Health outcomes in China have, generally speaking, improved tremendously over the past three decades. Some traditional infectious diseases have significantly decreased. However, death rates from chronic diseases have been rising, not least due to changes in lifestyles and environmental conditions.
Healthcare is overwhelmingly provided publicly and hospitals have been absorbing a growing share of resources. Absence of a primary care system and a tiered public hospital system with uneven distribution of resources and physician capabilities has led to over-crowding in big hospitals.
Demand for care has risen sharply, in line with incomes, and the relative price of care soared through the early 2000s. Hospital budgets and their doctors’ pay are partly based on the drugs they prescribe and sell. The prices of which are regulated and involve considerable cross-subsidisation.
Four key areas in focus
The government has been constantly conducting reforms of the system. Under the latest, ongoing reform, government plans call for spending of more than 1.5 trillion RMB (220 billion USD) on healthcare between 2009-2011, investing in four key areas: Building a public health system, improving healthcare provision, Providing medical insurance, ensuring basic drug delivery.
According to the Ministry of Health, the number of consumer health centers is expected to increase from 3,160 in 2007 to 8,594 in 2013. Basic medical insurance is expected to cover more than 90 % of the population by the end of 2011.
The healthcare consultancy company IMS estimates that in the next five years the compound annual growth rate of the Chinese pharmaceutical market will be 23.2 %. It will become the world’s third-largest prescription medicines market in 2011 after the USA and Japan. In 2008, IMS attributed 62 % of the Chinese pharmaceutical market to prescription medicines, 18 % to over-the-counter (OTC) products and 19 % to traditional Chinese medicine (TCM). Products from multinationals make up 27 % of prescription medicines.
China’s pharmaceutical output is also fueled by the accelerating global demand for cheap, effective medicines. Along with India, China supplies more than 40 % of the active pharmaceutical ingredients (APIs) used to make US pharmaceuticals, a figure expected to double in the next ten years.
All of the top 20 multinationals have already set up subsidiaries in China. According to IMS, the multinationals’ share of the Chinese pharmaceutical market share reached 25 % in 2010.
Compared to mature markets, China’s pharmaceutical market has unique features and is significantly fragmented due to strong local competition.
Many Chinese people believe TCMs have less side effects than pharmaceuticals and they are often much cheaper. TCMs comprise one-third of the government’s essential drugs list, which qualifies drugs for significant reimbursement. This has led to 20 % annual growth for TCMs. The figures vary. IMS says TCMs have grown from 1 % to 11 % of the Chinese medications market over the past decade, while the Chinese Food and Drug Administration says TCMs account for 36 % of the total market.
Main therapeutic areas
Market access is a key success factor in China. But the lack of coordination among key regulatory bodies results in a fragmented decision making process, creating many obstacles to market access. A new regulation (2009) mandates local clinical trials, adding an additional 3-6 months to the approval process. To lower drug prices, China brought in the Centralised Tender for Drug Purchase System in 2000 and only the drugs that win the bidding can be sold in a specific region.
In 2010, a plan to consolidate the fragmented drug distribution industry was launched by the government which would establish one or two leading national drug distribution companies and 20 regional distributors.