Five Characteristics of the Chinese Pharmaceutical Industry
Year:2010 ISSUE:8
COLUMN:PHARMACEUTICALS AND BIOCHEMICALS
Click:342    DateTime:Nov.02,2010
Five Characteristics of the Chinese Pharmaceutical Industry     

At present, China's pharmaceutical industry is expanding at all fronts and releasing an enormous potential. In 2009, despite the global financial crisis, the output, sales and profit of China's pharmaceutical industry still grew relatively rapidly. China's pharmaceutical industry has constantly enhanced its international competitiveness, optimized its industrial structure and accelerated the expansion of its industrial scale.   


1. The industrial production recorded excellent performances

According to the statistics of China Ministry of Industry and Information Technology (MIIT), China's pharmaceutical industry's total industrial output value in 2009 reached a record high of RMB1.0382 trillion, up 21.1% year on year, and its total industrial added value rose by 14.9%, 3.9 percentage points higher than the country's all-industries average level (11.0 %), continuing its rapid growth. The average annual growth rate of China's pharmaceutical industry's total output value reached 20% between 1998 and 2009, about twice that of China's GDP. In 2009, China's pharmaceutical industry achieved a total industrial sales revenue of RMB991.59 billion, up 21.4% year on year, of which the chemical active pharmaceutical ingredients (API) sector and the chemical pharmaceutical formulation sector achieved RMB183.75 billion and RMB275.86 billion, up 13.7% and 19.0%, respectively; the Chinese traditional medicine sector and the traditional Chinese medicine tablets processing sector realized RMB199.8 billion and RMB51.17 billion, up 24.0% and 28.3%, respectively; the biological and biochemical products sector achieved RMB88.72 billion, up 29.1%; and the medical equipment and device sector and the hygienic materials and medical goods sector achieved RMB95 billion and RMB52.07 billion, up 22.9% and 29.0%, respectively. The industry-wide sales/production ratio was 95.5%, up from 94% in 2008. It should be said that under the shadow of the international financial crisis, the Chinese pharmaceutical industry's uniquely strong growth potential has become a beautiful sight.


2. The supervision system has constantly improved  

In 2009, the supervision and quality control on pharmaceutical products in China made new progress. The Chinese government has obviously strengthened the supervision and regulation of pharmaceutical products. First, the tighter examination procedure has substantially reduced the number of applications for drug registration and significantly improved the structure of applied products. Second, China ensured normal supervision of medical devices. Third, the government departments strived to make China's GMP more systematic, scientific and comprehensive. In 2009, China's State Food and Drug Administration (SFDA) began to amend the 1998 version of GMP and will release the revised version formally in 2010. The new version will reportedly have nearly four times more provisions than the 1998 version and describes in detail the basic requirements for the quality control of pharmaceutical production. The provisions basically retain most chapters and the main content of the 1998 version, cite the basic requirements of the EU's GMP and the main principles and content of the WHO's GMP and are applicable to the production of all pharmaceuticals. The amendments emphasize the development of personnel and quality systems.


3. The industrial organization and
regional distribution were optimized

Through the implementation of the Drug Administration Law of the Peoples Republic of China, the Regulation for Implementation of the Drug Administration Law and the Regulation on the Supervision and Administration of Medical Devices, the Chinese drug administration and supervision authorities have further standardized the management of drug and medical device production and sales enterprises. Through the strict certification of GMP, GSP and GAP, China's pharmaceutical industry has greatly enhanced the quality consciousness of drug producers and sales enterprises and eliminated a number of ineligible enterprises. In 2009, through various forms of reorganization and mergers, China's pharmaceutical industry accelerated the adjustment of its industrial structure. In September 2009, the State Council approved that the China National Pharmaceutical Group Corporation (Sinopharm) take over the China National Biotech Group (CCR2009 No.30). In 2010, this new Sinopharm will achieve a sales revenue of more than RMB100 billion. Also in September 2009, Sinopharm Group Co., Ltd, a subsidiary company of Sinopharm, was listed in the Hong Kong stock exchange and raised more than 10 billion Hong Kong dollars. This has given Sinopharm new impetus for its future development. In October 2009, Shanghai Pharmaceutical Group Corporation, through its listed arm Shanghai Pharmaceutical Co., Ltd. (SH: 600849), acquired Shanghai Industrial Pharmaceutical Investment Co., Ltd. (SH: 600607) and Shanghai Zhongxi Pharmaceutical Co., Ltd. (600842) to become China's second largest pharmaceutical corporation. In the fourth quarter of 2009, Shanghai Pharmaceutical Group Corporation acquired four regional drug distribution companies such as Guangzhou Z.S.Y Pharmaceutical Co., Ltd., Shandong Shanglian Biochemical Pharmaceutical Co., Ltd. and Changzhou Yabang Pharmaceutical Group. In May 2009, Simcere Pharmaceutical Group (NYSE: SCR) spent RMB140 million to acquire all the shares of Pearl Ocean Holdings. In November, Simcere Pharmaceutical Group acquired 50.77% equity of Jiangsu Yanshen Biotechnology Co., Ltd. In December, it announced the acquisition of the rosuvastatin calcium business of Tianjin Tianda Pharmaceutical Co., Ltd.
    In recent years, through public financing and attracting venture capital and other means, China's pharmaceutical enterprises have quickly enhanced their own strength. So far, nearly 130 Chinese pharmaceutical companies have been listed on the Shanghai and Shenzhen Stock Exchanges, and over 20 Chinese pharmaceutical companies have been listed on overseas stock exchanges. Out of the Chinese pharmaceutical industry's output value, the proportion that state-owned and state-controlled enterprises account for had dropped from 29.0% in 2000 down to 20% in 2007, and the proportion that foreign-funded enterprises account for has increased to 25%, private enterprises account for 19%, and others account for 4%. At the same time, the distribution of China's pharmaceutical production capacity became more concentrated. The pharmaceutical capacity in China's eastern coastal areas accounts for 66% of the national total. The pharmaceutical industrial output value of the Yangtze River Delta region including Jiangsu and Zhejiang provinces and Shanghai accounts for 27% of China's total. Most of the world's top 20 pharmaceutical companies have set up factories or China headquarters in this region. In the aspect of chemical pharmaceutical formulations, traditional Chinese medicine, bio-pharmaceuticals and medical equipment and devices, the Pearl River Delta region leads in China. In 2009, Shanghai, Jiangsu province, Guangdong province, Zhejiang province and Beijing were China's five largest importers and exporters of pharmaceuticals. Their combined pharmaceuticals export and import value reached US$36.895 billion, accounting for 69.4% of China's total.


4. Foreign trade grew despite the global financial crisis

In 2009, due to the global financial crisis, the growth rate of the global pharmaceutical market fell reportedly by about 3%, and the import and export of China's pharmaceutical industry also dipped once but kept growing as a whole. In 2009, China's total import and export value of medicine and healthcare products reached US$53.15 billion, up 9.8% year on year, of which the import value was US$20.