China's pharmaceutical industry grew by 10.4% year on year in January–September 2016.
Implications | The news comes after China's pharmaceutical industry grew by an estimated 7.6% in 2015, its slowest rate of growth in a decade. |
Outlook | The announcement is positive news, after increasing concerns last year that China's slowing macroeconomic growth, coupled with the government's ongoing healthcare reforms, would potentially dampen growth for the industry. |
The Chinese pharmaceutical industry expanded by 10.4% year on year (y/y) during the January–September 2016 period, according to the Xinhua government news agency. This growth rate is 0.4 percentage point higher than that during the equivalent period a year earlier and approximately 4.4 percentage points greater than China's overall industrial growth rate, according to the source.
In 2015, the domestic pharmaceutical industry grew by an estimated 7.6%, its slowest rate of growth in a decade (see China: 11 February 2015: China's pharma industry growth slowed to 7.6% in 2015, at lowest level in a decade). Although estimates of the size of China's pharmaceutical sector vary, growth in 2015 continued an overall downward trend, reflected by falling annual pharmaceutical-sector revenue since 2012 in part as a result of ongoing healthcare reforms, as the drug tender system leads to lower drug pricing.
Pharma industry growth in the first nine months of 2016 comes as the China Food and Drug Administration (CFDA) continues to drive wide-ranging healthcare reforms. However, as the pharma sector adjusts, the three major challenges facing it are excess manufacturing capacity among China's numerous low-end drug makers (according to the source, the country's low-end drug production capacity has a utilisation rate of approximately 50%), increasing oversight and improvement standards among these manufacturers, and growing supply of high-quality and innovative treatments.
However, China's efforts to accelerate its marketing approvals of new treatments are having an effect. The source quoted the CFDA's Centre for Drug Evaluation (CDE) as saying that as of the end of September 2016, the CDE had completed 8,868 drug reviews, double the amount a year earlier. In addition, the CDE said that the backlog of drug registration applications had dropped to around 11,500, from a peak of almost 22,000 in 2015.
Outlook and implications
The announcement of growth is positive news, after increasing concerns last year that China's slowing macroeconomic growth, coupled with the government's ongoing healthcare reforms, would potentially dampen growth for the industry.
Looking ahead, China is expected to continue to make efforts to increase incentives for local pharmaceutical innovation (see China: 21 June 2016: China launches marketing-authorisation holder pilot programme for innovative drug makers), which in the longer term is expected to increase competition for pharmaceutical multinationals, as well as step up its attempts to raise the quality of homegrown pharma manufacturing (see China: 3 January 2017: China's CFDA increases staff numbers amid drug safety campaign, healthcare reform).
In addition, foreign drug makers are expected to benefit from China's attempts to accelerate market access for innovative treatments – in part by cutting its drug review times – although there are indications that faster time to market may continue to come with more stringent pricing pressure.