China’s healthcare market is experiencing double-digit growth, but the relatively low healthcare spending as a portion of GDP suggests that there’s still room to grow. In the pharmaceutical sector, specifically, China was the world’s second-largest national pharmaceutical market in 2017 — worth $122.6 billion, according to CNBC. But, as China’s aging population puts pressure on the public health system, the government has identified the healthcare industry as an area in need of reform.
Multinational pharmaceutical companies have benefited in China from selling off-patent branded drugs at a premium price and Chinese pharmaceutical companies happily sold low-cost generic drugs with gross margins of 80-90 percent. In a recent shake-up, China rolled out the “4+7” bulk-buying policy in an effort to drive down prices of generic drugs and force local players to become more globally competitive by investing in more R&D.
What does the new policy mean for established multinational pharmaceutical companies who have benefited from a decentralized system of quality control? How will Chinese pharmaceutical companies balance out the loss of revenue from the fall in generic drug prices? And what does the shifting landscape mean for new players hoping to gain a slice in this lucrative market? Professor of Finance Li Haitao explains.
Co-organizer: Foreign Correspondents’ Club of China (FCCC)
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