China’s Pharmaceutical Sector and the IP Puzzle
Despite impressive growth, the pharmaceutical sector in China still relies on generic drug production since the majority of domestic companies cannot compete with country-based foreign corporations.
China is the world’s largest producer of pharmaceutical ingredients and China’s pharmaceutical market value is estimated to reach $158 billion in 2016 and $315 billion in 2020. This increase will see China’s pharmaceutical market become the second largest in the world, with surging revenue propelling industry value significantly closer to that of the U.S., which is forecast to reach $475 billion in 2020. With government’s increasing investment in healthcare and R&D (research and development), China presents great opportunities for innovative products and technologies, and collaboration between international and domestic pharmaceutical companies.
Despite industry concerns, regulatory challenges, and IP protection, international pharmaceutical companies can offset these concerns by focusing on China’s growing pharmaceutical market and healthcare reforms. Opportunities exist in research, OTC (over the counter), distribution, and biotech subsector development, as well as in the overall growth of China’s market, and particularly rural and suburban market growth due to healthcare reform. Although there have been regulatory improvements, international firms are working with the Chinese government to encourage further reforms that will open the market up to international firms. International firms are already working to address long term opportunities by ramping up M&A (merger and acquisition) or joint venture activities as China’s Life Science and Healthcare industry enters its next phase of growth.
Exporing opportunities in biotechnology
China’s biotechnology industry has been growing at a fast pace over the past two decades. The dramatic expansion of manufacturing capability and rising consumer consumption in China has transformed China’s society and economy. China is one of the world’s major producers for industrial and consumer products.
Despite (or maybe because of) significant progress in Science and Technology (S&T) and commercial development in the last 20 years, there are still many problems that influence or handicap the sustainable development of biotechnology in China. For example, more and more public R&D funds are invested in biotechnology areas, but the accumulation of S&T is relatively small. Although China has a high level of biodiversity, the resources haven’t been fully put to use. As a developing country, China’s biotechnology lacks commercial experience, original innovations, and the suitable and effective ways to transform the S&T achievement into products. These are the areas presenting opportunities for New Zealand research centres and their commercial arms.
Collaborating on R&D
For a long time, pharmaceutical industry in China was known for its mass-production of low-level generic drugs and as a ‘world factory’ of active pharmaceutical ingredients (APIs) with little mentioning of real innovative medicines. It is now obvious that China has ascended to a worldwide leading position and at an accelerated pace in terms of R&D funding, scientific publications, and patents in recent years. Due to supporting national polices, economic growth, aging population and global trends, China’s share of pharmaceutical industry output increased nearly seven times, from 2.5% in 1995 to 18.3% in 2010, and is expected to become the second-largest pharmaceutical market in the world by 2020. This trend may also apply to the global healthcare innovation networks as increased sales performance can better support R&D, which allows fostering and promoting clinical research between China and New Zealand.
Understanding the health supplement market
Improving healthcare products and services is supported by the Chinese state and is a wider social ambition. The Chinese “big health” market, including health food, health supplements, healthcare services, offers significant opportunities for businesses working in the health sector.
The Internet has become the key tool for growth in this market sector. 80% of the 750 million netizens have searched for information about foreign-branded nutriceuticals related to health improvements online. There is tough competition in the Chinese market, so the implementation of efficient and innovative strategies is essential.
E-health – Pollution problems scandals linked to domestic products have changed Chinese consumers’ minds. They now pay more attention to their health. We now see the emergence of the e-patient, a person that will make their own enquiries on the Internet to auto-diagnose themselves before taking further steps. You should think about how to become a visible and reputable brand that can be found and searched online by Chinese consumers.
Design – To implement your brand successfully in the e-health sector in China and to gain the Chinese consumers’ trust in your healthcare offerings, you need to have an attractive and appealing design. A first impression of quality is decisive. Designed content featuring localised service offerings, eye-catching visuals, quality photographs and videos are the key factors you will have to think about. We can help you adapt your services and products to local Chinese tastes.
Social networks – By leveraging social networks, your products can be promoted without sounding too commercial, especially in healthcare. Visibility and transparency are important to adopt if you are wishing to develop a climate of trust. We can help you build your own platform on Chinese social networks, in order to allow interactions between patients, pharmacists and doctors. Conveying a quality image will attract real purchasers in this industry.
KOLs and Daigou – Chinese customers are strongly influenced by friends’ and family’s suggestions on social networks and often turn to their virtual communities for advice. We know how to share your brand to key online influencers and local Daigous, provide KOL and Daigou training, and work with the right digital publications.
E-commerce – Chinese consumers are using the Internet for the majority of their purchases, and buying health care services and products is a natural progression. Digital promotion and sale of health services and products is currently unregulated and, as a result, there aren't any platforms that have taken the lead for the moment. We have the tools that allow you to access the market and to acquire a positive reputation that can make you a leading player in this sector in China.
Data analysis – Your communication and your reputation are essential to convince prospects. A coherent strategy is necessary – in order to avoid a PR crisis that would tarnish your image and make you lose consumer’s trust in your brand, care is the keyword. We are here to analyze all your digital strategies against online performance data, and respond in the best way to make your business a success.
Please contact us for further information about how we can assist you with the Chinese market.