Big Pharma in China: New Opportunities

China’s commitment to universal healthcare in the past 10 years combined with more favorable regulations towards foreign firms has created opportunity for successful pharmaceutical R&D in China by foreign multinationals.

New Opportunities for Pharmceuticals

“Healthy China 2020” represents the Chinese government’s commitment to bringing universal healthcare coverage by the year 2020.  Since its implementation in April 2009, the central government has nearly doubled its total expenditure on healthcare and has committed $1.1 billion USD to new drug development.  As such, healthcare in China represents an opportunity for Western firms to turn a significant profit.

The pharmaceutical industry, in particular, is an attractive segment within the healthcare industry. Increased access to medicines, an aging population, and increased per capita spending on healthcare are key factors driving huge increases in pharmaceutical spending.  In fact, GlobalData projects revenues from the Chinese pharmaceutical industry to reach $315 billion USD, representing an 8-year compound annual growth rate (CAGR) of 26.5%.

Within pharmaceuticals, biosimilars, are a burgeoning market with a projected CAGR of 60.8% from 2014-2020.  Recent and upcoming biopharmaceutical patent expirations are behind this trend.  To capitalize on this expected growth of biosimilars, Western firms, like Amgen and Novartis, have established R&D centers in China, some of the first to ever be established on mainland China.  The CFDA is beginning to relinquish control of the pharmaceutical industry through the form of contract research organizations (CROs).  These relationships should help improve China’s historically poor pharmaceutical R&D.  In the near future, foreign firms will attempt to cheaply develop biosimilars in China while enjoying the profit margins offered in the United States and Europe.

Alex George
MD/MBA Candidate