China has become one of the largest pharmaceutical producers in the world. However, the supply chains that serve the industry remain complex and inefficient. Problems include lack of nationwide, large-scale distribution networks; industry fragmentation and too many small pharmaceutical manufacturers; lack of supply chain integration; outdated manufacturing technology and management structure; poor IT systems; and irregular activities. The Chinese pharmaceutical industry also has a lower market concentration and weak international trading competitiveness, coupled with a lack of patented pharmaceuticals developed in-house.

The advantages of business investment in the country include the vast consumer demand for pharmaceuticals, the lower labor costs and the changes resulting from economic reform. Non-Chinese pharmaceutical manufacturers can capture business opportunities in China by establishing wholly non-Chinese-owned pharmaceutical companies and produce pharmaceuticals with in-house patent rights. Another way is to buy existing pharmaceutical companies, and produce goods using pharmaceuticals developed in-house, substituting for older agents.

Novartis is betting big on China. Last year the Swiss pharmaceutical giant announced plans to invest $1.25 billion in a pair of Chinese R&D centers over the next five years. Novartis will put $250 million into a new R&D center and manufacturing facility in Changshu, a city near Shanghai, and another $1 billion to add 1,000 researchers at an existing center in Shanghai. Research and development is rapidly increasing with Shanghai becoming one of the most important global centers.

The international competition will place an intense pressure on the Chinese pharmaceutical industry and further open the door to a lucrative market for non-Chinese companies, especially for pharmaceutical producers and manufacturers. The Chinese Government has invested in medical care sector following the launch of national new medical reform policy, so China’s pharmaceutical industry remains a sound development.

The IE Group will be holding Pharma Strategy & Business Innovation summit in January 2011, for more information on this please contact Henrique on hsantiago@theiegroup.com

Also, view presentations from the previous events by joining the network at: http://network.theiegroup.com