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Continued Growth in Pharmaceutical Trade Surplus Expected in 2008; China to Play Broader Role in Global Marketplace
BEIJING, CHINA, Dec. 10, 2007 – The China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMHPIE) and IMS Health today said that China is poised to play an expanded role in the global pharmaceutical arena, driven by the rapid growth of China’s healthcare trade volume, expansion of the domestic market and a more attractive business environment for multinational companies.
Chinese healthcare trade volume grew to US$31.2 billion in the first ten months of 2007, an increase of 24.3 percent over the same period last year. Export volume reached a record high, growing 23.3 percent to $19.8 billion. An international healthcare trade surplus of $8.5 billion was maintained in the first 10 months of 2007.
Among export products, through the first 10 months of 2007, active pharmaceutical ingredients (APIs) led sales growth in China with $11.0 billion in sales, followed by hospital diagnostic and therapeutic products at $2.2 billion, and medical accessories at $1.9 billion. Among import products, APIs also ranked first, totaling $4.9 billion in sales through October. Hospital diagnostic and therapeutic products followed with sales estimated at $2.9 billion, with pharmaceutical preparations turning in $2.3 billion in sales.
“In 2007, we’ve seen extraordinary achievements in the healthcare marketplace in China,” said a spokesperson for CCCMHPIE. “Domestic companies have gained a larger share of the pharmaceutical market overall, accelerating the shift of global pharmaceutical business activity to Asia. In the next few years, China, along with India and Singapore, are poised to become leading centers of industry growth – not only for the region, but worldwide. We expect trade volume for Chinese pharmaceutical products to hit an all-time high again in 2008.”
Domestic Companies Increase Access to International Markets
An increasing number of China-based pharmaceutical companies have met API and Good Manufacturing Practice (GMP) standards in the European Union and United States. More than 160 products manufactured by approximately 80 companies gained Certificates of Suitability (COS) for APIs authorized by the EU, and eight manufacturing companies have met the EU’s GMP requirements. Additionally, 317 companies have obtained Drug Master Files (DMFs) from the U.S. Food and Drug Administration.
In the first 10 months of this year, the export volume of pharmaceutical preparations increased to $625.7 million, compared with $500 million for all of 2006, according to CCCMHPIE. Total export volume in the pharmaceutical sector will reach a record high for the 2007 full year.
Currently, approximately 900 companies are exporting pharmaceutical preparations from China, 40 percent of which are China-based multinationals or joint ventures. Takeda and Pfizer are ranked first and second, respectively, and the top 20 companies are estimated to have contributed 44.3 percent of the total export volume. Currently, China-made pharmaceutical preparations are being sold in more than 160 countries and regions worldwide. Japan, Korea and Hong Kong are the leading three markets for China-made pharmaceutical preparations, accounting for 29 percent of total exports. Domestic pharmaceutical companies, led by North China Pharmaceutical Group Corporation and Shanghai Medicines & Health Products Import & Export Corporation, are primarily focusing their exports on developing countries, such as Nigeria, Pakistan, Philippines, Vietnam and India.
“This is just the start of the internationalization of Chinese pharmaceutical firms,” said the CCCMHPIE spokesperson. “Finding an ideal partner is key to the process, along with making individually tailored international development strategies a top priority.”
To tighten the quality control of exported drugs, the State Food and Drug Administration of China is currently developing stricter rules on the supervision of exported drugs. China-based pharmaceutical companies have joined this effort to strengthen inspection and monitoring to ensure product quality.
International OEM and CRO Markets Grow
Aggressive investment over the past decade by multinational companies, as well as the expansion of global manufacturing and distribution networks, has led to a dramatic expansion of the international outsourcing market for manufacturing and research and development activities.
A recent report conducted by CCCMHPIE indicates that contract manufacturing is anticipated to grow at an approximately 10 percent annual pace, reaching an estimated market size of more than $30 billion by 2011. At present, China is considered the leading manufacturing site for APIs and pharmaceutical preparations, and is increasingly qualified to meet international market standards.
Meanwhile, the global contract research organization (CRO) market is growing at an annual average rate of 15 percent and is expected to reach $35 billion by 2010, according to CCCMHPIE. The country’s scientific research capabilities, along with abundant clinical trial resources, make China a new emerging destination for international outsourcing of R&D. A recent survey shows that China currently ranks third-highest in Asia in the number of contracted clinical drug trials.
Listings on Overseas Stock Markets Increase
A number of China-based companies, including Shenzhen Mindray Bio-Medical Electronics Co., Ltd., Harbin Pingchuan Pharmaceutical Holding Co., Ltd., Shenyang Sansheng Pharmaceutical Co., Ltd., and Asiapharm Group Ltd., have entered international capital markets by listing on the London, Singapore, New York or NASDAQ stock exchanges. In 2006, nearly 20 China-based companies in the biomedical industry listed on overseas stock exchanges, not including those already listed on the Hong Kong Stock Exchange. The pharmaceutical industry ranks fifth among domestic industries listed on overseas stock markets. The New York Stock Exchange and NASDAQ are the first choices for most Chinese companies going public. In 2007, Simcere Pharmaceutical Group, Tongjitang Chinese Medicines Company, and WuXi PharmaTech Co., Ltd. completed successful listings on the New York Stock Exchange.
“A new wave of overseas listing and merger activities will certainly have a positive impact on Chinese pharmaceutical companies in their efforts to break down trade barriers, to become more active in global distribution chains, and to attract more investment in local research and development,” said the CCCMHPIE spokesperson.
Intellectual Property Awareness Heightens
Intellectual Property Rights (IPR) protection is a key concern for multinational companies. Lack of IPR protection is a major deterrent for foreign capital investments in China, and also an obstacle that limits development and weakens international competitiveness of the pharmaceutical industry there. Along with stronger regulation of IPR by the Chinese government, CCCMHPIE is conducting training programs to enhance the awareness of IPR protection among its member companies.
Changing Global Market Dynamics Provide Platform for Robust Growth in China
As the dynamics of the global pharmaceutical market change – and genericization gains momentum and new emerging markets become more prominent – opportunities for China-based APIs and pharmaceutical preparations will expand.
The global pharmaceutical market is expected to grow at a 5 - 6 percent pace next year, compared with 6 - 7 percent in 2007, according to IMS Health’s 2008 Global Pharmaceutical Market and Therapy Forecast released in October 2007. The forecast, the leading annual industry indicator of market dynamics and therapy performance, predicts global pharmaceutical sales to expand to $735 - 745 billion next year.
“In several respects, 2008 marks an important inflection point for the global pharmaceutical market,” says Murray Aitken, senior vice president, Healthcare Insight, IMS. “For the first time, the seven largest markets will contribute just half of overall pharmaceutical market growth, while seven emerging markets will contribute nearly 25 percent of growth worldwide.”
Drugs with approximately $20 billion in annual sales will face patent expiry in 2008, similar to levels seen over the past two years. Leading products such as Risperdal®, Fosamax®, Topamax®, Lamictal® and Depakote® are expected to lose market exclusivity in one or more major markets around the world next year. This will help drive growth of generics by 14 - 15 percent next year, to more than $70 billion. In 2008, more than two-thirds of all prescriptions written in the U.S. are expected to be for generics. New government contracting initiatives in Germany, and educational programs in Japan, Spain and Italy, will drive greater generics use in those markets. Also, generics competition within the biotech sector will rise as the biosimilar epoeitin alfa is marketed across Europe.
The seven “pharmerging” markets of China, Brazil, Mexico, South Korea, India, Turkey and Russia are expected in aggregate to grow 12 - 13 percent next year, to $85 - 90 billion. In these markets, there is significantly greater access both to generic and innovative new medicines as primary care improves and becomes more available in rural areas, and as private health insurance becomes more commonly held. Ongoing economic growth in the developing world will continue to shift the focus away from infectious diseases and toward cardiovascular, diabetes and other chronic illnesses.
China Pharmaceutical Market Expands
China already ranks ninth in size among all pharmaceutical markets, with annual growth of about 16 percent. IMS expects that the China pharmaceutical market will continue to grow at a double-digit pace in the near term and be the sixth largest market by 2011. Strong economic expansion in China and a need for broader access to medications beyond the top-tier coastal cities is driving growth. Shanghai, Beijing and Guangzhou are contributing a sizeable 21 percent of the total China pharmaceutical market. However, the second-tier cities are growing even more rapidly, with many doubling their size in the past five years. Generally, locally manufactured generics still dominate the market.
About CCCMHPIE
Founded in May 1989, China Chamber of Commerce for Import & Export of Medicines & Health Products (CCCMHPIE) is the leading and most influential national trade association in China with a mission to promote the international trade and cooperation in medicinal and health products. CCCMHPIE, directly under the Ministry of Commerce of China, has a diverse membership of more than 1,800 companies including most of the major manufacturers and trading companies of pharmaceutical and health products across China. The fields that CCCMHPIE covers range from Traditional Chinese Medicines (TCM), pharmaceuticals, preparations, medical devices and equipment, dressings, biopharmaceuticals, nutraceuticals, functional cosmetics to health products.
Currently, CCCMHPIE has a staff of 50-strong professionals, most of whom are specialists in international trade, medicine and management. It has also set up several sub-chambers along product lines, each responsible for supervising the import and export in its own line and offering guidance or advice to its members. CCCMHPIE is headed by a president, nominated by China’s Ministry of Commerce. The president is assisted by a number of vice presidents. Headquartered in Beijing, CCCMHPIE is comprised of nine departments.
Since the beginning of the new millennium, China’s foreign trade in medicines and health products has been expanding exponentially at an annual rate of over 20 percent. It has become the largest exporter of active pharmaceutical ingredients in the world. CCCMHPIE’s significant contributions to this tremendous growth are well recognized, and this rapid trade expansion has in turn helped CCCMHPIE develop from strength to strength.
About IMS
Operating in more than 100 countries, IMS Health (NYSE: RX) is the world’s leading provider of market intelligence to the pharmaceutical and healthcare industries. With $2.0 billion in 2006 revenue and more than 50 years of industry experience, IMS offers leading-edge market intelligence products and services that are integral to clients’ day-to-day operations, including portfolio optimization capabilities; launch and brand management solutions; sales force effectiveness innovations; managed care and consumer health offerings; and consulting and services solutions that improve ROI and the delivery of quality healthcare worldwide. Additional information is available at http://www.imshealth.com.