The power of the Chinese pharmaceutical industry
China can export medical supplies to foreign countries in need because it has built a strong pharmaceutical and health industry over the years. According to the Statista dossier about the global pharmaceutical market, China’s pharmaceutical and healthcare market is one of the largest in the world. It is also one of the most dynamic, and most lucrative for medical companies. Thus, the coronavirus outbreak has enabled the healthcare industry to prove its worth.
Strengthening the pharmaceutical sector
China’s strategy to achieve a stronger pharmaceutical industry is anchored in three objectives.
- Invest massively in research and development
- Innovate and increase product quality by reducing the number of outsourced generics on the market
- Open up and accelerate the development of global activities
China is also showing its intention to top the global pharmaceutical market by creating its own pharmaceutical giants. To note, the country’s pharmaceutical industry has an annual turnover of more than USD1 trillion.
As part of the “Made in China 2025”, Beijing wants at least 100 Chinese companies to export medicines to the world’s major market. It aims to achieve production to international standards by the end of 2020. Also, according to government directives, Chinese companies will have to register between five and ten latest-generation treatments with American and European certification authorities.
The graph below shows the actual leaders in the pharmaceutical world.
Source: Statista Research Department
As shown in the graph, no Chinese company is listed in the top 16 biggest pharmaceutical industries. These companies make up most of the market shares.
The pharmaceutical distribution system in China is extremely fragmented. According to A.T. Kearney analysis shown in the graph above, there is a myriad of actors in the country. More than 13,000, most of whom provide local access are sometimes restricted to a few hospitals. The top 3 distributors of drugs in China (Sinopharm, Shanghai pharmaceuticals, China resources) represent only 20 percent of the Chinese pharmaceutical market. By way of comparison, the 3 main distributors of drugs in the U.S. represent 95 percent of its national market.
But how does China manage to take second place in the world rankings?
There is no Chinese company competing with big players in the pharmaceutical sector. However, public and private investment is increasing year after year and the number of players in the market is surging. This is where China’s pharmaceutical power lies. The speed at which local firms are improving is quite impressive. The most important national groups such as Yangzijiang, Jiangsu Hengrui, and Qilu, among others, are growing in the shadows but are cultivating the same ambitions as the Big Pharma.
China also owes its growth to the international players who have relied on the country since the reform of its health system. Thanks to Beijing’s “Made In China 2025” directive, innovating, producing and distributing are made easier in China.
The Chinese market plays on the volume effect and pushes all market players to adopt a low-price, high-volume supply policy. It, therefore, seems logical to see a significant supply of pharmaceutical products on the Chinese market today.