Opportunities in the Chinese Pharmaceutical Market

China’s healthcare industry is transforming from a pharmaceutical manufacturing base, to a strategic player in the global pharmaceutical market by establishing more R&D and growing its consumption base.

According to a report by Daxue Consulting, as of 2018, China’s pharmaceutical market was valued at $134.6 billion and is estimated to reach $161.8 billion by 2023 and take a 30% share of the global market. The Chinese pharmaceutical market are dominated by 3 large segments:

1. Generic Medicines: Accounts for 38.8% ($85.3 billion) of China’s pharmaceutical market and is the largest segment. High demand due to a robust local manufacturing sector for generic drugs and low purchasing power. This segment is likely to see an increase given the strong reliance of generic medication prescription in public insurance plans to minimize overall healthcare expenditures. Furthermore, there have been significant investments made by foreing drug makers in China’s generic medication industry through partnerships with local firms. For example, joint ventures between Teva and Guangzhou Pharma, as well as between Pfirzer and Zhejiang Hisun Pharmaceuticals.

2. Patented Medicines: Accounts for 22.9% ($30 billion) of China’s pharmaceutical market, the second-largest segment. Large demand due to China’s increasing affluent class due to its high-cost nature as a result of high R&D costs involved. This restricts its sales to the lower and middle income population segment. Since this is a niche market, it is dominated by foreing MNCs and is projected to have a growth rate of up to 10% in the following years.

3. Over-the-counter (OTC) Medicines: Accounts for 13.6% ($18.4 billion) of China’s pharmaceutical market and is the most attractive form of medication in the APAC region. This is due to prevalence of self-medication in Chinese culture and a fairly liberal sales channel allowing easy purchase of OTC medications.

Presently, the Chinese pharmaceutical market is fragmented, with more than 5000 pharmaceutical manufacturers in China, most of which are small to mid-sized companies. This fragmentation has caused R&D spending to drop as low as 5% of sales on average and the market is highly dependent on its distributor networks which leading players such as Sinopharm and Shanghai Pharmaceuticals have strong control over. Therefore, for foreign companies looking to penetrate the Chinese pharmaceutical market, they should find the right market opportunities and niche positions along the Chinese pharmaceutical value chain to benefit from.

Moving forward, the pharmaceutical industry will grow due to optimisation and improvement in medical treatment, as well as the accelerated development of drugs. If your company is interested in penetrating the Chinese pharmaceutical market, be it through a joint venture or alternative distribution deals, feel free to contact us at info@summeratlantic.com for a free evaluation of your market potential in China.

Thank you for reading and we look forward to working with you!