Global Insight Perspective | |
Significance | A new report published by the Southern Medicine Economic Research Institute (SMERI) reveals that the gross industrial output value of China's domestic pharmaceutical industry rose by 21.3% in the first half of 2007 to reach 291.3 billion yuan (US$38.7 billion). In terms of sales value, the industry experienced a rise of 21.8% to 267.8 billion yuan, while profits were up by 25.3% to 23.1 billion yuan. |
Implications | The overall figures are derived from a number of categories, including APIs (60.3 billion yuan sales value), Finished TCM (56.3 billion yuan) and Biopharmaceuticals (19.1 billion yuan). Sales values appear to be significantly larger than a previous report from the Shanghai Institute of Pharmaceutical Industry (SIPI), which had estimated sales of drugs to hospitals at around 27.2 billion yuan in 2006. However, differences in categorisation make it difficult to directly compare the two sets of figures. |
Outlook | SMERI forecasts overall growth of between 17.8-18.5% by the end of the year, which would take the domestic pharmaceutical industry's gross industrial output to around 600 billion yuan. However, despite the overall picture of health, there is likely to be continued consolidation in both the manufacturing and distribution sectors, owing to recent measures introduced by the government to control prices and increase innovation. |
The SMERI report, whose key findings were published on Interfax, divides China's domestic pharmaceutical manufacturing industry into six separate sectors, including Active Pharmaceutical Ingredients (APIs), Chemical Medicine, Finished TCM, Biopharmaceuticals, Medical Devices, and Sterile Materials (see table). The report also provides separate figures for sales value (as opposed to gross industrial output value), which rose by 21.8% in the first half of 2007 to reach 267.8 billion yuan (US$35.5 billion). During the same period, overall profits rose by 25.3% to 23.1 billion yuan.
Key Financial Statistics for Pharmaceutical Industry, H1 2007 | ||||
Gross Industrial Output Value | % Growth | Sales Value | % Growth | |
APIs | 62.98 | 20.42 | 60.32 | 17.99 |
Chemical Medicine | 79.30 | 18.94 | 72.69 | 19.47 |
Finished TCM | 62.87 | 16.88 | 56.25 | 21.42 |
Biopharamceuticals | 21.64 | 22.57 | 19.06 | 22.74 |
Medical Devices | 21.32 | 22.74 | 21.14 | 21.90 |
Sterile Materials | 10.08 | 38.67 | 10.02 | 49.66 |
Source: SFDA Southern Medicine Economic Research Institute | ||||
As may be seen from the table, the sales value of the API sector rose by 18% to 60.3 billion yuan, while the Finished TCM sector rose by 21.4% to 56.3 billion yuan, and the Biopharmaceuticals sector rose by 22.7% to 19.1 billion yuan. Together, these three key sectors therefore rose by 20.0% to reach 135.7 billion yuan (US$17.97 billion). Earlier this year, the Shanghai Institute of Pharmaceutical Industry (SIPI) had estimated that sales of drugs to hospitals reached around 27.2 billion yuan in 2006, although differences in categorisation make it difficult to directly compare the two figures (see China: 6 July 2007: Roche Leads Chinese Pharma Market in 2006, Statistics Reveal).
Looking from a regional perspective, the top 10 provinces together accounted for 64.5% of total gross industrial output value, which constituted an increase of 0.7 percentage point relative to the corresponding period in 2006. The two leading provinces were Shandong and Jiangsu, each of which contributed 10% of overall output value. Meanwhile, the fastest-growing provinces were Shandong, Sichuan, Hebei, Henan, Jilin, and Hubei. In terms of sales, the top 10 provinces accounted for 69.5% of the total, which was down by 0.46 percentage point since the first half of 2006.
Outlook and Implications
The figures make much healthier reading than in the previous year, when the government tightened its reins on the domestic pharmaceutical industry. Projecting ahead to the end of the year, SMERI is forecasting that the total gross industrial output value will reach approximately 600 billion yuan, which would represent an increase of 17.8-18.5% over 2006.
However, despite the overall positive forecasts, SMERI noted that there is a clear trend towards consolidation in the industry, which will have been fuelled by new measures introduced by the Chinese government to cut prices and to increase innovation. In 2006, the leading 100 domestic pharmaceutical manufacturers accounted for 30% of total sales, while the leading 100 pharmaceutical distributors accounted for 67.9% of sales. However, figures for the end of 2007 are likely to reveal a significant rise in both of these percentages.
Looking longer term, the National Development and Reform Commission (NDRC), which has imposed three rounds of price cuts in 2007, has announced that it will no longer make significant adjustments to prices. Instead, it will adopt a system whereby prices of medicines on the basic medical insurance list are reviewed every two years, as is currently the case in Japan. The NDRC is also seeking to expand the number of drugs that are included on the basic medical insurance list.