China Cures Drug Firms

开篇：润墨网以专业的文秘视角，为您筛选了一篇China Cures Drug Firms范文，如需获取更多写作素材，在线客服老师一对一协助。欢迎您的阅读与分享！

The foreign drug firms settles down in china and considers this most populated country as their new bases for expansion.

Sanofi-Aventis is undergoing fast development in China. Now the French drug company is reducing the staff in Europe and the USA. In comparison, the number of employees in China keeps increasing at 20% per year. It also contends with other drug multinationals for thousands of sales talents. These new employees make a great addition to the sales team for Sanofi-Aventis’ new drugs for cardiovascular disease and diabetes.

“Every drug company commits itself to expanding in China, whose drug industry increases by 28%,” said Tony Kelly, director of Sanofi-Aventis’ China branch. The company earned 686 million US dollars in 2009. It hopes to increase the income from China’s market to 2 billion US dollars in 2015.

1. New medical reform brings new changes

The drug industry in China is like the others, which depend on the economic growth of China. According to the statistics of IMS, the drug multinationals will lose the patents of drugs valuing 140 billion US dollars. The multinationals, like Sanofi-Aventis, Pfizer and GlaxoSmithKline are trying their best to offset the influence and start to diversify their businesses, cut jobs and conduct mergers and acquisitions. In spite of these, they still have to face the scary balance sheet.

The drug multinationals believe that China’s drug market can solve the problems they face right now. According to the estimation of IMS, China’s drug market has at the fifth place in the world and it is forecasted to climb to the third place in 2013. China’s drug market will see the increasing value of 40 billion US dollars in the next five years. This increase is attributed to the growing population, enlarging proportion of middle-class people and the increasing morbidity of cardiovascular disease and diabetes.

But the biggest factor is the program announced by China’s government, which aims at enlarging the medical expenditure. Right now the medical expenditure takes 4.5% of China’s GDP while the proportion in the USA is 16%. In order to boost the domestic consumption, the Chinese government must create a safe social network. Therefore, the Chinese government plans to invest 125 billion US dollars to spread the medical insurance network all over China.

This is both good news and bad news for the foreign drug firms. Most of the Chinese citizens can enjoy free essential drugs at that time. The Chinese government put their affordability into consideration. “There are certain uncertainties and instability in the Chinese market. The companies are not sure of the future development orientation because of some advent changes,” said Chris Arzt, director of the Shanghai Office, ZE Associates.

2. Lower price with bigger market volume

The drug market in China is very decentralized. Tens of thousands of drug manufacturers exist there and no one can take the dominant place. In addition, there are numerous drug retailers in this market. In the retailing market, most of the consumers buy drugs with cashes and what they buy are mostly non-prescription drugs and traditional Chinese herbs.

Presently, the main customers of multinationals’ non-prescription drugs are still the urban residents with certain wealth. Most of these drugs will be deprived of the aura of patent. Their field will be invaded by the generic drugs in the developed. But right now they can still be sold at a high price. “The foreign drug companies are famous for their good credit, which is accompanied by the high brand value and prices,” said Sati Sian from IMS China. “Presently, the Chinese consumers have a faith in the foreign products, just like what you see in the automotive field.”

The foreign drug companies have not made sure whether the new policy will affect their high-price products. It is known that a list of essential drugs has been formed in China. The drugs in the list are priced and delivered by the government.

Kelly from Sanofi-Aventis thought that the wider coverage of medical insurance and the bigger access to better diagnosis for patients would bring the increase in sales and offset the influence of the lowered price. “In China, decreasing drug prices will be more and more frequently, but it still has positive effect for the drug multinationals.”

Kelly also thought that a good medical insurance system under well-planned government control is good for foreign drug firms’ development in China. It is because the rights of purchasing and pricing in a certain place were previously taken by the local distributors, who usually gave preference to local companies. “If you build a manufacturing base in a province and employs 500 people, the local government will put you into the list of suppliers,” said Kelly. “What I consider is the long-term profit, which lies in the more market-oriented operation brought by the medical reform.”

3. Ante up in China

As Kelly analyzed, though half of the Top 10 pharmaceutical companies in China are from foreign countries, none of them has taken a market share of higher than 2.5%. In 2009, the Top 15 drug companies in the world only took 0.9% market share in total in China. The most popular drug in China is still the traditional Chinese herb, which enjoys much faster growth rate than the prescription drugs. “The multinationals are losing. Though they still enjoy growth, their market share is dropping.”

Therefore, the foreign drug firms have already launched long-term cooperation with Chinese local pharmaceutical companies in improving the production capacity. In the next three years, Pfizer will commit itself to gaining 6% of the Chinese drug market. Novartis declared on November 2009 that 1.25 billion US dollars would be put in China to set up a research and development center. Lily set up a venture fund with the capital of 100 million US dollars. The fund will be used to invest Piramal Life & Science Corp, a local drug company in China.

Every multinational drug company is improving their force in China. However, they will use more pristine investments. Sati from IMS said that the decentralized market in China forces the pharmaceutical companies to learn to deal with the complicated situation. “The key to success is to be the cleverest executor.”

Most of the foreign drug companies are adjusting the portfolio of products. Due to the unbalanced income level in China, these foreign firms must find a way to meet the demand of high-income earners and low-income people. For example, they must find a distribution channel compatible with high-end anti-cancer drugs and low-end hydrophobia vaccine. “The epidemiology in China is also different and changeable.”

“The liver cancer, lung cancer and esophagus cancer are not often in the western countries. But in China things are different,” said Sati. Hepatitis B, which is easy to see in China, only affects quite a small number of people in the USA.

The multinationals are extending their arms into the non-prescription drug field, like generic drugs, vaccines, healthcare products and traditional Chinese medicine. For example, Novartis acquired a Chinese local vaccine manufacturer. Sanofi-Aventis has successfully acquired a vitamin products producer in China. The multinationals are walking towards diversification when their knockout products are affected.

Sati said that the foreign drug firms are learning how to meet the demand of local consumers. “They work out measures based on local environment.” For example, foreign drug firms’ commercial campaigns are held in the hospitals in South China. In West China, the multinationals have to build partnership with local distributors.

Kelly said that Sanofi-Aventis would set up 10 regional companies in China, each of which has its own teams of human resources and government affairs. Right now the French company is busy distributing the human resources among these companies. In order to run these companies well, Sanofi-Aventis has to contend with other companies to recruit as many talents as possible.