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Driven by strong market growth, Big Pharma’s interest in China is set to increase

15 Dec 2010, by Informa Insights

Melbourne, 15th December 2010 – Rapid population growth as well as the increasing number of elderly people in China have created additional pressure on the government in terms of healthcare provision. In order to improve healthcare access, the Chinese government will spend $124.6 billion on healthcare reforms between 2009 and 2011 according to the latest analysis by Datamonitor.

Ling Sun, Healthcare Analyst at Datamonitor and author or the report says “China’s healthcare reform package is aiming to improve the country’s healthcare system with regards to medical insurance and access to essential medications”.

Currently many drugs remain unaffordable for a large proportion of China’s 1.34 billion population. Indeed, more than 50% of the expenditure on healthcare is paid by the patients themselves. Therefore, many patients are still forced to take on debt to finance expensive or prolonged medical treatment.

Sun adds: “An important goal of China’s healthcare reform is to increase access to medication for its citizens. With this reform in place, more than 90% of the Chinese population are set to benefit from revised reimbursement schemes through the renewed National Reimbursement Drug List (NRDL) and the newly established Essential Drug List (EDL).

Low operating costs, improvements in the intellectual property environment and introduction of an accelerated approval process for certain types of drugs will furthermore lead many foreign companies to open R&D centers in China.

Sun explains: “The growing reputation of the Chinese research capabilities has prompted many foreign companies to open R&D centers and also encouraged them to look for R&D collaborations with local players in China”.

However, to gain access to the Chinese mass market, multinational companies (MNCs) will need to agree to their innovative drugs being listed in the NRDL, making them subject to government pricing regulations and further price cuts”.

“This revised reimbursement scheme therefore brings mixed messages for big pharma operating in China. Foreign companies operating in China face a trade-off between a low price/high volume strategy by agreeing to include its innovative drugs in the NRDL, versus a high price/low volume approach by refusing to do so.

Western companies seem to choose different paths facing this dilemma. While some are pushing for their drugs to be listed on NRDL despite the risk of price reductions, others are lobbying for the Chinese government to introduce a more balanced system and to reward innovation and quality.

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