BMI View: Multinational drugmakers will face significant challenges in maintaining double-digit revenue growth rates in China. Reforms to the healthcare sector will continue over the coming quarters as authorities seek to expand healthcare access while containing costs in a macro environment that has seen economic growth slow. Provincial nuances will become more pertinent as the economic trajectories of each diverge and bidding processes differ. Collectively, this demands new approaches by multinational drugmakers to the China pharmaceutical market, integrating the macro-economic risk factors with a province level approach.
Headline Expenditure Projections
Pharmaceuticals: CNY688bn (USD109bn) in 2015 to CNY766bn (USD115bn) by 2016; +11.5% in local currency terms and +5.4% in USD terms.
Healthcare: CNY3,953bn (USD629bn) in 2015 to CNY4,424bn (USD665bn) in 2015; +11.9% in local currency and +5.8% in USD terms.
|f = BMI forecast. Source: WHO, National Sources, BMI|
|Pharmaceutical sales, USDbn||98.751||109.406||115.336||122.102||131.538||144.099||157.310|
|Pharmaceutical sales, % of GDP||0.93||0.96||0.99||1.02||1.03||1.04||1.06|
|Pharmaceutical sales, % of health expenditure||17.2||17.4||17.3||17.1||16.8||16.5||16.0|
|Health spending, USDbn||573.114||629.028||665.584||712.619||781.222||875.305||981.227|
In Q117, China is amongst the most attractive countries according to our Pharmaceutical Risk/Reward Index. The country scores 62.6 out of 100 and is ranked sixth amongst 19 other Asia Pacific countries. Key to China's strong score is its high market expenditure, high sector value growth and policy continuity. The only limiting factors come from the country's business transparency and limited legal diligence.
In August 2016, the Political Bureau of the Communist Party of China Central Committee reviewed and approved the Healthy China 2030 (Jian Kang Zhong Guo 2030) policy. While details have yet to be fully announced, the key themes of institutional reform and innovation echo the country's 13th Five-Year Plan. Areas of focus were also mentioned and include promoting healthy lifestyles, strengthen health services, improve preventatitive medicine and develop health-related industries.
In September 2016, a survey of 1,622 clinical trials in China by the regulators noted that more than 80% of trials used fabricated data. Several of the new drug applications were also found to be a combination of existing medicines with the data manipulated to match what firms wanted to find.
In October 2016, the US Securities and Exchange Commission noted that GlaxoSmithKline has agreed to pay USD20mn to settle chargers that its Chinese subsidiary engaged in bribery schemes. The statement noted that from 2010 to June 2013, employees of the firm and Sino-American Tianjin Smith Kline & French Laboratories, engaged in transactions and schemes to corruptly transfer things of value to foreign officials in China to increase pharmaceutical sales.
BMI Economic View
Amid an economy that is still burdened by excess capacity in the industrial sector and a housing inventory overhang, we expect the PBoC to continue easing monetary conditions through targeted methods, and we believe that the ongoing bull run in bonds since 2014 will remain intact.
BMI Political View
The Chinese government's progress in supply-side reforms, including the reduction of overcapacity in the coal and steel sectors, was uneven in H116, and we believe that progress is unlikely to be smooth over the coming years due to political and social considerations. However, we expect the central government to stay highly committed in cutting excess capacity, and note that success will require co-operation from various stakeholders, particularly the local government. Meanwhile, the restructuring of debt at these SOEs will be detrimental for banks, as they have to act under the discretion of the government.
The China Pharmaceuticals and Healthcare Report features BMI Research's forecasts for drugs and healthcare expenditure and imports and exports, focusing on the growth outlook for the prescription, OTC, patented drugs and generics market segments.
BMI's China Pharmaceuticals and Healthcare Report provides industry professionals, strategists, company executives, investors, analysts and sales/marketing heads with independent forecasts and competitive intelligence on the China pharmaceutical and healthcare industry.
- Benchmark BMI's pharmaceutical and healthcare market forecasts for China, to test other views - a key input for successful budgeting and strategic business planning in the Chinese pharmaceutical and healthcare market.
- Target business opportunities and risks in the Chinese pharmaceutical and healthcare sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in China.
- Assess the activities, strategy and market position of your competitors using our company profiles (including SWOTs, KPIs and latest activity) and competitive landscape tables.
BMI Industry View
An at-a-glance perspective on the latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The pharmaceuticals and healthcare SWOT outlines strategic factors that affect the basic assumptions underpinning BMI’s forecast analysis, and taken together with BMI’s political, economic and business environment SWOTs, it gives a complete overview of market climate.
BMI Industry Forecast Scenario
Industry forecasts to end-2019 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Healthcare: Total healthcare expenditure (USDbn), healthcare expenditure (% of GDP), healthcare expenditure per capita (USD), hospital beds, doctors, and birth & mortality rates (all per ‘000 population).
- Pharmaceutical Market: Drug expenditure in USDbn, % of GDP and per capita (USD).
- Patented Drug Market: Prescription drug sales (USDbn & % of total sales).
- Generic Drug Market: Generic product sales (USDbn), generic sales (% of total sales).
- OTC Drug Market: OTC sales (USDbn & % of total sales).
- Macroeconomic Forecasts: Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against USD, government expenditure and external debt.
BMI’s Pharmaceuticals and Healthcare Risk Reward Index
BMI’s Risk Reward Index provides investors (both national and multinational) looking for opportunities in the region with a clear country-comparative assessment of the market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
A snapshot of key market characteristics, including total size of the pharmaceuticals and healthcare segments, growth drivers, leading therapeutic areas and the competitive landscape
A focus on government healthcare reforms, epidemiological trends, mergers and acquisitions, product launches, market entries, FDI activity, R&D, biotechnology, clinical trials and supply chain issues.
Details of the industry regulatory framework and key legislation covering the licensing of new products/services, pricing and reimbursements, intellectual property, taxation and advertising, as well as analysis of the overall regulatory burden.
The competitive landscape section provides comparative company analyses and index by USD sales and % share of total sales – for the total pharmaceutical sector, as well as the OTC, generics and distribution sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.