China is Business Monitor International's (BMI) favourite emerging pharma market. According to a latest report by BMI, combined sales of prescription drugs and over-the-counter (OTC) medicines are forecast to increase from US$46.8 billion (CNY319.3 billion) in 2009 to $88.7 billion (CNY571.2 billion) in 2014. Due to the strengthening Yuan, this equates to a compound annual growth rate (CAGR) of 12.4 percent in local currency terms, and 13.7 percent in US dollar terms. Over the next five years, annual percapita spending on pharma is projected to increase from $35 to $65. Key drivers of market expansion are the CNY850 billion ($125 billion) healthcare reform plan, the expansion of China's basic medicine catalog, growing demand for medicines in rural areas and the increasing adoption of tender systems for pharmaceutical procurement.
In the Asia Pacific Pharmaceuticals & Healthcare Business Environment Ratings (BERs) for fourth quarter of 2010, China has dropped from fourth position to fifth out of 17 regional markets. The cause was marginal downgrade of Industry Rewards, which itself was due to a revision of projected growth of pharmaceutical sales (13.2 percent in fourth quarter of 2010 versus 16.1 percent in third quarter of 2010), in line with BMI's expectation of a slowdown in China's economy in the second half of 2010. China's score for Country Risks improved slightly, from 55 in third quarter of 2010 to 56 this quarter. Assessments of Country Rewards and Industry Risks were unchanged from the previous quarter.
Corruption is an ongoing issue for China's pharma sector. In June 2010, Zhang Jingli, the deputy head of the State Food and Drug Administration (SFDA), was dismissed for accepting bribes, allegedly from the Shanghai branch of Johnson & Johnson (J&J). The most serious case of healthcare corruption involved the former head of the SFDA, Zheng Xiayou, who was executed in May 2007 for accepting kickbacks totaling CNY65 million ($9.5 million) to accelerate drug registrations.
Manufacturing standards in China's pharmaceutical sector are below international standards. In June 2010, Gerald Van Odijk, CEO & president of Israeli drugmaker, Teva Pharmaceutical Industries, raised concerns over the prices and quality of drugs produced and distributed by Chinese drug companies. Odijk urged European drug regulators to inspect the facilities of pharmaceutical manufacturers in China.
Reinforcing BMI's Core View that sales forces will contract in developed states and expand in emerging markets, Japan-based drugmakers { Astellas and Eisai { have announced that they would double their sales forces in China. Astellas aims to raise the number of medical representatives in China from the current 300 to more than 600 by 2014. Eisai plans to increase its marketing personnel to 1,000 by 2011 and to 1,400 by 2013, up from the current 730.