China is the second largest pharmaceutical market in the world
With China’s expanding personal income and the growing medical needs of its aging population, its pharmaceutical market has become the second largest in the world. IMS Health predicts that global spending on medicines will reach around USD1,300 billion by 2018, a 30% increase over the 2013 level. During 2014-18, the compound annual growth rate (CAGR) on medicines spending will be 4% to 7%. China had a spending level of USD77.2 billion in 2012, which accounted for 8% of global medicines spending. It is forecasted that China’s spending level will reach USD155-185 billion in 2018, which would be the highest among emerging pharmaceutical markets. The key drivers for growth will be healthcare infrastructure improvements, increased access to medicines, and increases in the number of private hospitals.
Sales revenue of manufacturers recorded continuous growth
From 2004 to 2009, China’s pharmaceutical manufacturing industry expanded massively; the number of manufacturers increased by 44.6% to reach 6,807 in 2009. Between 2010 and 2013, the number of manufacturers decreased sharply from 7,038 in 2010 to 5,674 in 2011 and then increased in the two subsequent years to reach 6,525 in 2013. In the meantime, the value of total assets of the pharmaceutical industry increased by 71.6%. Sales revenue and profit received by manufacturers recorded continuous growth from 2011 to 2013 (figure 1), with average annual growth rates of 19.1% and 17.8% respectively. In the first three quarters of 2014, sales revenues amounted to USD264.4 billion and profits to USD25.3 billion.
The pharmaceutical industry is fragmented
The Chinese pharmaceutical industry is very fragmented. The top two pharmaceutical companies together only occupied a small portion of market share, a notable contrast to the US market. Moreover, aggregated revenues for the top 100 pharmaceutical companies only accounted for 27.1% of the industry’s total revenue. In 2013, SMEs experienced rapid growth and 6 more SMEs received USD0.81 - 1.61 billion (RMB50-100 billion) compared with 2012. Another notable observation is that some traditional Chinese medicine manufacturers, such as Guanxi Wuzhou Zhongheng (87%), Chase Sun (70.2%) and Shijiazhuang Yiling (50%), recorded significant year-on-year revenue growth.