With revenues of RMB 1.7bn, China's pharmaceutical manufacturing sector generated 13% of the domestic healthcare market in 2012, which in turn accounted for 3.3% of the country's GDP for the year. The sector revenue growth has remained in the double digits since the turn of the century, driven by strong domestic demand and government support for manufacturers.
Exports, which so far accounted for about a third of the output, have been declining but foreign demand still had a significant contribution to the sector's growth during the 2000s. The overall slowdown of the Chinese economic growth did not discourage pharmaceutical manufacturers as they continued to invest heavily into new production capacities and R&D, a measure deemed necessary considering the obsolete equipment and the predominant production of generic drugs rather than branded ones.
The total output of medicines exceeded 5.8mn tons in 2012, almost a double increase from 3bn tons in 2007. Output growth was fuelled by rising incomes, which made health care more affordable for a higher percentage of the population, as well as by the development of the domestic medicine manufacturers.
The sector's 2012 sales revenues grew by 24% on the year. The government's decision to increase subsidies for producers and the restrictions on retail price growth made pharmaceuticals affordable to a bigger portion of the population but had a negative effect on retailers. The market is highly fragmented with the number of drug producers exceeding 6,350. Even the largest domestic producers do not hold significant market shares.
We expect the decelerating economic growth and the government efforts to artificially rein the retail price hikes of medicines to suppress the manufacturing output increase at just below 20%. Despite this decline from the preceding years, this is still a solid growth that is also above many other sectors of the domestic economy. On the plus side, the government is also pouring investments into the healthcare system that guarantees a positive effect on drug production. According to a healthcare strategy report from August 2012, the government aims to raise life expectancy to 77 years in 2020 from 74.8 years in 2010, and cut the infant mortality rate to below 10% in 2020 from 12% in 2011.
Pharmaceutical manufacturers will have to deal with a more regulated market in the next five years, with higher control on drug prices, more standardised procurement of drugs included in the Essential Drugs List for hospitals, and about 700 more drugs included in the list. These measures will favour domestic producers, which are expected to grow faster and establish stronger market positions in the near future. Foreign players will continue to suffer unfavourable government policies and strong competition from growing domestic competitors.
Some of the questions the report answers are:
- What are the major trends in the pharmaceutical production and retail distribution in the coming years?
- What are the current and forecast market sizes and market growth rates for the pharmaceutical sector
- What is the role of the government in the healthcare sector and how will its initiatives affect the sector in the future?
- What is the popularity ratio between Chinese and Western medicine in the country?
- What is the number of employees and enterprises in the sector?
- Which are the major drug producers in the industry and what are their financial performance indicators and future investment plans?
You can access the full EMIS Insight report on China's pharmaceutical industry here: