Spanish pharmaceutical companies have turned their attention to the Chinese pharmaceutical market, with those that already have a presence in China – Cinfa, Esteve, and Grifols – planning to consolidate their position there. Meanwhile, Spain's Faes Farma and Kern Pharma have recently formed deals to enter the Chinese market.
IHS Life Sciences perspective | |
Significance | The largest Spain-headquartered companies, such as Faes Farma, Esteve, and Grifols, have turned their attention to the Chinese pharmaceutical market following China's National Development and Reform Commission's (NDRC) decision to remove controls on the prices of most medicines from 1 June. |
Implications | The Spanish pharmaceutical companies that already have a presence in China – Cinfa, Esteve, and Grifols – plan to consolidate their position in the now even more attractive Chinese market. Meanwhile, Spain's Faes Farma and Kern Pharma have struck deals to enter the Chinese market. |
Outlook | Spanish pharmaceutical companies are expected to benefit from the increased pricing flexibility in China, which could also raise incentives for innovation. |
The largest Spanish pharmaceutical companies have become increasingly interested in the Chinese pharmaceutical market, following China's National Development and Reform Commission (NDRC) plans to remove controls on the prices of most medicines from 1 June, reports Spanish medical newspaper Redacción Medica. According to the source, drug prices are now determined by the market and not by the national authorities.
After the liberalisation of prices in China, the Spanish pharmaceutical companies already present in China – Cinfa, Esteve, and Grifols – plan to consolidate their position in this attractive market. Meanwhile, Faes Farma recently signed a deal with Eddingpharm (Hong Kong) that allows the Spanish company to market its products in the Chinese market (see China - Spain: 1 June 2015: Faes Farma and Eddingpharm form joint venture in China). Similarly, Kern Pharma (Spain) recently announced plans to enter the Japanese pharma market (see Japan - Spain: 13 March 2015: Reig Jofre and Kern Pharma sign commercialisation agreement with Maruishi Pharma).
Outlook and implications
Spanish pharmaceutical company Esteve has a better position in the Chinese market since it currently possesses two operational production plants in Yiwu and Shaoxing, and another two in the province of Zheijian, near Shanghai (see Spain: 3 March 2014: Esteve targets international expansion). The company created a pharmaceutical subsidiary in 2005, Esteve Huayi Pharmaceutical, which manufactures active pharmaceutical ingredients (see Spain: 29 October 2010: Spanish Esteve Launches Second Production Site in China and Spain: 11 January 2006: Esteve's New Chinese Facility to Be Operational by 2007).
Furthermore, the recent joint agreement between Faes Farma and Eddingpharm positions the Spanish firm to commercialise its portfolio in the fast-growing Chinese market and complements Faes Farma's strategy of internationalising its business, which is already present in Australia, Chile, Malaysia, the Philippines, Singapore, Taiwan, Thailand, and Vietnam (see Spain: 4 March 2015: Faes Farma reports 6.3% y/y growth in revenue to USD213.3 mil. during 2014 and Italy - Spain: 18 May 2012: Invida to Market Faes Farma's Bilastine in 17 Countries).
Not only Spanish pharma companies, but also international pharmaceutical firms are similarly expected to benefit from the increased pricing flexibility in China, which could also raise incentives for innovation. The main effect of the Chinese healthcare reform is likely to be absorbed by hospital-sold drugs, leaving an attractive private retail market for international pharm companies to enter. . For this section, a more flexible drug pricing mechanism is likely to remove several of the incentives that had effectively become a barrier to patient access to treatment, as well as an obstacle to foreign drug makers seeking market access (see China: 7 May 2015: China confirms removal of price controls on most drugs from 1 June and China: 9 November 2014: China deregulates national drug pricing system).
Finally, this trend from the Spanish pharma companies is likely to be the result of the austerity measures and reference price system enforced in Spain that have pushed them to increase efforts to reduce their dependence on the domestic market and strategies of globalising their businesses by expanding their presence in international markets or restructuring (see Spain: 6 March 2015: Spanish pharmaceutical companies report positive 2014 performance despite reference price system).