6% of China’s gross domestic product (GDP), putting it far behind other top pharmaceutical markets such as the US, which spends more than 16% of its GDP in terms of healthcare expenditure [3, 4, 5].

Fuelled by a massive ageing population, rapid economic development, and urbanisation, the pace of China’s medical spending over the past five years has been double its massive GDP growth rate. China is now the world’s third-largest prescription drug market and is expected to become the world’s second-largest by 2020, with the market estimated to be worth more than US$110 billion by 2015, from US$50 billion in 2010 [2, 6, 7].

The Chinese generics market had total revenue of US$19.6 billion in 2010, representing a compound annual growth rate of 16.4% between 2006 and 2010. In 2010, 95.3% of prescription drug sales by volume in China were generics. This actually represented a decline of 0.2% between 2006 and 2010 [8].

In May 2012, China created a change in their intellectual property rights legislation to be able to issue compulsory licences. The move enables the country to produce generics of drugs still under patent where life-saving treatments are unaffordable according to World Trade Organization rules. With the change in the law, China intends to become a generics producer for the domestic and possibly the international market [9].

No generics substitution policies exist in China, however, the Ministry of Health suggested that physicians should prescribe using international non-proprietary name, patented drug names for new active compounds, and names of combination preparations authorised and published by the State Food and Drug Administration (SFDA) [10]. The key driver for the uptake of generics drugs is the fact that the majority of pharmaceuticals available and covered by the Essential Drug List (EDL) and National Drug Reimbursement List (NDRL) in China are domestically manufactured generics, with a preference for cheap generics over more expensive brand-name drugs among poorer patients [11].

While the burgeoning middle class is becoming increasingly brand loyal, the expansion of healthcare provision and growing healthcare costs will ensure the future volume and value growth of the generics sector. However, the frequent price cuts have hit the generics industry domestically, while the perception of poor quality Chinese-made drugs limits uptake internationally [12].

China and India now account for roughly 25% of the global generics market, and demand in these countries is expected to remain strong for the foreseeable future as the middle class continues to emerge. China consumed roughly 19.2% of the total global demand for generic active pharmaceutical ingredients (APIs) in 2008, making it the second largest consumer of APIs after the US, and is projected to become the largest consumer of generic APIs by 2013, capturing a 26% share of the total generic API market [13].

In April 2009, the Chinese Government announced guidelines for healthcare reform. The main goal was to provide universal health care to the country’s 1.3 billion residents [14]. According to the official report, China's central government invested 450.6 billion yuan (US$70.79 billion) in the country's medical care services [15].

Domestic manufacturers dominate the Chinese generics market, accounting for nearly 99% of generics sales of both branded and unbranded generics. The domestic industry has expanded rapidly as companies have improved their manufacturing capacities [16].

Key facts – generic medicines in China

  • The Chinese generics market had total revenue of US$19.6 billion in 2010, representing a 16.4% increase between 2006 and 2010 [8].
  • In 2010, the generics industry supplied 95% of prescriptions by volume at only 63% of the cost [8, 17].
  • In 2007, an average of only US$126 per head of population was spent on health care in China compared to an average of US$ 3,619 in Germany and US$7,285 in the US [3].
  • The Chinese Government is introducing healthcare reforms to enable better access to medicines and health care for China’s population [17].

China is the largest generics market in Asia, and second largest in the world after the US, with an estimated market size of US$13 billion in 2008 [MIDAS sales data, IMS Health, March 2010]. Generics drug use has been embraced by the Chinese healthcare market, with generics volume uptake recorded at 70% and value uptake at 62% in 2008 [18].

  • The Chinese prescription pharmaceutical market generated US$22.9 billion in 2009 which was a striking 26.5% increase over the previous year. One of the driving forces behind this rapid growth was the Chinese generics sector. According to the IMS China Hospital Audit released in June 2008, generics drug sales growth outperformed the overall pharmaceutical market, including traditional Chinese medicines.
  • The generics share has grown from 54% in 1999 to 62% in 2008. The key driver for the uptake of generic drugs is the fact that the majority of pharmaceuticals available and covered by the EDL and NDRL in China are domestically manufactured generics, with a preference for cheap generics over more expensive branded drugs among poorer patients [18].

*A mature generics market is one where generics have been on the market for more than 10 years and where the market share of generics exceeds 40% [19].

References

1.  China.org.cn. Chinese account for 19 percent of world population, government [monograph on the Internet] [cited 2012 Nov 9]. Available from: www.china.org.cn/china/2011-07/11/content_22967992.htm

2.  IMS Health. IMS Health Forecasts Global Pharmaceutical Market Growth of 5-7 Percent in 2011, Reaching $880 Billion [monograph on the Internet] [cited 2012 Nov 9]. Available from: www.imshealth.com/portal/site/ims/menuitem.d248e29c86589c9c30e81c033208c22a/?vgnextoid=119717f27128b210VgnVCM100000ed152ca2RCRD

3.  ChinaBio LLC. China pharmaceutical industry report: current status and future growth. 2010 Nov.

4.  WHO. China [monograph on the Internet] [cited 2012 Nov 9]. Available from: www.who.int/countries/chn/en/

5.  WHO. United States of America [monograph on the Internet] [cited 2012 Nov 9]. Available from: www.who.int/countries/usa/en/

6.  IMS Health. IMS announces 17 countries now rank as high-growth ‘pharmerging’ markets; forecast to contribute nearly half of industry growth by 2013 [monograph on the Internet]. IMS Health [cited 2012 Nov 9]. Available from: www.imshealth.com/portal/site/imshealth/menuitem.a46c6d4df3db4b3d88f611019418c22a/?vgnextoid=01624605b5367210VgnVCM100000ed152ca2RCRD&vgnextfmt=default

7.  Reuters. China pharmaceuticals feel bite of healthcare reforms [monograph on the Internet] [cited 2012 Nov 9]. Available from: www.reuters.com/article/2012/03/02/us-china-pharma-outlook-idUSTRE8210CY20120302

8.  Market Research.com. Generics in China [monograph on the Internet]. Market Research.com c2011 [cited 2012 Nov 9]. Available from: www.marketresearch.com/MarketLine-v3883/Generics-China-6555161/

9.  GaBI Online - Generics and Biosimilars Initiative. Indian Government issues first compulsory licence [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2012 Nov 9]. Available from: www.gabionline.net/Generics/General/Indian-Government-issues-first-compulsory-licence 

10.  Ziyan-Wang. China’s pharmaceutical price policies and practices [monograph on the Internet] [cited 2012 Nov 9]. Available from: http://archives.who.int/tbs/ChinesePharmaceuticalPolicy/BackgroundENGdefault.htm

11.  Scrip. Ask the Analyst response Q: could you please provide me with a list stating whether generic substitution is exercised in pharmacies in the following countries? Response by Philip Greenfield and Ian Schofield, IBI Principal Analysts, 2011 Apr 6.

12.  Datamonitor. The pharmaceutical market: China [monograph on the Internet]. [cited 2012 Nov 9]. Available from: www.espicom.com/prodcat2.nsf/Product_ID_Lookup/00000333?OpenDocument

13.  Biojobblog. Why generic drug companies will dominate future pharmaceutical markets [monograph on the Internet]. Biojobblog c2011 [cited 2012 Nov 9].

14.  GaBI Online - Generics and Biosimilars Initiative. China’s Healthcare reform in 2010    [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2012 Nov 9]. Available from: www.gabionline.net/Policies-Legislation/China-s-healthcare-reform-in-2010

15.  China.org.cn. China's healthcare reform tasks completed: report [monograph on the Internet] [cited 2012 Sept 19]. Available from: www.china.org.cn/china/2012-06/26/content_25735562.htm

16.  Datamonitor. China pharmaceutical market overview [monograph on the Internet]. [cited 2012 Nov 9]. Available from: www.pharmaceutical-market-research.com/publications/country_reports/china_pharmaceutical_market_overview.html

17.  Frost & Sulivan. What lures the attention of global generic drug makers towards China? [monograph on the Internet]. Frost & Sulivan. 2011 Aug 12 [cited 2012 Nov 9]. Available from: www.frost.com/prod/servlet/market-insight-top.pag?Src=RSS&docid=240018520

18.  IMAP. An IMAP Healthcare Report: Pharmaceuticals & Biotech Industry Global Report–2011. 2011:1-44. Available from: www.imap.com

19.  Simoens S. International comparison of generic medicine prices. Curr Med Res Opin. 2007;23(11):2647-54.

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