China’s pharma boom
GlobalData predicts more than 650-percent revenue growth by 2020
LONDON—Because of considerable investment in China's pharmaceutical research and development (R&D) sector, along with numerous government-initiated reforms, the Chinese pharmaceutical market value is projected to reach $315 billion by 2020. That would represent more than 650-percent revenue growth, according to a new report from research and consulting firm GlobalData, which also projects that China's medical device market will grow to $54 billion by same year.
China is the most populated country in the world. In 2012, its population was about 1.3 billion, or one-fifth of the global population. Until now, growth has effectively been controlled by government programs, but currently, the government is interested in enabling investments and supporting reforms, according to the report.
GlobalData, which offers advanced analytics to help clients make informed decisions, believes that the soaring growth will take China's pharmaceutical market value from an estimated $48 billion in 2012 to a massive $315 billion in 2020, at a compound annual growth rate (CAGR) of 26.5 percent. This dramatic increase will make China's pharmaceutical market the second largest in the world, with surging revenue propelling industry value significantly closer to that of the United States, which will reach $475 billion in 2020, according to GlobalData.
Additionally, an expanding and aging population will play a key role in increasing China's pharmaceutical market revenue. Because the country's elderly population is projected to account for 19 percent of its total population of 1.41 billion in 2020, GlobalData projects a rising prevalence of chronic diseases, which in turn will spark an increasing demand for treatment. According to the report, this factor will also be a primary driver behind the rising value of China's medical device market, the second largest in Asia, behind Japan, which GlobalData forecasts will climb from $20 billion in 2012 to $54 billion in 2020.
According to Adefemi Adenuga, GlobalData's industry dynamics analyst, multinational pharmaceutical companies are increasingly investing in China's R&D sector. This phenomenon, he says, is "due to various factors including the country's possession of a large patient pool, government tax incentives for R&D activities, lower costs and the presence of pharmaceutical and biotech clusters, such as the Shanghai Zhangjiang Hi-Tech Park, which houses Roche, Novartis, AstraZeneca, GSK, Eli Lilly, Johnson & Johnson and Pfizer."
"Interestingly, the Chinese government is in support of these investments as it seeks to transform the Chinese market from being the manufacturing center of the world to being a go-to research center," Adenuga says. "However, the government is also encouraging local participation, through grants and loans, to ensure that domestic companies are not left behind."
The government is initiating ongoing reform in the Chinese pharmaceutical industry, and Adenuga anticipates that these reforms will be maintained.
"I expect the government's effort to reduce drug prices by eradicating over-prescription to continue," he says. "The current gap between rural and urban dwellers in China in terms of healthcare accessibility and affordability will also be bridged over time as healthcare coverage increases in the country. The government is also expected to fight drug counterfeiting—a significant issue facing the Chinese drug industry."
China's infrastructure is a substantial factor that contributes to the growth of the pharmaceutical market in the country, according to Adenuga. Incentives such as tax relief, direct funding opportunities and the development of numerous technology parks have been encouraging domestic pharmaceutical and biotechnology companies as well as foreign multinationals, he says.
The report, "CountryFocus: Healthcare, Regulatory and Reimbursement Landscape-China," was developed by using data and information sourced from proprietary databases, primary and secondary research and in-house analysis conducted by GlobalData's team of industry experts. It is designed to provide insight into the trends and segmentation of the pharmaceutical and medical device markets. GlobalData's research and analysis is based on the knowledge of more than 700 business analysts and 25,000 interviews conducted with industry insiders every year.