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Pharmaceutical Industry in China amid COVID-19 Pandemic

Posted by: Yann Barbelivien
Category: Economy & Trade
Pharmaceutical Industry in China amid COVID-19 Pandemic

Amid the exponential growth of COVID-19 cases around the globe, China has continually manifested a drastic drop in its new virus cases. Thanks to its stricter control and prevention measures, China is on the road to recovery. Nevertheless, it still faces difficulties due to the impact of COVID-19 on its overall economy.

Read our previous article about China and the COVID-19 Pandemic: Impact on Economy

The COVID-19 pandemic forces the Beijing government to create an international response and thus, the decision to help epidemic-stricken countries. China has tapped on the power of its healthcare industry in order to realize this mission. Keep reading!

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.

Tightening bounds with allied countries

According to Deng Boqing, vice chairman of the China International Development Cooperation Agency (CIDCA), China has organized four batches of anti-epidemic emergency aid for 89 countries and four international organizations. For instance, on April 2, 2020, Chinese President Xi Jinping offered help to Belgium in overcoming its current shortage of medical supplies.

A medical team by the Red Cross Society of China also arrived in Tehran on February 19, 2020, to assist in Iran’s battle against COVID-19. Upon their arrival, the experts immediately engaged in exchanging experience on combating COVID-19 with their Iranian counterparts and promoting bilateral cooperation in the field of health and medicine. Furthermore, China also donated medical supplies to many other allied countries such as Mexico, Russia, Namibia, and the Netherlands.

CIDCA Vice-Chairman Boqing also stated that China has responded to the World Health Organization’s call to support countries with vulnerable public health systems. Boqing mentioned that the country has provided a total of USD20,000,000 worth of donations to the WHO. This is to aid COVID-19 hard-hit regions such as the European Union, the African Union, and the ASEAN. Boqing added that China has also given medical supplies and technological assistance to various countries in need.

Conclusion

To sum up, China can help other countries because they have a strong pharmaceutical industry. The sector is full of opportunities and is still growing. The COVID-19 crisis shows that there is a need to strengthen the pharmaceutical industry to face a global health crisis. Thus, investments in this sector are expected to rise in the coming months.

Meanwhile, many international Big Pharma firms continue to increase their investments in China amid the COVID-19 pandemic.

Check out COVID-19 related news on our COVID-19 Policy Briefings.

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Author: Yann Barbelivien

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